Markets Sell Off Sharply Despite Good Economic News

Early Monday Activity

In early Monday trading the markets continued last Fridayis decline as investors pounded tech stocks from the opening bell. The resignation of Tyco Internationalis CEO under a cloud of suspicion kept pressure on prices in morning trading.

Fridayis Market Recap

When the closing bell rang on Friday the markets recorded another down week with the major indexes finishing the holiday-shortened four-day trading week at levels below their Tuesday start. At the end of the week traders were concerning by the heightened tensions between nuclear neighbors India and Pakistan and the advisories issued to US citizens in the area by the State Department. Traders flocked to the sidelines or to safe-haven stocks such as food and tobacco companies.

The foundation for economic recovery continues to strengthen. Last week the markets received their first positive report on manufacturing activity. Despite last weekis conflicting reports on consumer sentiment, consumers continue to buy while the markets wait on corporate America to increase business spending.

Monday Afternoon Activity

In late afternoon trading on Monday the markets failed to recover from the morning drop despite another positive report on manufacturing activity. According to a Reuters story, The Institute for Supply Management reported that its monthly index of manufacturing activity reached a high in May no seen since February, 2000. The markets endured a dramatic drop in prices during the last hour of trading. The Dow Jones Industrial Average closed at 9,709.79, down 215.46. The S&P 500 fell 26.46 to end the day at 1,040.68. The NASDAQ Composite Index was the big percentage loser on the day, falling more than 3 percent or 53.17 to finish at 1,562.56. AAPL, which dropped more than $.70 in price in early trading, recovered about $.30 of the loss to close down $.41 at $22.89, falling below the $23.00 per share marker.


On Friday Morgan Stanley issued a report suggesting Apple would fall below estimates on the shipment of new iMacs this quarter. Soon after Morgan Stanleyis statement, Smith Barney issued a statement of its own stating the brokerage firm viewed Apple shipments to be on track for the quarter. Apple has not commented on the Morgan Stanley report.

In May UBS Warburg and SoundView raised their earnings estimates for Apple citing strong sales and falling components prices. Increasingly Apple is shipping products through its own distribution systems that do not show-up on traditional sales tracking systems. For example, Apple Education ships directly to schools and teachers, Apple retail stores continue to grow in number and sales made through the Apple online store are .not publicly reported by Apple until the company releases financial statements at the end of each quarter.

With about one monthis production and sales activity remaining in the current quarter, it may be too early for analysts to accurately estimate Appleis revenues and earnings. However, The Mac Observer is following all major Apple-related stories and will provide timely coverage of any major announcement from Apple and any new analyst reports.


IBM has announced that the US governmentis National Centers For Weather Prediction have selected an IBM solution to improve the accuracy of weather forecasts. The solution will be installed in stages and by 2009 will be able to handle 100 teraflops a second. According to IBM, 100 teraflops would require a person working with a calculator more than 80 million years to complete.

IBM is engaged in a tit-for-tat contest with NEC and other hardware manufacturers to build the worldis most powerful super computer. The new weather prediction solution is IBMis latest entry into the worldis fastest super computer competition. The contract is worth more than $200 million to Big Blue over nine years.

Meanwhile, IBMis share price continues to suffer at the hands of wary tech investors. The shares trade perilously close to their recent 52-week low and at levels first reached as a new high back in late 1998.


Last week Macromedia released new versions of its Web content creation products. Macromedia Studio MX and its independent components are designed for both Mac OS X and Windows XP. Macromediais share price, like the share price of its rival Adobe Systems, has fared relatively well over the past year when compared to other companies in the software sector and the broader markets as a whole. Both companies expect to see a pick up in sales from Mac OS X compliant products.

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