[4:00 PM] Apple Stock Watch: An Interest Rate Hike Rally? Go Figure. Apple Dips Anyway
by Wes George
The stock markets climbed a wall of inflation fears signaling to traders that a quartile interest rate increase expected from the Fed tomorrow afternoon is fully priced into the market. They say the market is never wrong, but it certainly does sometime defy conventional wisdom.
James Bianco, of Bianco Research, appearing on CNBC placed the odds on an interest rate hike at 100%, with a 67% chance for a 25 basis point hike and a 33% chance of a 50 basis point bump.
The US economy officially entered a historical twilight zone as the current economic expansion continued into its 107 month, crushing every record going back to the halcyon days of capitalism in the 1850's. Running parallel to the economy is the stock market, which is experiencing its single greatest expansion in history too.
The second longest growth period lasted 106 months in the 1960s. Third longest was in the 1980's at 92 months. Economists point out that the expansions are historically growing in length, while recessions separating periods of expansion declined in length dramatically in the second half on the 20th century.
Most economists concur: The strong economy will continue thanks to the unprecedented productivity growth due to innovations in communication and digital technologies. Historian John Steel Gordon, who believes technology will continue to drive the economy forward, exclaimed on CNBC, "the computer is the most fundamental technology since the steam engine."
Apple sagged 3 1/2 or 3.37% to close at 100 1/4 on light volume. There was just no buying pressure on AAPL after yesterday's roller coaster $10 price range and high volume exhausted demand. Today, profit taking took control once more. If it's any consolation, computer hardware stocks were soft all day.
Apple's Fiscal first quarterly report was posted at EDGAR Online this morning. The bottom line: Apple's total assets increased from $5.161 billion in September to 7.586 billion in January due largely to Apple's savvy equity investment in Akamai and ARM Holdings.
Other highlights from the report: inventories declined and long term debt remained flat at $300 million from a quarter earlier, while total shareholders' equity (total asset minus total liabilities) soared to $4.4 billion from $3.1 billion last quarter.
The Nasdaq climbed 111 points (2.83%) to close at 4051 with 1.4 billion shared traded. Internet stocks led the way higher today. The Nasdaq traded an average of 1.6 billion shares a day in January up over 20% from December.
The Dow gained 100 points (0.92%) to close at 11041, on volume of 978 million shares traded. Financial and retail stocks led the way higher.
The S&P 500 climbed 14.82 points (1.06%) to close at 1409.28.
The bellwether 30-year US Treasury bond traded up 26/32 to 96 1/32, pushing the yield down to 6.42% from 6.48% on Monday. Many investors are turning to the intermediate bonds which they believe are tracking the volatile stock markets closer than long bond so far this year.
In Apple related businesses, Akamai lost 10 dollars to close at 239, Adobe gained 13/16 to close at 55 7/8. Earthlink, Apple's new Internet partner, traded up 1/2 to 43 1/4. Motorola gained 7/8 to close at 136 7/8, while IBM sagged 2 7/16 to close at 109 13/16.
Apple's competitors: Compaq gained 11/16 to close at 28 3/16. Dell climbed 1/2 to 38 15/16. Gateway slipped 1 7/16 to end at 59 3/4. Hewlett Packard gave back 2 7/16 to close at 105 13/16. Intel shares climbed 2 1/2 dollars to close at 101 7/16. Shares of Microsoft were up 5 dollars to close at 102 15/16.
In other market news: The NAPM composite index derived from a survey of corporate purchasing executives, was at 56.3 in January as expected by economists. The December reading was revised up to 56.8 from 55.5. A reading above 50 indicates economic expansion, while a reading below 50 indicates contraction.
From the Wall Street Journal, "Though the index fell slightly, the NAPM report showed a troublesome jump in the prices of raw materials, with the prices-paid subindex soaring to 72.6 from a revised 68.3 the month before. The latest reading was the highest since April 1995, when the price index hit 74.5."
Increases in productivity due to high tech capital improvement have allowed corporations to offset the higher prices of raw materials, but economists worry that eventually some of the cost will have to be passed along to consumers in the form of price inflation. Others claim that the super competitive pricing environment engendered by the Internet will limit any consumer price hikes.
For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. We also have many of these same quotes reported live (20 minute delay) on our home page. For other stories regarding Apple's stock activity, visit our Apple Stock Watch Special Report.
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