Queasy Markets Brace for an Economic Slowdown, AAPL Bounces

A solid Nasdaq rally led by bottom feeders and short traders failed late in the session, leaving investors disappointed and nervous ahead of what might be the decisive weekend in the U.S. presidential election. Appleis stock climbed slightly off yesterdayis new 52-week low.

Every day more tech firms warn that theyill miss earnings due to unexpected slow downs in demand. The latest is Micron Electronics, (MUEI) which complained lousy holiday sales will push its forecast of $0.11 per share down to between $0.01 and $0.04 per share. How many ways are there to say new 52-week low? Micron slipped 1 1/4 to 4 1/16.

The economic slowdown is effecting corporations in every sector. DaimlerChrysler (DCX) said it will cut auto production by 20% in the 4th quarter, indicating they expect demand for cars to fall next year as the economy slows.

Oil prices are down 8% from recent highs. Meanwhile, the dollar has weakened as foreign investors repatriate their cash in the wake of the U.S. political uncertainty generated by the election fiasco and fears that the U.S. economy is entering a recession.

Appleis stock climbed 9/16, or 3.41% to 17 1/16 on volume of 6.8 million shares. One classic indication a stock has hit rock bottom is that it actually begins to rise in face of continued negative news.

A C/NET report analyzed Appleis high inventories in light of new evidence that PC demand is significantly lower than last year at this time and concludes that Apple is going to have extraordinarily tough sledding this holiday season. See the full Mac Observer article.

Apple, Dell, Compaq and, now, Gatewayis woes may illustrate larger trends, "The darker view is that the abruptness and size of the decline that Gateway encountered are particularly vivid portents among many others of an approaching economic downturn, " argues the New York Times. "It may also reflect a growing resistance among consumers to upgrading personal computers, a trend that could make life tougher for everyone in the industry now that more than half of American homes have at least one such device."

The Nasdaq gained 47 points (1.82%) to close at 2645 on high volume of 2.1 billion shares.

The Dow shed 40 points (-0.39%) to close at 10373 on volume of 1.1 billion shares.

The S&P 500 climbed 0.25 points to close at 1315.20.

In Apple related businesses: Akamai lost 1 3/4 to 27. Adobe rallied 3 15/16 to 67 5/16 . IBM jumped 2 1/8 to 95 5/8. Motorola lost 1 1/2 to 18 9/16, a new 52-week low. Dell lost 13/16 to 18 7/16, a new 52-week low.

Compaqis board of directors have authorized the repurchase of up to $1 billion of its stock as market conditions present buying opportunities. "At current price levels, we believe Compaqis stock offers a tremendous investment opportunity for the company," Michael Capellas, chairman and CEO, said in a statement.

Compaq has also declared a regular quarterly cash dividend of $0.025 per common share — an unusual move for a technology firm. The dividend is payable on January 19, 2001, to stockholders of record on December 29, 2000. Compaq gained back 1.30 to 22.80 as a number of analysts claimed Compaq was the most-likely-to-succeed bet in the PC sector during 2001.

"Microsoft has recruited a new top deal maker, raising the possibility of more acquisitions and investments," according to the Wall Street Journal. Microsoft hired Richard Emerson, a formerly of the investment firm Lazard Freres & Co., to the new post of senior VP for corporate development and strategy. He started Thursday and reports to Microsoftis CEO, Steve Ballmer. Shares of Microsoft lost 3/4 to 56 5/8.

CS First Boston analyst Charlie Glavin belatedly jumped on the bear bandwagon today when he lowering his earnings and revenue estimates for Intel, yet again. He said recent channel checks showed that PC pricing pressures "continue to ratchet up, with no indications of easing until mid-2001." Intel dived 3 15/16 to 34 1/8.

CSFB also lowered estimates on the semiconductor capital equipment sector, which is usually the first group to show weakness when the chip cycle turns south. "The trough revenue quarter will probably occur in the June/July time frame," said CSFB analyst John Pitzer, "that peak to trough revenue decline should be 15-20%."

Hewlett Packard climbed 9/16 to 32 3/16. Gateway was higher by 0.12 to 19.12.

In economic news: The National Association of Purchasing Managementis (NAPM), an index of manufacturing activity, dropped to 47.7 in November from 48.3 in October. Indications below 50 mean that at least part of the U.S. economy is decelerating. The November reading was below Wall Streetis forecast of 48.9.

Meanwhile, the Commerce Department reported that new construction spending increased a more-than-expected 0.9%. The Wall Street Journal reported, "Octoberis spending level is the highest since March, suggesting the construction sector remains healthy despite a broad slowdown in domestic economic activity."

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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