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May 30th, 2000

[4:00 PM] Apple Stock Watch: Happy Days Are Here Again, Even For Apple
by Wes George

The stock markets decisively rallied today wiping out all of last week's losses. Some pundits even hailed today's turn around as the first day of the much hoped for summer rally. AAPL fell 4 dollars in the first two hours crushed by a "neutral" rating initiated by influential analyst Dan Niles, but the Nasdaq's optimism was contagious. Apple's stock came back more than five bucks late in the day to end in positive territory.

The day started with veteran bull market prognosticator Joe Battipaglia of Gruntal & Co. appeared on CNBC to tell viewers he believes that the Federal Reserve is finished raising interest rates for the year and he expects a strong rally this summer.

Meanwhile, Dan Niles dissed Apple while placing outperform to buy ratings on Gateway, Dell and Compaq among others. Mr. Niles appeared on CNBC later in the day to explain why he's neutral on Apple, "iMac sales aren't doing quite as well as they (Apple's management) thought". He believes Apple's revenues will be on the light side. However, he doesn't expect the company to missing this quarter's earnings forecast.

Mr. Niles is strong on the PC vendors because he forecasts this year we'll see the best revenue growth in the sector since 1996 and the long trend of declining margins should flatten out.

Today's rally was on low volume and the institutional investors were absent. Much of today's action was retail investor bargain hunting and short traders closing out positions.

Meanwhile, in what must be bad news from the Federal Reserve's perspective, consumer confident soared in May to near an all time high at 144.4 up from 137.7 in April. This surprised economists who had expect the index to slip a point in May. Consumers are apparently so confident because of their strong employment prospects, suggesting the economy is not yet ready to slow significantly due to the Fed's half dozen interest rate hikes.

According to the Wall Street Journal, "US consumers also seem set to commit to big-ticket purchases. The percentage of respondents expecting to buy an automobile over the next six months rose to 9.6% from 8.3%. Those expecting to buy a home rose a half point to 3.6%, while the percentage expecting to buy a major appliance rose to the highest level since August."

Paradoxically, last week the April durable goods orders, a measure of items ordered that last three or more years, registered its biggest drop in nine years, indicating the economy is slowing down. May's unemployment rate (expected to remain flat at 3.9%) to be announced on Friday morning could be the crucial piece of data determining whether this rally continues or not.

Apple bounced 1 3/16, after dipping to 81 3/4, to close higher at 87 9/16 dollars on almost twice normal volume of 6.1 million shares.

The Nasdaq soared 254 points (7.94%) to closed at 3459 on volume of 1.4 billion shares. Today was the second biggest single day gain in Nasdaq history.

The Dow leaped 227 points (2.21%) to close at 10527 on weak volume of 839 million shares.

The S&P 500 rose 44.40 points (3.22%) to close at 1422.42.

The Mac Observer Stock Watch Virtual Portfolio bounced back on strong moves by Akamai, IBM and Lucent.

In Apple related businesses: Akamai rocks, the stock rose more than 25% today, up 15 1/16 to close at 75 dollars. ARM Holdings soared 3 1/16 to close at 26 9/16. Adobe was also a huge winner, rising 13 3/4 to close at 116 9/16. Earthlink climbed 1 1/2 to close at 16 1/8. Motorola ended 4 5/16 higher at 96 7/16.

IBM gained 4 1/16 to 111 dollars, although an analyst warned that IBM might not be able to keep up with disk drive demand. Other analysts claimed IBM's disk drive production problems are old news and won't effect the company quarterly results.

Apple's competitors: Hewlett Packard gained 6 3/8 to close at 124 1/2. Compaq climbed 5/16 to close at 26 5/8. Shares of Microsoft were up 1 15/16 to 63 3/8.

Intel soared 8 3/16 to close at 125 3/4. The chip maker dropped prices on desktop Pentium III chips by up to 31% and laptop Pentium III chips by 34%. They also cut prices on the mobile Celeron by 44% and by Xeon processors by up to 29%.

Gateway broke out 5 11/16 to close at 52 1/2. Gateway along with AOL selected Transmeta to provide processors and software for an upcoming line of Internet appliances.

According to a C-Net News article, "The announcement was not unexpected, as Gateway and AOL in late April joined Compaq Computer and others providing Transmeta with $88 million in funding and endorsing its Crusoe chip technology. Gateway and AOL last month unveiled a line of jointly developed Internet appliances--a Web tablet, a countertop appliance and a PC-like desktop appliance--running Linux. At the time, neither company revealed which chip maker would supply the devices' processors."

The bellwether 30-year US Treasury bond fell 13/32 to 102 7/32. The yield, which moves inversely to the price, climbed to 6.09%.

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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