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June 1st, 2000

[4:30 PM] Apple Stock Watch: AAPL Rallies On Lower Earnings Forecast!
by Wes George

Woo Hoo! More economic data out this morning shows the economy is slowing and stocks surged in appreciation. Some one reading this a year from now will think we are all crazy. But wait there's more: Apple's stock finally sprang to life, after days of suffering, to rise more than 6.0% on high volume when a couple of analysts lowered their earnings estimate on our favorite stock. Apparently, AAPL's early morning low of $80 3/8 was unsustainable. Some observers speculate Apple's stock buy back program kicked in today.

Donaldson, Lufkin & Jenrette analyst Kevin McCarthy cut estimates for Apple's fiscal third-quarter earnings and revenue. McCarthy said he reduced his earnings forecast for the quarter ending in June to $0.88 a share from $0.90, and his revenue estimate to $1.9 billion from $1.95 billion, after a chat with Apple executives.

Bloomberg News reported, "The analyst, who still rates Apple a 'top pick", said iMac shipments will be less than expected while a weakening euro is making the company's products more expensive for European consumers. The revised 88-cent estimate matches the average of analysts surveyed by First Call/Thomson Financial. Forecasts range from 86 cents to 93 cents.

Then Steve Fortuna of Merill Lynch decided to lower his revenue estimates for the quarter to $1.9 billion too. He projects Apple will sell 445,000 iMacs, down from his earlier forecast of 470,000.

Finally, C-Net News reported , "Earlier this week, analyst Donald M.Young of PaineWebber cut his 12-month price target on Apple shares to $100 from $130."

Construction spending dropped like a rock in April, falling 0.6%, it's biggest decline in a year. Meanwhile, the National Association of Purchasing Management registered slowing growth in the manufacturing sector in May and moderating prices paid for raw materials. Both reports were music to the ears on Wall Street who fear nothing more than further interest rate hikes by the Federal Reserve.

Stay tuned for the May employment report tomorrow morning. Unemployment now at a 30-year low of 3.9% is perhaps the key economic indicator that is driving the Fed towards higher rates, because the tight US labor market is the only significant sign of inflation on the horizon.

Apple climbed 5 1/8 or 6.10%, to close at the day's high of 89 1/8 on more than double normal volume of 8 million shares for a very convincing rally off 80 3/8, the new AAPL intraday low for 2000.

The Nasdaq rallied 181 points (5.34%) to close near the high of the day at 3582 on volume of 1.59 billion shares traded. All of the Nasdaq's sectors participated in today's rally with the semiconductor stocks (SOX) leading the way, up by almost 7.0%

The Dow climbed 129 points (1.23%) to close at 10652 on volume of 955 million shares. Interestingly, the Philadelphia Banking Index (BKX) rose by 2.68% and is up 10% in the last month hinting that traders believe the Fed is near finished with the interest rate hikes.

The S&P 500 gained 28.21 points (1.99%) to close at 1448.81.

The Mac Observer Stock Watch Virtual Portfolio bounced off this week's dismal low, thanks to Apple's and Akamai's strong performance. Lucent also surged 2 7/8 today to close at 60 1/8.

In Apple related businesses: Akamai soared 7 1/8 to close at 73 7/8. Akamai and Excite at Home (ATHM) announced a strategic alliance that will integrate Akamai's Internet content-delivery technology into Excite at Home's broadband network to improve multimedia delivery.

ARM Holdings gained 2 9/16 to close at 128 7/16. Adobe jumped 5 15/16 to close at 118 1/2. Earthlink gained 13/16 to close at 15 5/8. Macromedia bounced 5 7/8 to 85 3/8. IBM sagged 1 3/8 to 105 15/16.

Motorola climbed 5 1/16 to close at 99 dollars on the news that cell phone demand is forecast to continue strong through out the year.

Apple's competitors: Intel rose 5 bucks to close at 129 11/16. Gateway lost 1/2 to close at 49 dollars. Compaq lost 3/8 to close at 25 7/8.

Hewlett Packard rocketed 14 5/16 to close at 134 1/2 after a thrilling meeting with analysts where revenue growth was pegged up to 15% accompanied by a prediction for improving operating margins.

Microsoft climbed 2 bucks to 64 9/16. In Microsoft's continuing antitrust woes Judge Jackson granted the prosecution's request for more time to file addition written arguments supporting their break up proposal in the wake of Microsoft's accusation that the prosecutor's proposals are too vague.

The bellwether 30-year US Treasury bond climbed 23/32 to 104 23/32. The yield, which moves inversely to the price, dropped to 5.95%.

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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