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April 13th, 2000

[5:00 PM] Apple Stock Watch: Wall St. Slides Again, Apple Bounces Back
by Wes George

Has the Nasdaq put in a short-term bottom or is there more pain to come? That's the trillion dollar question on Wall Street as traders try to call the market bottom. Many of the most promising tech stocks are 30 to 60% or more off recent highs, creating a "blue-light special" buying opportunity, but investors seem intent on waiting for somebody else to test the water first. Apple, a true tech value stock if ever there was one, climbed 4.18% off yesterday's lows.

The Nasdaq is 27% off the high it set of 5048 on March 10th and that qualifies as a bear market in technology stocks. This is a critical level for the Nasdaq since strong corrections typically bottom out at around 33% declines from the recent high, but if support breaks down, a pull back of as much as 66% is possible, as we have seen in many Internet and most biotech stocks already.

The Mac Observer Stock Watch Virtual Portfolio has lost 3.8% in our first week, not an auspicious beginning.

The Nasdaq closed at the day's low of 3676, within 26 points of the April 3rd low of 3650. Investors are nervous that if this bottoming area doesn't hold the next support levels are 100 to 200 points lower.

Technical indicators show the Nasdaq hugely oversold and yet contrarian sentiment, as revealed by the put to call ratios doesn't show enough bearish sentiment to relieve the nervousness among those holding long positions. The fact that breadth is poor and there is a lack of demand for puts indicates that the Nasdaq's over sold condition could continue into next week.

Many tech stocks have been savaged: Akamai has been slashed by 72% from its high, CMGI is off 56%, Amazon is cut in half and Apple is down 23%. Bear market? No doubt. How long will it last? Nasdaq bear markets have been historically brief compared to those on the Dow or NYSE. However, this is a poor time of the year for the Nasdaq as money flows toward tech stocks tend to weaken during the spring. We may be in for an extended down turn.

Apple climbed 4 9/16 to close at 113 13/16 on volume of 4.73 million shares. Yesterday's Banc of America upgrade on AAPL to a strong buy recommendation helped the stock to soar by $10 per share early in the morning, but the weakness on the Nasdaq was contagious.

The Nasdaq sagged another 92 points (2.46%), to close at 3676 on volume of 1.9 billion shares traded. The Nasdaq is down 9.5% for the year.

The Dow fell 201 points (1.81%) to close at 10923 on volume of a billion shares.

The S&P 500 lost 26.66 points (1.82%) to close at 1440.51.

In Apple related businesses: Akamai lost 4 3/4 to close at 88 dollars. ARM Holdings gained 2 7/16 to close at 152 7/16. Adobe climbed 1 1/2 to close at 113 9/16. Earthlink lost 2 1/16 to close at 12 13/16. Macromedia fell 3/4 to 60 1/4. Motorola gained 3/4 to close at 116 5/8. IBM shed 3 1/8 to 110 5/8.

Apple's competitors: Hewlett Packard lost 3 1/16 to close at 131 15/16. Intel lost 3/4 to close at 121 1/8. Compaq climbed 3/16 to close at 26 5/16. Shares of Microsoft lost 1/8 to 79 1/4.

Gateway shed 4 1/8 to close at 51 1/8. According to a company press release just out: "First quarter 2000 net income increases 37 percent year-over-year to $136 million - Quarterly earnings per diluted share increase to $0.41, up 32 percent over last year - Revenues increase 11 percent to $2.34 billion - Non-PC income exceeds 25 percent of overall income - Gateway ISP nets another 300,000 subscribers in the quarter, remains fastest-growing paid ISP." Gateway was expected to announce earnings of $0.41 per share.

After the market closed Sun Microsystems (SUNW) reported earnings of $0.26 per share in the 3rd quarter above estimates of $0.23 and quarterly revenue above $4 billion for the first time ever. Sun traded down 2 1/4 to close at 77 3/4.

Yesterday, Advanced Micro Devices (AMD) beat their earnings estimates twice over at $1.15 per share, estimates were for only $0.52 per share. AMD traded down 3 1/4 to close at 72 3/4. Rambus (RMBS) met earnings and Seagate (SEG) beat earnings yesterday.

In Economic News: Producer Price Index rose 1% in March, the same as in February. The culprit: the biggest one-month gain in oil prices at 5.8%, since 1990. Economists had forecast a more tame 0.5% increase. Other prices rose only a mild 0.1% in line with expectations. However, import prices rose over 1% in March after deleting fuel costs.

The Wall Street Journal noted, "Businesses are starting to pass on their higher costs. The National Association for Business Economics said Thursday that U.S. companies endured a sharp increase in costs in the first three months of the year. According to the group's survey, 29% of the 109 firms the association surveyed reported they had decided to raise prices, forced by the tight job market to raise wages to recruit skilled workers. Of those that decided to raise prices, 94% said they had already implemented the increases."

Tomorrow morning watch for the all important Consumer Price Index and Industrial Production Numbers for March. Strong productivity gains and steady or slightly rising CPI could set the stage for a rally, along with anticipation of a strong week of good earnings for the tech stocks next week.

The bellwether 30-year US Treasury bond climbed 7/32, after selling off most of the day, to 106 12/32. The yield, which moves inversely to the price, dropped to 5.87%.

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. We also have many of these same quotes reported live (20 minute delay) on our home page. For other stories regarding Apple's stock activity, visit our Apple Stock Watch Special Report, as well as The Mac Observer Virtual Stock Watch portfolio.


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