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It's tough to measure how much the government shutdown is affecting the economy. But we know markets don't like instability, and there is a whole lot of that right now. The Dow has rallied after a stronger-than-expected jobs report this morning. But yesterday stock prices took a steep dive. The Standard & Poor’s 500 index was down nearly 2.5 percent, and the Dow fell even more. As NPR's Jim Zarroli reports, a grim profit warning from Apple has left a lot of investors worried about China's economic growth.
JIM ZARROLI, BYLINE: On Wednesday afternoon, Apple announced news that sent a chill through Wall Street. It said it made a lot less money during the last three months of the year than it expected. The news caused Apple's shares to fall more than 10 percent yesterday, its worst one-day performance in six years. And because Apple is such a huge company now, that sent all of the major indexes down, too. But economist Linda Lim of the University of Michigan says what happened in the market yesterday wasn't just about one company.
LINDA LIM: It's not just Apple, and it's not just smartphones. It's what it reflects of the second-largest economy in the world.
ZARROLI: Apple warned that it was hurt by slowing growth in China, and it blamed that in part on trade tensions. Washington and Beijing have been slapping tariffs on each other's imports. But Lim says the troubles facing China go beyond trade.
LIM: China's economy is slowing due to its own domestic dynamic.
ZARROLI: Lim says China is a more mature economy now, and mature economies don't grow as fast as developing ones. But China has also been hurt by the downturn in countries it does business with throughout Asia and Europe. These were points alluded to yesterday outside the White House by Kevin Hassett, who chairs the Council of Economic Advisers.
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KEVIN HASSETT: Make no mistake, the Chinese economy is on a path that we haven't seen in decades. That's something that will affect companies that operate in China.
ZARROLI: Hassett said it's not just Apple that's been affected. In an unusually frank statement, he said that a heck of a lot more companies that do business in China will probably issue warnings about slower profits in the weeks to come. Companies such as GM and Caterpillar have already expressed concern about China. Hassett went on to say that the slowdown is actually a good opportunity for the U.S. He said it gives U.S. negotiators more leverage in the current trade talks.
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HASSETT: There's a lot of room for positive gain in the Chinese negotiations. And I think the fact that their economy is having trouble right now shows that our policies have been effective at getting them to the table.
ZARROLI: But Mary Lovely, a professor of economics at Syracuse University, points out that the China slowdown can also hurt the U.S.
MARY LOVELY: It seems to me that it also shows that there's a great deal at stake here for the American economy.
ZARROLI: A number of U.S. companies now make as much as 10 percent of their revenue in China, including McDonald's, Starbucks and Intel. And Lovely says these include a lot of very big and innovative companies that also have large workforces inside the United States. In a global economy, she says, they're likely to be affected by what happens in China.
LOVELY: And I think it's kind of glib to be talking about warnings about future sales as bad for China but not bad for the U.S.
ZARROLI: Yesterday's big market sell-off suggests that a lot of investors understand that. And for now, they're responding by pulling their money out of stocks. Jim Zarroli, NPR News, New York.
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