Fed Cuts Interest Rates By 1/4 Point, Apple Closes Lower

The Fed cut short term interest rates by 25 basis points, a quarter point for those keeping score at home, bringing the overnight Fed Funds rate to 3.75%. Wall Street, which had been sort of hoping for a 50 basis point cut, reacted by sending stocks to a mixed close, on slightly stronger volume than has been the norm of late. With interest rate cuts of 275 basis points in the last 5 months, analysts and investors alike want to simply see some results in the forum of stabilizing profits and revenues. According to a CBS Marketwatch report:

"The patterns evident in recent months -- declining profitability and business capital spending, weak expansion of consumption, and slowing growth abroad -- continue to weigh on the economy," the Federal Reserve said in a statement. The central bank said easing of pressures on labor and product markets are expected to keep inflation contained.

Ian Shepherdosn, chief U.S. economist at High Frequency Economics, points out that the Fedis accompanying statement was much shorter than in recent months and offered only a "bare bones" analysis.

"There is nothing on the progress being made to reduce inventories, or the risk posed by the continued softness of asset prices, both of which figured in the April and May statements. Given the lack of detail, it is hard to know what prompted the switch from 50 to 25 basis points. We think this is the right decision -- though we expected 50 -- because the signs of incipient recovery should begin to emerge over the next few months," Shepherdson said.

Gil Amelio, former CEO of Apple, has made his first investment as part of the venture capital firm Sienna Ventures. Mr. Amelio has bought a "$5 million stake in Viaquo, a San Jose, Calif.-based company that provides Internet encryption technology."

AP is reporting on the DVD recordable format wars that are being fought at this weekis PC Expo. A number of formats have emerged, each with its adherents, users, and supporters, including the DVD-RW format.

CBS Marketwatch has published an article about Susan Byrne, the president and chief executive of the Westwood Group, that includes some comments about Apple. Ms. Byrne apparently chose Apple over Cisco, a wise move, and this is why:

But the bad news that brought Apple down -- slowing PC sales, general market conditions and an unsuccessful launch of the iMac -- was more than offset by the good news - excess inventories were brought down faster than expected, the new Titanium notebook was a hit and the company drained far less cash from reserves than had been forecast.

With the strong acceptance of its newest products and a forecast of earnings per share in fiscal year 2002 to $1.45, Apple became a buy at $18, Byrne said. Her most pessimistic look at the stock saw it losing 8 percent, but the optimistic outlook saw a gain of 108 percent. The stock on Wednesday closed at $23.34 on the NYSE.

Apple opened up in positive territory but quickly took a nosedive into Negativeland. The stock dipped as far as US$1.25 in the hole, but staged a rally in late afternoon that recovered 90 cents of that loss. Volume was light and the stock traded in a range of 22.50 - 24.

Apple closed at 23.34, a loss of 0.41 (-1.73%), on light volume of 6,680,900 shares trading hands.

The Nasdaq closed at 2074.74, a gain of 10.12 (+0.49%), on volume of 1,719,131,000 trading hands.

The Dow closed at 10434.84, a loss of 37.64 (-0.36%), on volume of 1,141,983,000 trading hands.

The S&P 500 closed at 1211.07, down 5.69 (-0.47%).

Adobe closed at 44.35, a loss of 0.30 (-0.67%), on light volume of 3,075,100 shares trading hands.

Akamai increased its relationship with Yahoo! today as Yahoo! chose Akamaiis EsgeScape service to handle delivery of some customized ads. AKAM closed at 7.59, a gain of 0.18 (+2.43%), on light volume of 2,022,500 shares trading hands. Apple is a large shareholder of Akamai.

Earthlink is the subject of an article at Upside Today called "Can EarthLink survive against Redmond?." ELNK closed at 13.90, up 0.07 (+0.51%), on light volume of 2,099,900 shares trading hands.

IBM is about to suffer a counterstrike from Oracle in the Database Wars. IBM closed at 113.52, up 0.48 (+0.42%) on light volume of 4,814,100 shares trading hands.

Macromedia closed at 18.72, down 0.87 (-4.44%), on volume of 1,081,300 shares trading hands.

Motorola closed at 15.08, up 0.43 (+2.94%), on light volume of 10,830,800 shares trading hands.

Dell wants 40% of the global PC market. DELL closed at 25.74, a gain of 0.74 (+2.96%), on light volume of 29,050,800 shares trading hands.

Gateway closed at 14.78, off 0.11 (-0.74%), on light volume of 1,013,600 shares trading hands.

Intel closed at 28.65, down 0.32 (-1.10%), on light volume of 33,729,700 shares trading hands.

Microsoft closed at 71.14, up a buck (+1.43%), on light volume of 34,601,500 shares trading hands.

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