Apple, Facebook and Twitter shares slump after tech sector downgrade

Apple shares slumped more than 6pc in early US trading on Monday, its biggest fall in three months, as the technology sector was hit by a bearish note from Morgan Stanley.

Stock in the iPhone maker opened at $118.76 before rising to $119.25. However, it plummeted to $111.27 soon after, wiping more than $30bn off the technology giant. The shares recovered some of their losses to close down 3.3pc at $115.07.

The sudden drop came after Morgan Stanley cut the US technology sector to "market weight" from "underweight". The broker reduced its holding in Apple from 4pc to 3pc and recommended its clients cut their position, too.

"The stock has nearly doubled over the past three years and our optimiser simulations have consistently recommended a modest reduction," Morgan Stanley said.

However, one analyst said Apple's share price fall was due to investors taking profits.

"I think the most logical explanation is profit taking," Lou Basenese, founder of Disruptive Tech Research, told CNBC. "Shares were up about 25pc off the October lows, compared to a 10pc move for the Nasdaq."

Apple's shares have risen 46.7pc so far this year. The company released the iPhone 6 and 6 Plus in September, revealing that it sold 10m units in the first three days. Chief executive Tim Cook said in October that demand for the new iPhone was “off the charts”, as he revealed revenues rose 12pc to $42.1bn and profits climbed 13pc to $8.47bn in the fourth quarter.

^{Apple shares fell shortly 6pc after opening on Monday morning}

The technology giant is facing increasing demand from consumers for new products in areas the company hasn't entered into yet.

Apple will release its first smartwatch early next year, while a television has been widely rumoured.

Mr Cook revealed earlier this year that his company is also working on products that "haven't been rumoured about yet".

Morgan Stanley’s move hit the whole tech sector, with Twitter down 6.5pc to $39.04, Facebook off 2.6pc at $75.10 and Google losing 1.7pc to $539.65.

^{Twitter shares fell 5pc}

Meanwhile, Amazon shares fell 3.7pc to $326 after Moody’s cut its outlook on the online retailer to “negative” from “stable”, just hours after Amazon said it would raise new debt to grow the company.

The move came just hours after Amazon said it would raise new debt to grow the company further.

"The change in outlook to negative results from Amazon's announcement that it was issuing a sizeable, though amount to be determined, level of new senior unsecured notes," said Moody's vice-president Charlie O'Shea. "Proceeds are to be used for general corporate purposes in support of Amazon's myriad growth initiatives, and it is Moody's expectation that the funds will not be utilised for any form of shareholder returns."

^{Amazon shares dropped 3.4pc to $327.26}

Amazon is also facing increased competition from brick-and-mortar retailers as they integrate high street operations with their online businesses.

Moody's affirmed Amazon's Baa1 rating because the retail giant's "excellent liquidity provides sufficient cushion".

Amazon’s investors have been patient with chief executive Jeff Bezos's strategy, on the basis that any money it spends on growing its market share now will lead to riches down the line, on a par with Apple and Google which make billions of dollars every quarter.

Last month it revealed it lost nearly $500m in the last quarter as it spent heavily on new projects.

Mr Bezos has authorised the company to spend tens of millions of dollars developing drones, which could form the backbone of a new delivery network, and much more on new servers for Amazon Web Services, its online data storage business.

“We’ve been, for several years now, in investment mode because of the opportunity in front of us,” Thomas Szkutak, chief financial officer, said last month. “There is still lots of opportunity in front of us, but we know we have to be selective.”