[4:00 PM] Apple Stock Watch: Merill Lynch Reinstates Apple, Apple Gains Almost 5%
by Wes George
No surprises from the Fed's policy meeting spurred the broader market higher and sent the tech stocks through the roof. As far as tech stock were concerned, the Fed's neutral bias was like waving a checkered flag at a stock car race.
On CNBC, Peter Mancuso of Buttonwood Specialists called it a "relief rally", saying, "we have a battleship in full motion and you know how hard those things are to turn around."
Apple climbed back 4 1/2 points or 4.59%, after yesterday's 2 dollar loss, to close at 102 1/2 solidifying a five day uptrend.
Merrill Lynch reinstated coverage of Apple with a "near-term and long-term accumulate" rating and a price target of $120 per share.
According to Barron's Finance & Investment Handbook, financial analysts "spot accumulation areas when a stock does not drop below a particular price. Technicians who use the on-balance volume method of analysis advise buying stocks that have hit their accumulation area, because the stocks can be expected to attract more buying interest."
The Dow gained 56 points (0.50%) to close at 11200 on volume of 960 million shares traded.
The Nasdaq rocketed 127 points (03.36%) to close at 3911 for the 56th record high of the year on 1.47 billion shares traded. The Nasdaq is now up 77% for the year.
Tech stocks went into hyper-drive right after the Fed's announcement at 2 pm (EST), and never looked back to close right at the high for the day. Chip equipment, telecommunication and the so-called "business to business" Internet stocks were especially strong.
The S&P 500 advanced 15.45 points (1.09%) to close at 1433.54 for a new record high.
The bellwether 30-year Treasury bond climbed 8/32 to close at 95 18/32, while the yield rose to 6.46% from 6.44% on Monday.
The Federal Reserve announced after their FOMC meeting this morning that interest rates and the Fed's neutral bias will remain the same, at least till their next meeting in February. Most bond traders believe that the Fed would have raised rates today if it weren't for the Fed's fear of destabilizing the stock market just ahead of Y2K.
In a statement, the Fed warned: "Based on the available evidence, the committee remains concerned with the possibility that over time increases in demand will continue to exceed the growth in potential supply, even after taking account of the remarkable rise in productivity growth. Such trends could foster inflationary imbalances that would undermine the economy's exemplary performance."
On Wednesday the 3rd quarter gross domestic product data is released. The consensus estimate is for a 5.5% growth rate, holding steady from the 2nd quarter. Most bond traders feel this will guarantee further tightening by the Fed in February.
In Apple related businesses, Adobe traded down 1 7/8 to close at 63 3/8. Akamai was up 15 5/8 to close at 301 7/8, while ARM Holdings gave back a fraction to close at 195 . Macromedia gained 3 5/16 to end at 82. Symantec climbed another 3 3/4, after advancing 5 3/8 yesterday, to close at 64 3/4.
Apple's Power PC partners, IBM and Motorola had a good day. IBM gained a fraction to close at 109 15/16 and Motorola advanced 4 1/8 to end at 138 3/4.
Apple's competitors were mostly higher, Dell was up 2 1/16 to close at 49 3/4 after JP Morgan upgraded Dell to a buy from a market perform yesterday. Gateway lost 1 7/16 to close at 71 9/16. Hewlett Packard was up 2 7/8 to close at 108 3/4. Microsoft gained 3 1/8 to close at 115 7/8.
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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