No Rest For AAPL, But That Might Be the Least of Your Worries

Appleis stock drifted lower as Wall Street made the inevitable, if misleading, comparison between Appleis earnings miss and the nightmare at Xerox. The Nasdaq valiantly tried to rally, but failed. Shades of Octobers past are spooking investors. Even the Dowis blue chip rally, celebrating the Federal Reserveis pause in its jihad against inflation, died out late in the day.

Xerox said they expect a third-quarter loss of $0.15-$0.20 cents per share instead of a $0.12 per share profit forecast previously. The stock price is so depressed and management so demoralized that speculation is circulating the company might be for sale.

The same type of value hunting investors note that the Apple Corporation, as a take over target, is 58% more enticing today than it was last Thursday.

Meanwhile, those visionary analysts over at PaineWebber have, "discovered an overall weakness in the U.S. retail PC sector," according to an Upside.com article. PaineWebber illuminated its clients, "We now have data that would imply broader consumer PC softness," after earlier saying the sales slowdown at Apple was Mac specific.

The Federal Reserve let interest rates hang at 6.5%. However, the Fed said it still believes risks are tipped towards conditions that favor inflation, largely due to the tight labor market and the high cost of oil. The markets took the Fedis comments to mean more interest rate hikes are possible in 2001.

Energy prices are a double whammy for the economy. Rising energy costs slow the economy by acting as a tax on consumer spending power. Later, the higher energy costs work their way through the economy to end up as higher prices for just about everything. The Federal Reserve has the catch-22 task of dealing with the inflationary effects of energy prices. Higher core inflation normally calls for interest rate boosts from the Fed. But higher fuel costs slow the economy, rendering the interest rate sword (which also slows the economy) as a poor choice of weapons to fight energy-cost spawned inflation.

Apple sank 1 15/16 to close at 22 5/16 on volume of 36 million shares. Normal volume is 5 million shares. The stock continues to churn driven by day traders, short traders and other assorted bottom feeders whose strategies thrive on distorted market conditions.

The Nasdaq fell 114 points (-3.20%) to close at 3454 on high volume of 1.9 billion shares. The Nasdaq broke through support at 3500, perhaps on its way to test the yearis low set in May of about 3100.

The Dow climbed 19 points (0.18%) to close at 10719 on volume of 1 billion shares.

John Bollinger of EquityTader.com said on CNBC, the sectors doing the best lately are the defensive havens that fund managers favor when in a bearish mode: healthcare, energy, financial, yield and consumer noncyclicals. However, this is creating an oversold situation in many stocks that present opportunities for stock picking value players.

The S&P 500 dropped 10.08 points (-0.70%) to close at 1426.15

In Apple related businesses: Oracle got the wind knocked out of its sails today, falling 9 1/2 to close at 69 1/4, while waiting for CEO Larry Ellison to talk with analysts this afternoon. Reports after market close claim the meeting was upbeat. "Oracle issued $1,000,000 guarantee that its software will run web sites three times faster than IBM Or Microsoft software", according a headline grabbing company press release.

Akamai fell 2 7/8 to 44 dollars, a new all time low. Earthlink fell 1/4 to 8 3/8, its second 52-week low this week. Adobe climbed 7/16 to 163 7/16. Motorola fell 11/16 to 27 7/16. IBM declined 7 1/4 to 110 9/16.

Appleis competitors: Dell scored another 52-week low, sliding 11/16 to 28 9/16.

Gateway was higher by 1.22 to 50 dollars, after Merrill Lynch upgraded the stock from near term accumulated to near term buy. Itis hard to imagine whois still listening to recommendations after the analysts discredited themselves by their Monty Pythonesque en masse downgrade of AAPL after the fact on Friday. Offering a counter opinion, PaineWebber said Gateway was the most exposed PC vendor, along with Apple, to the soft consumer PC market.

Compaq gave back 0.84 to 27.45. ABN AMRO initiated coverage on Compaq with a "hold", which in effect means do nothing, donit buy and donit sell.

Shares of Microsoft dived 2 9/16 to 56 9/16, you guessed it, another 52-week low. The Redmond giant bought a $135 million chunk of Corel Corp. (CORL), the software maker of WordPerfect and other apps for Linux. Coral traded higher by 2 3/32, 56% pop, to 5 25/32, .

"Under the deal announced Monday, Microsoft will buy 24 million Corel nonvoting convertible preferred shares at $5.63 each for a total of $135 million, making the Redmond, Wash.-based company one of Corelis largest shareholders with a 24.6 percent non-voting stake," the Associated Press reported.

Microsoftis goal is to enlist the support of Corel for Redmondis .NET initiative. Coral was one of the companies Microsoftis attorneys could point to as evidence of free market competition. Today the two software companies agreed to settle their legal disputes and cooperate on establishing Internet standards.

Intel gained 3/16 to 40 5/16. Hewlett Packard lost 5/16 to 93 1/2

In economic news: New home sales fell 3% in August after Julyis hefty boost.

"Meanwhile, the index of leading economic indicators inched down 0.1%, the latest sign that U.S. economic growth is continuing to slow," noted the Wall Street Journal. It was the indexis four consecutive monthly decline.

The Mac Observer Stock Watch Virtual Portfolio set a new low for the year.

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 Apple Stock Watch Special Report.

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