US tech stocks fall amid fears of a crackdown on Huawei Technologies, and S&P 500 tech sector slips nearly 2 percent.

United States stock markets were lower on Monday as a US crackdown on China’s Huawei Technologies raised concerns of a bigger impact on chipmakers and stoked fears of an escalation in the trade war between the world’s two largest economies.

Apple Inc slumped 3.3 percent, weighing the most on the three main indexes and driving down the Standard & Poor’s (S&P) 500 technology sector 1.27 percent, the biggest drop among the six S&P sectors trading lower.

The iPhone maker was also pressured by a warning from financial-services company HSBC that higher prices for the Apple products following the increase in tariffs could have “dire consequences” on demand.

US suppliers of Huawei, including Qualcomm, Micron Technology and Broadcom Inc, fell about 5 percent, while the Philadelphia Semiconductor Index slid 2.88 percent, its lowest level in more than two months.

“For a lot of these tech companies, there is no bigger market than China, and there is some concern it could forestall growth, and also force countries to take sides and begin to allow China to develop alternatives,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

“It’s a lot of speculation and there isn’t any basis. But it looks like the trade talks are getting worse and not better.”

Huawei, the world’s largest telecommunications equipment maker, was added to a trade blacklist by the administration of US President Donald Trump on Thursday, escalating the already bitter trade war, while China on Monday accused the United States of harbouring “extravagant expectations” for a trade deal.

Underscoring a likely hit to US tech companies, Lumentum Holdings Inc said it would halt shipments to Huawei and cut its quarterly revenue expectations. Shares of Lumentum fell 2.68 percent.

Alphabet Inc’s Google has suspended some business with Huawei, Reuters reported over the weekend, while chipmakers including Intel Corporation, Qualcomm, Xilinx Inc and Broadcom Inc have told employees that they will not supply the Chinese company until further notice, Bloomberg reported on Sunday.

Shares of Alphabet, Facebook Inc and Microsoft Corporation were all down over 2 percent.

On a stronger note, Sprint Corporation shares jumped 23 percent and T-Mobile US Inc gained 5.2 percent after the companies won the support of the US telecoms regulator chairman for their proposed $26bn merger.

Verizon Communications Inc’s 3.5 percent gain helped the Dow Jones Industrial Average index limit some losses, while shares of AT&T Inc rose 3 percent.

Investors will also look for comments from a clutch of retailers reporting this week – including Home Depot, Nordstrom, Kohl’s and Target – to gauge the impact of the latest round of tariffs.

With 460 of S&P 500 companies having posted first-quarter results, 75.2 percent have topped analysts’ profit expectations. Analysts now expect first-quarter earnings growth of 1.4 percent, a sharp turnaround from the two percent loss expected on April 1, according to Refinitiv data.

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