[4:00 PM] Apple Stock Watch: Apple Dips As Markets React To Fed
by Wes George
The Stock market got what it expected, a mild quarter point rate hike. All heads on Wall Street rise from the contemplation of their interest rate belly buttons to scan the horizon. What's next for the stock market? More of the same, rapid growth, good earnings, inflation fears, and more rate hikes starting as early as March.
The Fed warned the economy could overheat and foster inflationary trends after it directed the US central bank to raise the target on federal fund rates to 5.75%.
According to the New York Times, the Fed said, "The Committee remains concerned that over time increases in demand will continue to exceed the growth in potential supply, even after taking account of the pronounced rise in productivity growth. Such trends could foster inflationary imbalances that would undermine the economy's record economic expansion."
Reuters' quoted Richard Babson, of Babson-United Investment Advisors: "What they have gone for is the gradual approach. The Fed watch has merely been elongated. If you look at the Fed futures, they had already anticipated this rise and two more rises. My only concern is that it looks like the Fed is following the market rather than leading it."
As Larry Kudlow put it on CNBC, in reference to limiting inflation, "The Internet is more important than the Fed."
Apple sagged 1 7/16 or 1.43% to close at 98 13/16 on average volume. The PC vendors, Compaq, Gateway, and Dell were also weak. The whole PC sector is experiencing a downdraft on the generally poor earnings for the group last quarter. Apple, even with its excellent earnings record, is dragged down by its association with the hardware sector.
The Nasdaq climbed 21 points (0.54%) to close at 4073 with 1.5 billion shared traded. The chip sector was up about 3.0%, as analysts everywhere predict soaring demand in 2000. Amazon is reporting earnings later today.
The Dow gave back 37 points (0.34%) to close at 11003, on volume of a billion shares traded.
The S&P 500 edged lower by 0.15 to close at 1409.12.
The bellwether 30-year US Treasury bond traded up 1 18/32 to 97 18/32, pushing the yield down to 6.30% from 6.42% on Tuesday.
The long bond is responding to supply and demand more than the Fed's interest rate move. The government said it plans on buying back 30-year treasury notes to reduce US debt. That has the effect of reducing supply of the long bond, pushing up the bond's price and sinking the yield, which moves inversely to price.
Many investors are turning to the intermediate bonds which they believe are tracking the volatile stock markets closer than 30-year bond so far this year.
In Apple related businesses, Akamai lost 5 7/16 to close at 233 5/8, Adobe gained 5 7/16 to close at 61 5/16. Earthlink, Apple's new Internet partner, traded up 2 dollars to 45 1/4. Motorola gained 7 15/16 to close at 144 13/16.
Macromedia received a strong buy recommendation from Banc of America Securities but the stock fell 1 1/8 to 67 3/8.
IBM announced today that it will begin selling PCs direct online in a deal with computer retailer, DirectWeb. IBM bounced off recent lows by 3 1/2 to close at 113 1/2.
Apple's competitors: Compaq slid 1 3/16 to close at 27 5/16. Dell climbed 13/16 to 38 1/8. Gateway slipped a fraction to 59 5/8. Intel shares lost 1 3/8 to close at 100 1/16. Shares of Microsoft headed south 2 1/8 dollars to close at 100 13/16.
HP and Kodak are going to announce a joint venture in digital photo finishing later today. Shares of Hewlett Packard climb 4 3/4 to close at 110 9/16.
In other market news: The LinuxWorld Conference and Expo opened today with a keynote address from Linus Torvalds, leader of the collective effort to develop Linux, in New York. The LinuxWorld Expo is the first to be held on the east coast and is expected to court the high financiers on Wall Street with their open source evangelism.
An announcement that a version of Linux is ready to run on the next generation of Intel's mciroprocessors pushed Linux related stocks higher in late day trading.
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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