Markets Continue Higher as Apple Prepares to Bite the Bullet

Money sidelined by the last two months of bearishness continues to pour back into the stock markets after yesterdayis spectacular rally. Appleis stock posted a modest gain Friday.

Solid earnings results posted by tech leaders such as Microsoft, Sun Microsystems, Nokia, EMC and Texas Instruments have added a sense of confidence to investorsi new found optimism.

According to the Wall Street Journal, "Short-selling activity through mid-October on the New York Stock Exchange hit a record for the second month in a row, as some bearish investors increased their bets on a pullback. Indeed, based on some of the stock marketis drops this month, the short-sellers made some prescient decisions. Then again, more rallies like Thursdayis will have the bears licking their wounds."

High short interest means in the event of a rally a larger number of shares will have to be repurchased by short traders to return to their lenders than normal forming a bullish positive feedback loop.

Appleis stock climbed 9/16, or 2.97%, to close at 19 1/2 on continued high volume of 14 million shares.

JP Morgan analyst Daniel Kunstler, talking about Appleis lowered projections for the Christmas season, told Mercury News, "The reason itis so brutal is, God bless them, they donit want to play monkey business with channel inventories. The worst is still ahead of them because they canit ship anything at all until the channel inventory is cleared out. Theyire essentially forced to curtail their revenue."

As Steve Jobs said in Wednesdayis conference call: "Rather than reducing it (inventory) gradually over the next several quarters, we have decided to reduce it to a normal level by the end of this quarter. This will result in a second disappointing financial quarter, even though our sell-through sales should be moderately strong. Our plan is to be back on track for the January quarter, and we remain very excited about our products and programs for 2001."

The Register claimed that Apple may allow retailers to stock certain Mac items the company has only offered via the online Apple store. This would include the G4 Cube, lime-colored iBooks, the Pro Mouse and Keyboard.

Apple announced that it has created two European sales teams to focus on growing the Companyis retail and education market shares.

CNET News reported that market research firm Dataquest clocked worldwide PC shipment growth in the third quarter at 15.2%, while IDC, another market research firm, claims PC shipments grew by 18.3%. The Asia Pacific region appeared to be the strongest for PC sales, while the US pulled its weight and European sales were somewhat slower than expected due to the weak Euro.

The Nasdaq continued higher by 64 points (1.88%) to close at 3483 on volume of 2.15 billion. The index is up over 400 points from the low on Wednesday. Investors are very pleased with this weekis activity in the markets, in spite of the fact that the Nasdaq closed well off the dayis high.

Internet stocks led the march higher after eBay (EBAY) reported a strong quarter.

The Dow climbed 83 points (0.82%) to close at 10226 on volume of 1.17 billion shares to end the week over 500 points off Wednesdayis low.

Crude oil prices closed up over a dollar at $32.95 since few traders were willing to hold short positions over the weekend — an indication that the Middle East situation still possesses the potential to up stage this market.

The S&P 500 climbed 8.14 points (0.59%) to close at 1396.90

In Apple related businesses: Adobe climbed 2 1/2 to 140 1/16. Earthlink climbed 1/2 to 7 1/8. IBM shed 1 3/4 to 94 11/16.

Macromedia rallied 9 11/16 to 84 9/16 after beating earnings earlier this week. Macromedia expects earnings to grow 90 to 100% next year with revenue growth of 55 to 58%.

Appleis competitors: Compaq gained 0.93 to 28.63 after the company once again assured shareholders they have no inventory problems a la Apple.

Shares of Microsoft climbed 3 5/16 to 65 3/16 for an amazing two-day gain of 30%.

Intel jumped gained 1 1/16 to 43 dollars and is higher by 23% this week. Hewlett Packard soared 5 1/16 to 96 dollars. Gateway was higher by 1.98 to 56.98.

Dell claims that new market data confirms the Austin Texas PC vendor has displaced Apple from the top spot in the education market. In Wednesdayis conference call Steve Jobs said that Apple was number one or two, "depending on whose numbers you believe." Dell lost 3/8 to 28 7/16.

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 recently updated Apple Stock Watch Special Report.