Apple Stock Watch - Nasdaq Scores 52-week Low Courtesy of Federal Reserve

by , 5:10 PM EST, December 19th, 2000

A broad morning rally failed when the Federal Reserve decided to leave short-term interest rates unchanged. Nevertheless, the Fed jumped over the expected shift to a neutral bias all the way to a proclivity towards an easing of rates. Apple's stock closed slightly higher.

Observers say a bias change was largely priced into the markets and some traders where even betting on a rate cut. By changing the bias to easing, the Fed admitted the need to lower the federal-funds rate, which is at a 9-year high at 6.50%, but is doing nothing about it at this time. The stock markets seem to believe things are going to get worse before they get better.

The Federal Open Market Committee issued a statement warning the economy is now slowing faster than expected:

"Against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the [Open Market] Committee consequently believes that the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future."

According to the Wall Street Journal, "Recent economic data have suggested that the Fed's six rate increases since June 1999 have had their intended goal of slowing economic growth enough to keep inflation under control without retarding the economy so much that it brings about a recession."

Apple's stock lost 3/16 or -1.32%, after being in rally mode most of the day, to close at 14 1/16 on volume of 6.6 million shares.

"Until Dec. 27, Apple is offering $100 off purchases of $949 or more made through Apple's Online Store for Education," a C/NET News article reports. "The deal is limited to schools, teachers or students who made a recent order from the online store. The rebate is aimed at enticing those customers back for another purchase."

The Nasdaq shed 112 points (-4.30%) to closed at the day's low of 2511, a level not seen since August 1999, on volume 2.3 billion shares traded. The Nasdaq down 38% is poised to have its worst year ever, beating out 1974 when the tech-heavey index was down 35.1%. Today was the 6th consecutive negative session for the index.

If the Nasdaq breaks through 2500, technical analysts say the next support level is at 2330.

Corporate earnings warnings this quarter are up 70% over the 4th quarter of 1999.

The Dow slipped 61 points (-0.58%), after rallying 130 points earlier, to close at 10583 on volume of 1.3 million shares.

The S&P 500 fell 17.14 points (-1.30%) to close at 1305.60 for a new 52-week low.

In Apple related businesses: Akamai lost 3 dollars to close at 28. Adobe gained 7/16 to close at 64.

IBM has signed marketing deals with another four software makers to promote IBM products. Big Blue has signed 40 such agreements in the past year. Shares of IBM lost 3/8 to 90 1/8.

Dell lost 1 1/4 to 18 1/4 after announcing some Dell customers won't be getting their Dimension 8100 PCs and Inspiron 8000 notebooks in time for Christmas.

Steve Ballmer, Microsoft's top dog, sent a 4,000 word memo to employees outlining ways to cut expenses. Microsoft fell 3 dollars to close at 44 13/16, another 52-week low.

In Economic News: The FOMC left the Fed fund rate alone but changed their bias to an easing mode. The Fed meets again on January 31st, about 6 weeks from now. Some economists feel that is too long to wait before lowering interest rates. The last time the Fed lowered interest rates was during the Asian financial crisis in October of 1998. The Federal Reserve hasn't changed the Fed fund rate in the last 5 meetings.

Meanwhile, the U.S. trade deficit dropped from the highest level in history, $33.74 billion, to $33.18 billion in October in spite of higher fuel import costs.

"Exports declined 1.5% to $91.23 billion, following several months of strong growth this year," reported the Wall Street Journal. "U.S. farmers sold fewer commodities such as wheat and corn abroad. Foreign sales of chemicals, newsprint, semiconductors, telecommunications equipment and consumer goods like drugs, tobacco and televisions also dropped."

For other stories regarding Apple's stock activity, visit our Apple Stock Watch Special Report.

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