|Apple dropped more than 2 points today as the entire tech sector took a big hit today. Internet stocks led the way, though companies like Microsoft and Dell were right in the thick of things. A consistent theme from today's trading was worries about future interest rate hikes. According to a News.com report:
Rising interest rates are bad for stocks because the present value of companies' expected future earnings declines when discounted using a higher rate. That's especially true of highly valued computer-related companies, which promise higher rates of earnings growth in the future.
"There's a worldwide feeling of interest rates going higher," said Robert Basel, head of listed stock trading at Salomon Smith Barney. "If rates are higher, US companies aren't going to earn so much money."
Investors are concerned that strong growth and a tight labor market in the US will cause inflation here and force the Federal Reserve to raise short-term interest rates.
The concern about higher rates is overshadowing second-quarter earnings, which are on track for the biggest growth since the third quarter of 1997. So far, 327 of the companies in the S&P 500 have reported, with 65 percent of them surpassing analysts' expectations, according to First Call.
Apple closed at 50 15/16, a loss of 2 3/8 or 4.45%. Volume was moderate with 3,135,600 shares trading hands.
Apple's PC competitors also fared poorly with IBM, Dell, Gateway 2000, and HEwlett-Packard exploring negative territory. Compaq closed up. This, despite the news that Dell is gaining on Compaq's market share, offering Compaq the first serious challenge as the dominant PC maker for the first time since 1994.
The Dow and the Nasdaq both ended the day in the red with the Dow closing at 10860.62, a loss of 50.34, while the Nasdaq closed at 2619.16, down 73.24.