Apple just confirmed everybody's biggest fear about China

While [management] commentary sought to re-assure, iPhone units were light even adjusting for channel inventory. Normally, this would not concern us but evidence of a widespread demand reset from China is mounting (auto #s, UTX, FCS, LLTC to name a few from what we watch).

Everyone worried about an economic slowdown in China and the impacts it could have on the US economy should read that again: "... evidence of a widespread demand reset from China is mounting ..."

On Tuesday, defense giant United Technologies cut its full year sales outlook for, among other reasons, "a slowing China." And in June, Chinese auto sales declined over the prior year for the first time in over 2 years.

Decidedly negative signals from the world's second-largest economy.

In the last few months, we've seen a huge sell off in the Chinese stock market, which has either been viewed as a harbinger of assured global economic doom, or not a big deal because the Chinese economy isn't as financialized (meaning the actual economy won't be greatly impacted by big swings in the stock market) as, say, the US economy.

But as Cowen notes, whether the impact on US companies is related to the recent stock market action or not, there appears to be something off about the Chinese economy. At least as it appears to some of the biggest US companies.

On Wednesday, Apple shares were selling off after the company's third quarter results disappointed on sales, particularly for iPhone. On the company's earnings conference call, Apple CEO Tim Cook said the iPhone sales miss was due to lower inventory.

At least by our count, Cowen appears to be the only Wall Street firm that downgraded Apple shares following the quarter, while most other firms either said Wednesday's decline presents an opportunity to buy shares at a lower price, or emphasized that despite the disappointment, their thesis for Apple shares remains intact.

In its note, Cowen wrote that while they, "dislike to downgrade stocks off earnings reports, we are convinced [Apple] has entered a transition period where risk/reward no longer supports an Outperform rating."

All companies go through cycles and things can't just get better forever. But a lot of the potential Wall Street has seen in Apple over the last year or so has been about China, which might not be the sure thing it used to seem.