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May 25th, 2000

[5:00 PM] Apple Stock Watch: Selling Into The Rally Melts AAPL
by Wes George

The day started with an extension of yesterday's healthy rally as the tech stocks led the way higher. However, as is common in bear markets, a bit of bad news brought the whole house of cards tumbling down in an afternoon sell-off. Tomorrow is expected to be very weak ahead of the long Memorial Day weekend.

Merrill Lynch said that the Goldman Sachs Group (GS) might not meet its quarterly earnings estimates due to the stock market slump and the dearth of initial public offerings (IPOs). The brokerage firms nose dived and the rest of the markets followed suit.

Selling into rallies will continue until the technology leaders selling at 100 plus times earnings and companies with no earnings at all decline to levels that can be supported. Today's negative performance almost certainly assures the Nasdaq will eventually trend below 3000 and the Dow will slide below 10,000 before finding a solid bottom to rally off.

Apple fell 7/16 or -0.48% to close at 87 1/4 on volume of 3.6 million shares. AAPL wants to rally but can't given the crummy market conditions. The stock traded as high as $92 11/16 before the sell-off ensued.

ZDNet News reported that IBM plans to release a series of new PowerPC 750 (G3) processors that will boost performance to as high as 700 MHz, while reducing energy consumption. "The late-summer arrival of the new G3 chips could coincide with a rumored next-generation PowerBook from Apple... According to sources, Apple's new pro PowerBook, tentatively scheduled for September, will be based on the same motherboard design as the current PowerBook generation, which Apple CEO Steve Jobs unveiled at February's Macworld Expo/Tokyo."

The Nasdaq dived 64 points (-1.97%), after being in positive territory most of the day, to closed at 3206 on volume of 1.5 billion shares.

The Dow fell 211 points (-2.01%) to close at 10323 on volume of 976 million shares.

The S&P 500 dropped 17.53 points (-1.25%) to close at 1381.52.

The Mac Observer Stock Watch Virtual Portfolio is so underwater.

In Apple related businesses: Akamai lost 4 dollars to close at 62 7/16. ARM Holdings lost 1 3/4 to close at 22 1/2. Adobe traded down 1 5/8 to close at 104 1/2. Earthlink fell 15/16 to close at 14 7/8. Motorola slipped 5 bucks to close at 92 dollars. IBM gave back 3 1/4 to 106 3/8.

Apple's competitors: Hewlett Packard lost 2 3/8 to close at 116 1/4. Compaq fell 5/16 to close at 26 13/16. Shares of Microsoft dropped 4 1/16 to 61 1/2, a new 52-week low after a Goldman Sachs analyst noted Microsoft is more than the sum of its parts. See the full Mac Observer story. Intel lost 2 3/16 to close at 115 3/16.

Gateway beat the bear trend, rising 15/16 to close at 47 7/8 after announcing a joint venture to help companies bring workers online.

It was a big day for economic news: The second quarter gross national product came in at 5.4%, the same as last quarter although down from the 7.4% growth in the 4th quarter of 1999. Consumer spending, which accounts for two-thirds of all economic activity, is growing at a strong 7.5%.

According to the Wall Street Journal, "All that spending, pulled the nation's savings rate -- savings as a percentage of disposable income -- to a quarterly low of 0.6%, worse than the government's initial estimate of 0.7% and down from the previous all-time low of 1.8% recorded in the fourth quarter. But it wasn't as dire as it seems because the rate doesn't capture such things as rising stock values and higher real-estate values for homes."

Meanwhile, US exports climbed 5.5% in the first quarter, much better than the decline expected by economists, but still down from the fourth quarter's 10.1%.

Perhaps the best economic news today was sales of existing homes slipped in April by 6.2%, the biggest drop since January, indicating that the higher interest rates instigated by the Federal Reserve are starting to cool the US economy.

The bellwether 30-year US Treasury bond soared late in the day by 1 5 /32 to 101 28/32. The yield, which moves inversely to the price, fell to 6.11%. The bond markets close early tomorrow for the Memorial Day weekend.

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.


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