The markets reacted wildly in early trading to the news of horrendous accounting woes at telecommunications giant WorldCom. The news of expense misallocations to the tune of $4 billion sent foreign markets reeling downward overnight and caused very heavy selling pressure in early New York trading.
The NASDAQ Composite Index fell through its post-9/11 lows to establish a new 52-week low in intra-day trading. The S&P 500 Index came within 10 points of its September lows while the Dow Jones Industrial Average fell below the 9,000 point level in morning trading.
Wednesday Afternoon Trading
The markets recovered from the shock of the WorldCom news but the battered US Dollar continued to sink against the Japanese Yen and the Euro. The dollaris continuing slide raises the prospects of higher prices for many imported goods in the US. The impact of the falling dollar deepened the concerns of traders in foreign markets for companies that depend heavily on US trade for revenues and earnings.
Toward the end of the day bargain hunters pushed the indexes higher, believing that todayis sharp sell-off which dropped the major indexes either to new 52-week lows or near new 52-week lows represents a possible market bottom. However, despite the gains in the indexes in afternoon trading, declining stocks far outnumbered advancing stocks during the heaviest trading day of 2002. The Dow Jones Industrial Average finished down 6.71 at 9,120.11. The S&P 500 was down 2.61 at 973.52. The NASDAQ Composite Index ended up 5.34 at 1,429.33 .
Overshadowed by the WorldCom woes, the Federal Reserve Boardis Open Market Committee voted to maintain interests at their current levels, noting uncertainty as to the pace of the economic recovery but confident that the is poised to continue its current growth trend.
AppleOn Wednesday EquityOutlook.com issued a short-term "Outperform" rating on Apple. A more ominous report on Apple was posted on CNET News. There are serious concerns in the market that iMacs are being stockpiled at distributors and retailers due to a lack of interest by consumers in new PCs. For example, Apple distributor Ingram Micro is said to have 2,600 new iMacs in stock, equal to fifteen weeks inventory at the current sales pace. Apple uses a select group of distributors to sell product to authorized Apple resellers. What is not factored into inventory reports are the increase in sales made directly by Apple through its online store, Apple retail stores and Apple Education. Appleis shares have floundered since its recent earnings warning with little information for investors as to when the Cupertino-based company expects an upswing in sales to consumers and professional customers. Apple closed at $16.55 on the day, down $.59 on volume of almost 10 million shares.
Gateway
The San Diego-based PC mini-major continues to languish in an economy hostile to PC makers. Gatewayis stock stood at $4.35 when trading ended on Wednesday, down $.06. In intra-day trading Gateway matched its 52-week low of $4.26 per share. The companyis market value has withered to about $1.4 billion, just $300 million or so above its reported cash holdings of about $1.1 billion.
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