China Incident Weighs Down Stocks, Apple Off By 2%

It was a bloody day on Wall Street as tech stocks and other sectors all took a loss. The biggest factor that impacted todayis trading seems to be the fracas between the US government and China. For those hiding under a rock today, a US spy plane hit a Chinese jet on Monday morning (China time). Both planes seem to have landed and all 24 US servicemen are reportedly fine. The Chinese government isnit giving access to the servicemen or the plane, which technically violates any number of international treaties. President Bush is posturing (as would any President), and no one on the US side seems to be acknowledging the fact that it was a *spy* plane on a *spying* mission. Quick show of hands: who thinks that the Chinese government is going to obey international laws on anything they donit want to, especially in this situation? Hence the pressure on the stock markets. CNN has a nice story on the incident itself. Some financial reactions according to Reuters:

"It would seem this China news is a depressant. Something of that nature is going to bring out the sellers,ii said Tom Sparico, managing director of equities at Bengal Partners. "The underlying trend is still down anyway. The economy is continuing to slow down, generally speaking. The horizon for the turn is not visible yet.ii

"Clearly, (the American-Chinese situation) is not a positive signal for the market,ii said Bernard Horn, portfolio manager with Polaris Capital Management, which oversees $90 million. "My suspicion is there is too much economically at stake for the two governments to let this deteriorate into a full-blown diplomatic battle. Hopefully, cooler heads will prevail and this will end up being constructive instead of destructive.ii

On what should be the plus side, the National Association of Purchasing Managers Index (NAPM) came in higher than expected. This is a measure of manufacturing strength in the US economy and is closely watched by the Fed and every other economist interested in trends. The good news is that the stronger than expected results suggest the economy bottomed out in January and is reaching towards growth again. The bad news is that the stronger than expected results suggest the economy bottomed out in January and is reaching towards growth again. Huh? Thatis right, the fact that the economy may be doing OK after all is considered bad news by those investors and analysts hoping for another inter-meeting rate cut from the Fed. Ainit gonna happen. According to a CBS Marketwatch report:

The NAPM index rose to 43.1 percent from 41.9 percent in February. The index shows that the manufacturing sector was still falling in March, but at a slower pace than in January or February. Read the report.

"It really looks as if the bottomed was reached in January," said Joel Naroff, president of Naroff Economic Advisers. Another economist said calling a bottom now is "premature."

"The inventory correction and the capital spending slowdown-both of which fall disproportionately on factories-MUST run their courses, lasting at least through the summer months," said Ken Mayland, president of Clearview Economics.

Economists surveyed by were expecting the NAPM number to rise to 42.3 percent.

The Dow actually kicked off the day strong, but once the China Incident took root, all three major indexes took off south, running at a good clip. The Dow staged a rally of sorts that turned a 172 point loss into a 100 point loss. The Nasdaq leveled out at the same time and closed down 57 points, near the dayis lows. The Nasdaq also ended the day below 1800 to achieve a new 29 month low. Volume on the Nasdaq was light at 1.8 billion shares traded. Volume for the Dow was moderate.

All but two of the stocks we track ended up the day in the red. Motorola and Microsoft both posted moderate gains.

Apple was included in the Fortune 500 ranking results of the biggest American corporations. Fortune Magazine published the results today. Apple rose from #285 to #236 with a 30% increase in sales over 1999. As we said in our full report, Apple is currently projecting 2001 sales to be in the US$6-US$6.5 billion range, about the same as their 1999 results. Apple was the lowest ranked Fortune 500 companies of the box makers that we track in the Stock Watch.

Apple traded down more than 2%, not bad considering the results from other box makers today. Volume was light as the stock traded in a range of 21.4 - 22.66.

Apple closed at 21.59, off by 0.48 (-2.17%)l, on light volume of 6,089,600 shares trading hands.

The Nasdaq closed at 1782.97, down 57.29 (-3.11%), on volume of 1,848,175,000 shares trading hands.

The Dow closed at 9777.93, down 100.85 (-1.02%), on volume of 1,210,245,000 shares trading hands.

The S&P 500 closed at 1145.87, down 14.46 (-1.25%).

Akamai was hammered for another 13% today. AKAM closed at 7 7/16, down 1 1/8 (-13.14%), on light volume of 1,326,900 shares trading hands. Apple is a large shareholder of Akamai.

Adobe closed at 34, down 0.97 (-2.77%), on light volume of 3,892,500 shares trading hands.

IBM closed lower at 94.66, a loss of 1.52 (-1.58%), on volume of 8,786,500 shares trading hands.

Motorola was one of two winners in the Stock Watch today and closed at 14.70, up 0.44 (+3.09%), on light volume of 8,888,800 shares trading hands.

Earthlink lost 11 1/2, down 5/8 (-5.15%), on light volume of 1,794,900 shares trading hands.

Gateway closed at 15.95, a loss of 0.86 (-5.12%), on light volume of 1,717,700 shares trading hands.

Dell closed at 24 1/16, off by 1 5/8 (-6.33%), on strong volume of 40,064,800 shares trading hands.

Intel closed at 25 51/64, a loss of 33/64 (-1.96%), on volume of 44,922,800 shares trading hands.

Microsoft closed at 55 13/16, up 1 1/8 (+2.06%), on volume of 37,950,900 shares trading hands.

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Appleis stock activity, visit our updated Apple Stock Watch Special Report. You can also check out our Apple Financial Boards, a new moderated forum for Apple Investors and people who are interested in Appleis financial dealings.