[4:00 PM] Apple Stock Watch: Apple's Whiplash Roller Coaster Ride
by Wes George
Tech stocks sank like a rock all morning, then did a convincing rebound late in the day. The story behind the action is bonds, interest rates and the two day Fed meeting that starts tomorrow. Wall Street is obsessed with fears of inflation and the Fed's soon to be unveiled respond to the challenge of keeping inflation down. Nevertheless, intrepid bargain hunters were stalking the blue chips and select tech stocks all day.
Apple gained 2 1/8 or 2.09% to close at 103 3/4, but that hardly tells the whole story.
Today AAPL created an important bottom reversal pattern according to traders who utilize technical analysis. While volume showed a large increase from recent sessions, shares of Apple slid as low as 94 1/2 dollars by mid day with 6.25 million AAPL shares trading hands. Often the culmination of a stock sell off coincides with a spike in volume and gut wrenching volatility.
Meanwhile, Apple's investment in ARM Holdings soared in value after the company announced its pretax profits doubled in the fourth quarter and plans for a 5-for-1 stock split.
CBS MarketWatch reported, "The company said royalty revenues were a major factor in boosting operating margins from 18 percent in 1998 to 25 percent in 1999 as a whole. In the fourth quarter, royalties constituted 23 percent of total revenue, up from 17 percent in the same period of 1998." Shares of ARM Holdings rose 30 dollars or 19% to close at 188 15/16.
Fletcher and Faraday reiterated their recommended list of tech stocks announced earlier this month. Apple was highlighted as a buy along with Motorola, IBM, Oracle, Dell and others.
The Nasdaq climbed 53 points (1.37%), after sagging 150 points, to close at 3940 with 1.5 billion shared traded. The Nasdaq was down over 10% from the year's high intraday in what Wall Street considers correction territory. Internet stocks were weak, semiconductors led the way up. There were 17 days of triple digit price swings in the Nasdaq during January.
The Dow was in higher territory all day, helped by the financial service stocks to a gain of 201 points (1.88%) to close at 10940, on volume of 0.9 billion shares traded. The utility index is the only major index to end January in positive territory up 8.4%, a sign of just how conservative investors have become in 2000.
The Best performing business sectors of January: The entertainment stocks, (such as Disney) up 12.4%, the semiconductor sector, up 9.0% and the biotech stock, surging 7.4% for the month.
The Worst performing sectors of January: Airlines, hit hard by higher fuel prices, were down 15.2% and software slid by 11.7% during the month.
The S&P 500 climbed 34.30 points (2.52%) to close at 1394.46. In January the S&P 500 ended down 5.4% for the month, close to its all time worst performance for a January at 7.6% in 1976. The S&P's best January was in 1987, up 13.2%.
The bellwether 30-year US Treasury bond traded down 13/32 to 95 9/32 dollars, pushing the yield up to 6.48% from 6.42% on Friday. 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 20 15/16 to close at 249 1/8, Adobe slid 2 1/2 to close at 55 1/16. Earthlink, Apple's new Internet partner, traded down a fraction to 42 3/4. Motorola soared 8 1/4, along with the strong semiconductor sector, to close at 136 1/2, while IBM traded up 11/16 to close at 112 1/4.
Apple's competitors: Compaq gained 3/8 to close at 27 7/8. Dell climbed 1 3/16 to 38 7/16. Gateway gained 1 1/8 to end at 61 3/16. Hewlett Packard gave back 1/2 dollar to close at 109 1/4. Intel shares climbed 5 dollars to close at 99. Shares of Microsoft were down a fraction to close at 97 7/8.
PC vendors, such as Dell and Gateway have recently attributed weak earnings in their fourth quarters to a microchip shortage. Yesterday, a Reuters' article reported that much of the shortage was due to supply chain disruptions in Taiwan caused by the earthquake there last autumn.
According to the Reuters' article, "Prices of DRAM, the basic building block for computer memory, spiked sharply higher due to panic stockpiling after the Taiwan quake, but have since eased as damage to components makers was less than feared and corporate computers sales dropped as companies took precautions on the millennium bug."
Analysts expect the demand on the DRAM and motherboard manufacturers in Asia to remain intense in 2000 because the component makers have not expanded capacity in recent years due to four-year slump in the cyclical semiconductor industry, which only returned to a growth phase in 1999.
In other market news: Personal income increased, a bit slower in December at 0.3%, than forecast by economists, after growing 0.4% in November. Spending by Americans rose by a solid 0.8% for the strongest gain since August, after a big gain of 0.7% in November.
In 1999, overall income for Americans rose 5.9%, the same as in 1998, while wages were up 6.8%.
The Wall Street Journal reported, "Many analysts expect the Federal Reserve to lift interest rates by a quarter of a percentage point at the end of a two-day meeting Wednesday, to slow the red-hot economy and stanch inflation. Robust consumer spending has been the prime fuel of the economy's strength. Some economists are thinking a .5 percentage point increase in rates is a possibility."
"The central bank raised interest rates three times last year, making borrowing more expensive for millions of American consumers and businesses. But even with those increases, the economy has powered ahead at a pace that many economists fear can't be sustained without triggering inflation."
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.
Apple
|
