[4:00 PM] Apple Stock Watch: Nasdaq And Apple Head Into A Correction
by Wes George
Strange days on Wall Street, the long bond's yield is less than the 2-year treasury note's, GDP growth soars even higher than forecast, and the euro is at an all time low against the dollar. The Fed meets next week to decide interest rates and a hike now seems a foregone conclusion, but some worry the Fed can't brake fast enough to spare the economy from inflation. The high tech stock rally tide recedes.
PC stocks continue their downtrend. A C-NET News article points out that, "Although retail stores are benefiting from healthy sales volumes, the numbers do not mask the ongoing trouble the PC market is having as a result of the free fall PC prices have experienced over the last few years. Despite the staggering 37 percent unit growth, revenues only grew by 9 percent, a gap reflected in the woes PC makers have been reporting in earnings announcements this week."
Apple lost 8 3/8 dollars or 7.61% to close at 101 5/8, as the company's great earnings offered little protection from today's market down draft. Volume was slightly low with 3.7 million AAPL shares trading hands.
The Nasdaq slid 151 points (3.75%) to close at 3888 with 1.6 billion shared traded. The Nasdaq is now down nearly 10% from the year's high, approaching what Wall Street considers correction territory, but still about 150 points above 3727, the low for 2000. The Internet Index is off its high for 2000 by about 14%, while the semiconductor index is down about 10% and biotech stocks have fallen 15%.
The Dow lost 288 points (2.61%) to close at 10739, on volume of 1.1 billion shares traded. Intraday, the Dow traded below its 200-day moving average for the first time since October and settled below 10,800, a level that some consider an important support area.
The S&P 500 lost 38.17 points (2.73%) to close at 1360.39.
The bellwether 30-year US Treasury bond traded at a six week high, up 1 4/32 to 96 dollars, pushing the yield down to 6.42% from 6.50% on Thursday. Meanwhile, the 10-year bond yield was as high as 6.75%, the 5-year yield rose to 6.62% and even the 2-year note's yield was inverted with the 30-year at 6.5%. Bond traders attribute the rare inverse in bond yields to "a flight to the quality of the long bond" from equity markets. Also, the US government is buying back long bond debt reducing supply, boosting price and sinking the yield.
Due to the supply concerns in the bond market, most traders don't believe the current bond yield curve inversion holds any value as an economic forecasting tool. Historically, such inversions have often indicated an economic down turn is just ahead.
In Apple related businesses, Akamai lost 11 1/16 to close at 270, while IBM traded lower by 1 7/8 to close at 111 5/8. Adobe slid 5 1/8 to close at 57 9/16. ARM Holdings traded higher by 3/4 to close at 158 3/4. Earthlink, Apple's new Internet partner, traded down 1 1/8 to 42 7/8. Motorola lost 7 7/8 to close at 128 1/8.
Apple's competitors: Compaq met with analysts to say they expect 15% top line growth this year, but Merrill Lynch claims Compaq is too optimistic. Merrill expects the company can't do better than 10 to 11% growth. Merrill also said they doubt Compaq can achieve their stated goal of reducing their indirect PC sales from 85% to 35% by year end.Compaq dropped 3/4 to close at 27 1/4.
Dell declined 5/16 to 37 1/4.Gateway gained a fraction to end at 60 3/16. Hewlett Packard gained 7/16 at 108 15/16. Intel shares dropped 3 15/16 to close at 94 3/16. Shares of Microsoft were down 1/2 to close at 98 1/4.
In other market news: The gross domestic product surged by 5.8% in the fourth quarter shattering economists' forecasts for a 5.2% growth. The GDP, which is a measure of the goods and services produced by the US economy, showed a healthy 4% growth for 1999, slightly down from the 4.3% rate for 1998. Consumer spending is the main force propelling growth in the US.
The Labor Department said the employment-cost index rose 1.1% in the fourth quarter, its fastest pace since the first half of 1999 and up from 0.8% in the third quarter. The index climbed 3.4% in 1999 matching 1998's pace.
Apparently, the stock market interpreted this data as inflationary and investors are racheting up their expectations for high interest rates going forward in 2000.
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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