Apple Stock Watch - Fed Disappoints, Stocks Drop, Apple Loses 4.2%

by , 9:00 PM EST, March 20th, 2001

The Fed moved to lower interest rates by 50 basis points (a half point), much as the market expected. That move was greeted with a big sell off. It was like someone flipped a light switch. The morning and early afternoon trading sessions showed various levels of gains, though light volume, as traders mostly sat on the sidelines awaiting the Fed move. Tech stocks, including Apple, traded higher during the gentle lull until about 2:15 PM EST. At that moment the Fed announcement was released and within seconds, both the Dow and the Nasdaq had erased all gains and were trading in the red. A brief rally was staged a few minutes later, but then both indexes headed south with a vengeance.

For those not in the loop for the last few weeks, the Fed lowered rates to spur the economy. With today's half-point drop, the Fed has lowered rates by a point and a half since the middle of January, a precipitous decline indeed from the traditionally slow-moving Federal Reserve. The problem is that Wall Street wanted to see a 75 basis point cut (3/4 of a point) instead of 50 basis points. Wall Street is deeply disturbed by continued shortfalls in corporate earnings and wanted to see the Fed move more aggressively.

Fed Chairman Alan Greenspan did indicate that they considered economic growth to be the biggest threat to the economy. Supply outweighs demand, according to the body, and this should have been taken as a sign that the Fed is not afraid to cut rates further. Had Mr. Greenspan's comments included a cautionary tone concerned about inflation, more cuts any time soon would not be likely. Still, it wasn't enough for the markets, and the Nasdaq hit a 28 month low of 2857. According to a Reuters report:

"(The Fed is) dancing to the music of the economy, and not responding to cries for help from the stock market," said David Jones, chief economist at futures brokerage Aubrey G. Lanston & Co.

The stocks we track all closed in the red with the exception of Adobe, which posted a 3% gain, and Earthlink, which ended the day unchanged. Apple started off the day in positive territory, trading in light volume. Once the sell off hit, AAPL held onto its gains for some 30 minutes before it too followed the downward trend. C|Net reported that Mac OS X will not support CD-R or CD-RW burning. Very bad news in our opinion, though it is still possible that Apple will release an update of some sort on the 24th. On24 called Apple a "diamond in the PC rough."

Apple closed at 19 11/16, a loss of 7/8 (-4.26%), on strong volume of 8,915,400 shares trading hands.

The Nasdaq closed at 1857.44, a loss of 93.74 (-4.80%), on volume of 2,018,682,000 shares trading hands.

The Dow closed at 9720.82, a loss of 238.29 (-2.39%), on volume of 1,235,980,000 shares trading hands.

The S&P 500 closed at 1142.62, a loss of 28.19 (-2.41%).

Akamai resumed its downward trek to close at 8 7/8, a loss of 19/32 (-6.27%), on heavy volume of 5,177,900 shares trading hands. Apple is a large shareholder of Akamai.

Adobe saw coverage initiated by Thomas Weisel at a Market Perform. The stock was one of the few winners and closed at 32 13/16, a gain of 1 1/16 (+3.35%), on heavy volume of 8,221,200 shares trading hands.

IBM dipped back below the 90 mark to close at 88.30, a loss of 4.30 (-4.64%), on strong volume of 10,102,700 shares trading hands.

Motorola closed at 14.12, a loss of 0.88 (-5.87%), on light volume of 9,902,500 shares trading hands.

Earthlink was the victim of "problems" at AOL, but said today they were satisfied that the problem was being resolved. ELNK closed at 10 3/4, unchanged, on strong volume of 4,327,400 shares trading hands.

Gateway closed at 15.51, a loss of 0.75 (-4.61%), on light volume of 1,932,200 shares trading hands.

Dell closed at 24 1/2, down 3/8 (-1.51%), on volume of 37,304,100 shares trading hands.

Hewlett Packard closed at 29.31, a loss of 1.19 (-3.90%), on volume of 5,879,000 shares trading hands.

Intel closed 24 5/8, a loss of 2 7/16 (-9.01%), on strong volume of 64,447,400 shares trading hands.

Microsoft closed at 52 11/16, a loss of 1 5/8 (-2.99%), on strong volume of 45,912,800 shares trading hands.

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Apple's stock activity, visit our updated Apple Stock Watch Special Report. You can also check out our Apple Financial Boards, a new moderated forum for Apple Investors and people who are interested in Apple's financial dealings.

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