Stocks Dive After Apple Supplier Slashes Outlook

Stocks dropped Monday, giving back a slice of their recent gains as investors dumped shares in some of the large technology companies that hold outsize sway over major market indexes.

The Nasdaq composite was one of the hardest-hit among the major bench marks. The technology-heavy index was down 2.8 percent. The S&P 500 fell 2 percent, and the Dow Jones industrial average dropped 2.3 percent.

Apple’s shares declined 5 percent after one of its suppliers, Lumentum, slashed its fiscal outlook for the current quarter and said it had received a request from one of its largest customers to reduce shipments. The company, whose shares plummeted over 30 percent, did not identify Apple in its warning but Apple is Lumentum’s largest customer, generating roughly one-third of the company’s revenue, according to a regulatory filing.

Apple’s stumble seemed to weigh on other previously high-flying technology companies. Amazon shares dropped 4.4 percent, and Facebook fell 2.4 percent. The social network was briefly offline for many users Monday afternoon, giving visitors an error message saying “sorry, something went wrong.”

Alphabet, the parent company of Google, declined 2.6 percent, and Netflix stock fell more than 3 percent.

The slump in technology shares Monday was a reminder of the ugly drop stocks suffered in October. Worried about rising interest rates, trade tensions and a potential peak in corporate profits, investors briefly pushed the broader market down nearly 10 percent below its late-September peak and into negative territory for the year.

More recently, stocks had regained much of that ground. Wall Street jumped after last Tuesday’s contentious midterm elections were resolved, with the S&P 500 finishing the next day up more than 3.5 percent.

Monday’s pain was not exclusively due to tech stocks.

Shares of Goldman Sachs tumbled 7.5 percent as questions mounted over what role the investment bank may have played in the looting of a multibillion-dollar Malaysian government investment fund.

General Electric’s stock fell 6.9 percent in its fourth straight decline after comments by its new chief executive failed to calm investors’ worries.

But Apple remains a key concern. The company has a market value above $900 billion, so moves in the share price have an outsize effect on stock indexes —like the S&P 500 — that are weighted by market size.

That dynamic mostly has been a boon for the stock market in recent years. Apple shares rose more than 45 percent last year.

And large tech companies have been crucial to the market’s performance this year. From the start of the year through the market’s Sept. 20 peak, roughly half the gain of the S&P 500 was attributable to five huge tech companies: Apple, Amazon, Microsoft, Netflix and Google’s parent company, Alphabet. Through much of last month’s slump, these companies held up reasonably well.

But Apple’s recent stumble suggests that some investors are questioning the ability of major tech companies to continue to carry the broader markets.

Apple’s tumble Monday followed another slide after its Nov. 1 earnings report, when the company said it would no longer report the number of iPhones it sells each quarter. So far this month, its stock price is down more than 10 percent.