Second Best Day Ever for the Nasdaq, Apple’s Stock Rallies Over 10%

Eureka! Itis hard to imagine a dreamier scenario for the stock markets this lovely Friday the 13th. On the Nasdaq the bulls came off the year-to-date low swinging, after days of gloom topped the scare in the Middle East. Appleis stock bounced by over 10% on continued high volume.

Could this be the end of the now habitual October bear raid? If so, it will be the beginning of the best time of the year to own stocks historically. Abby Joseph Cohen forecasts the S&P 500 will hit 1575 by yearis end, assuming 8% profit growth. She sees no sign of a recession and forecasts energy prices will be lower in a year than they are today.

Trend Tabs, a company that keeps track of money flow in the markets, reported what looked like capitulation among retail investors this week. Trend Tabs reported that outflows from mutual funds this week was $9.7 billion — the largest pack of redemptions in a a one-week period ever. The market watcher was quick to point out it wasnit part of a larger trend. Even as the market fell through, October mutual funds experienced a net positive cash inflow.

Meanwhile, Gateway reported strong earnings yesterday afternoon and today the analystis were back tracking on their recent wave of pessimism. "The results should remind investors that the PC market is good, not great and not a disaster!" wrote Morgan Stanley Dean Witter analyst Gillian Munson. "PC demand hasnit really fallen off a cliff and is indeed sufficient for well-executing companies to deliver expectations," wrote Salomon Smith Barneyis Don Young, according to CNET News

Appleis stock roared off its lows by 2 1/16 or 10.31% to close at 22 1/16 on amazing volume of 22 million shares.

Apple computer said it will offer rebates on G4 Cubes and PowerBooks for the rest of the year.

CS First Boston initiated coverage on Appleis stock this morning with a buy rating. And Charles Schwab notified its customers: "Analystsi Consensus Earnings Estimate for this quarter changed by 9.68%. The Consensus Earnings Estimate increased from $0.31 to $0.34."

For whatever itis worth, an average of 11 analystsi 4th quarter earnings estimates is now higher by a few pennies than the recent guidance lower to $0.31 per share from $0.45.

AAPLis P/E ratio is now 12.1, slashed by more than half from 29 in August.

A consensus of 11 estimates was for Apple to earn $1.85 per share in 2000. A new First Call report on Apple shows the annual EPS (earnings per share) forecast for 2000 is now $1.80, which doesnit seem so bad considering Apple earned only $1.29 per share in 1999. But looking forward the steady upward EPS curve is broken in 2001 forecasts.

In August, the EPS forecast for 2001 was $2.12 itis now has fallen to $1.73, well below this yearis earnings. First Call had predicted earnings of $2.52 for Apple in 2002, now they wonit venture a guess.

The updated PEG ratio (P/E Ratio divided by expected growth rate) for AAPL is 0.81, while the PC industryis average PEG is more than twice as expensive at 1.88. The Nasdaq average PEG is 1.83.

The Nasdaq steadily rallied all day, up 241 points (7.88%), to close at the dayis high of 3316 on huge volume of 2 billion shares. The session was the second best percentage gainer on the Nasdaq ever. Semiconductor stocks climbed over 10%. Computer stocks were up 8% as a group.

The Dow rallied 156 points (1.55%) to 10190, on volume of 1.2 million shares. Banks and brokerages made a come back. Meanwhile, crude oil prices fell over 4%.

The S&P 500 climbed 44 points (3.34%) to close at 1374.16.

In Apple related businesses: Akamai climbed 6 1/8 to 49 dollars. The content-delivery leader announced a new storage service for big audio, video and other files, representing a significant expansion of its business into new territories.

Adobe rallied 15 5/16 to 145 1/8. Earthlink climbed 9/16 to 7 1/2. IBM jumped 6 dollars to 109 1/8.

Appleis competitors: Dell gained 4 1/8 to 27 5/16. Compaq gained back 2.67 to 25.20.

Shares of Microsoft did not partake in todayis rally , down 11/16 to 53 11/16, as investors ponder the slew of private suits seeking damages for individual antitrust violation incidents.

Intel soared 3 1/4 to 40 3/8. A Bloomberg report noted, "Profit at the No. 1 chipmaker for computers is expected to rise to 38 cents a share, the average analyst estimate of a First Call/Thomson Financial survey. Intel earned a split-adjusted 28 cents a year earlier. Sales are forecast to rise 18 percent to $8.64 billion from $7.33 billion."Thatis slower then was expected before Intel warned of weaker demand in Europe last month setting off the tech stock slide which continued until today.

Hewlett Packard gained 6 15/16 to 90 5/8. HP actually ended the week higher by 4.9%.

Gateway was higher by 9.48 to 53.11, after the company met expectation for 3rd quarter sales and earnings and forecast a strong 4th quarter. Especially strong were sales to consumers and the company expects that to continue next quarter with analystis estimating 48% growth in profits. Gateway recieved a number of upgrades. But Ashok Kumar of US Bancorp Piper Jaffray lowered his price target on the stock from $82 to $56 today.

In economic news: Consumers spent much more in September partly due to higher fuel costs, but not entirely. Retail sales climbed by a sharp 0.9% for the month, a big chunk of it on new automobiles.

Wholesale prices rose by 0.9% in Septmember, more than expected and the largest gain in 7 months. Wholesale prices were down 0.2% in August.

The Wall Street Journal commented, "The September (wholesale) price surge aside, wholesale inflationary pressures have been relatively stable over the last year. Septemberis PPI was up 3.3% from a year earlier, steady with the 12-month increase through August and just a tad higher than the 3.1% year-over-year rate logged in September 1999. The core index rose 1.2% in September, compared with 1.5% in the year through August."

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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