A Hard Landing For Earnings Growth? AAPL Hits New Low

Stocks tumbled lower for a fourth day, this time with huge trading volumes, as Gateway warned it wonit meet 4th quarter estimates by a long shot. The bad news turned a bearish market into an even gloomier place. Fortunately, a few brave investors cut the Nasdaqis, and Appleis, losses in the afternoon. Apple hit lows not seen since March of 1999.

Gatewayis stock price was slashed by 10.50 or -35% to 19 dollars in a scene eerily reminiscent of the "speed bump" warning delivered September 28 by Appleis Steve Jobs and Fred Anderson, which precipitated AAPLis fall from grace on Wall Street.

Gateway warned it expects 4th quarter operating income of $0.37 per share, way below First Callis $0.62 per share estimate. Figuring in a $200 million dollar charge to write down some investments and assets, Gateway could post a net earnings loss of $0.02 per share when the company reports in late December.

A 5-year chart of the Nasdaq shows that the tech heavy index has fallen to an important support level, roughly at 2500, but in those 5-years the Nasdaq has still climbed about 170%, even if it is 50% lower than its March high.

The long-term secular bull market trend line can support a dip to 2000 on the Nasdaq before officially breaking down. While tech stocks could continue to slide deeper, now is the time to make decisions based on the macroeconomic picture. Do you believe in the recession scenario? Even a mild recession will make it impossible for many tech sectors to meet their growth projections for 2001 and that would lead to an extended tech stock bear market.

Or will the global expansion of the information economy continue to support earnings growth, driven by the expanding Internet and unprecedented productivity gains created by the accelerating pace of innovation?

Appleis stock lost 1 1/16, or -6.05%, to close at 16 1/2 on huge volume of 14 million shares. A quick look at a 3-year AAPL chart shows the stock has finally arrived at the low end of its support level.

With a PE ratio of 7.5 and $12 in hard cash per share, Appleis entire business infrastructure and its future potential is being valued at an astoundingly low $4.50 per share! Market forces have assigned Apple a market capitalization of $5.5 billion, but Apple has $4.03 billion in the bank. Of course, who is in the mood to buy PC stocks today? And thatis precisely the reason AAPL is priced so low.

The Nasdaq shed 108 points (-4.02%) to close at 2598 on the 2nd highest volume in Nasdaq history at 2.6 billion shares. Is this the big downside flush-out traders have been expecting before the market could move higher? Or was the mild afternoon rally merely short traders covering ahead of what could be a decisive weekend in the U.S. presidential stalemate, which could lead to a substantial rally early next week?

The Dow dropped 214 points (-2.02%) to close at 10414 on the highest trading volume day in history with 1.5 billion shares changing hands.

The S&P 500 shed 26.93 points (-2.01%) to close at 1314.98.

In Apple related businesses: Akamai lost 2 3/16 to 28 3/4. Adobe dipped 15/16 to 63 3/8. Earthlink lost 5/16 to 6 1/2. IBM shed 6 5/16 to 93 1/2. Dell dropped 2 9/16 to 19 1/4, a new 52-week low.

Compaq lost 1.20 to 21.50. Shares of Microsoft lost 7 11/16 to 57 3/8.

In economic news: Personal income fell an unexpected 0.2% in October, its first drop in about two years, and yet another sign of a slowing economy. Meanwhile, weekly jobless claims have recently jumped to a two-year high.

The Wall Street Journal reported sales for the holiday season are off to an inauspicious start. "Some analysts say that retailers will have to resort to bigger price cuts in the next week to draw consumers. Customer traffic has slowed substantially in malls and department stores since last Friday, according to RCT Systems, a market-research firm."

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 Appleis stock activity, visit our updated Apple Stock Watch Special Report.

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