Markets Worry About the Economy and Now Microsoft Warns

More earnings warnings, this time from financial bellwethers, dragged down the Dow. The Nasdaq made a valiant attempt to reverse recent losses, but settled lower for the third day in a row. Appleis stock fell to 52-week lows. Then, after the markets closed, Microsoft lower its guidance for the quarter and next year too.

"Weire past the election, and I think weire focused in on the economy and earnings," Richard Cripps, chief market strategist at Legg Mason Wood Walker told the Wall Street Journal. "I think that weive seen the lows, and weire trying to consolidate. But I donit think we have [strength] in the economy to sustain a broad advance."

Microsoft just announced that revenue and earnings for its second quarter ending Dec. 31 will be below expectations due to a world wide slowdown in PC sales and corporate IT spending, among other things.

"Revenue for the second quarter is now expected to be in the range of $6.4 to $6.5 billion, and diluted earnings per share is expected to be $0.46 or $0.47. The revised expectations for both revenue and earnings per share represent a reduction of five to six percent from prior guidance. The company also announced revised revenue and earnings guidance for the remainder of the current fiscal year. Based on the companyis current economic outlook, full-year fiscal 2001 revenue is now expected to be in the range of $25.2 to $25.4 billion, about five percent lower than previous expectations. Diluted earnings per share for fiscal 2001 is expected to be in the range of $1.80 to $1.82."

Meanwhile, the Federal Trade Commission approved the megamerger of America Online (AOL) and Time Warner (TWX) based on an agreement the companies made to open their cable system to competing Internet providers in order to assure free market competition.

Appleis stock fell 9/16 or -3.75% to 14 7/16 on low volume of 4.6 million shares. points out the unusual number of price discounts Apple is offering on every Macintosh model.

The Nasdaq dived another 94 points (-3.34%) to close at the dayis low of 2728 on volume of 1.7 billion shares.

The Dow shed 119 points (-1.11%) to close at 10647 on volume of 1.05 billion shares.

The S&P 500 lost 19.07 points (-1.40%) to close at 1340.92

In Apple related businesses: "We believe that Akamaiis EdgeAdvantage platform will emerge as the operating system for the Internet," said Lehman Brothers as they initiated coverate of Akamai with an outperform rating and a $55 target price. Akamai lost 1 5/8 to 32 5/8.

Adobe is expected to report Q4 earnings of $0.29 cents per share this afternoon, with revenues at $353.6 million. Adobe sagged 8 7/8 to 57 5/16.

A Morgan Stanley Dean Witter analyst downgraded Adobe without waiting to hear Adobeis earnings report. Basically, the analyst said, Adobeis PE ratio is too high for the macroeconomic forecast to support.

Oracle beat Q2 estimates for earnings of $0.10 per share with $0.11. Oracle posted earnings of $0.06 per share in Q2 1999. Revenues increased to $2.6 billion, a 16% increase year over year and better than the forecasts of $2.3 billion. Shares of Oracle lost 7/8 to 27 1/2.

Sam Palmisano, IBMis president said development of the companyis new mainframe computer is on schedule. He also said the current consumer PC demand slowdown shouldnit effect IBM nearly as much as Gateway, Dell or Apple. "Our PC business is not heavily consumer related. We got out of the retail business a year-and-a-half ago. We paid our dues for that last year." IBM rallied 1 3/16 to 92 7/16.

Dell lost 1/2 to 19 15/16. Gateway jumped 1.11 to 18.79.

At the Palm Inc (PALM) software developersi conference the company promised new features and is gearing up to confront the Microsoft challenge to Palmis dominance in the PDA market. Palm will sell 4.4 million handhelds using the Palm OS this year. Palmis stock lost 3 5/16 to 44 1/8 dollars.

Microsoftis stock fell 1 3/4 to 55 1/2 on the news AOL Time Warner will be allowed to complete their merger to become a major competitor with Redmondis Internet initiatives.

In economic news: U.S. wholesale prices inched higher by 0.1% in November to about a 3.7% annual rate.

"Excluding the volatile food and energy components, the inflation news was also friendly," reported the Wall Street Journal. "The so-called core index was unchanged in November, following a 0.1% decline in October."

In a separate report, business inventories increased 0.6% in October as shelf space filled in preparation for the holiday shopping season at twice the rate expected by economists. The inventory-to-sales ratio (the number of months it would take to liquidate current inventories) rose to 1.35, its highest reading since mid-1999.

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.