Nasdaq Dips to 21 Month Low, Dow Follows, But AAPL Bounces

With only six more trading sessions to lock in tax losses for 2000, investors rushed to dump devalued stocks in what is poised to become the worst year in the Nasdaqis history. The Dow suffered too, unless you are into the likes of utilities, food stocks and HMOs. Appleis stock eked out a small gain, since its price is already crushed back to within a few bucks of its book value.

When they take the generals out back and shoot them the worse is almost over, goes an old Wall Street Journal saying. The generals like Cisco, Microsoft , Sun, Oracle, Yahoo, Adobe and EMC are all getting their comeuppance today.

Every investor knows by now the economy is going to suck going into 2001 and the analysts have almost completely discredited themselves by advising to buy high and sell low. Forecasts for earnings next year are too high. The slumping price of stocks across the board represents the lowering of expectations for 2001. After all, the Nasdaq 100 still has an average PE ratio in the triple digits. Cisco (CSCO) which fell 5 1/4 to 36 1/2 today, still has a high P/E ratio of 86.

In the eyes of Wall Street, the Federal Reserve erred by not lowering interest rates on Tuesday, thus dooming the economy to spiral downward to the very brink of recession. The Fed will have to wait till the next FOMC meeting on January 31st before they can lower the Fed funds rate, or they will have to call a highly unusual, interim meeting, which could spook the markets.

Today was all about tax loss selling with the occasional margin calls, combined with a distinct lack of the buy-on-the-dip traders or value hunters. Welcome to the first serious bear market in a decade on the Dow and the worst bear market for the Nasdaq since 1974.

Appleis stock gained 3/8 or 2.68%, to close at 14 3/8 on high volume of 10 million shares. Investors are using AAPL like a value stock, a safe place to stash some capital while this thing blows over.

The Nasdaq shed 178 points (-7.12%) to closed at 2332 on the second heaviest trading day ever with volume of 2.7 billion shares. Market internals were atrocious with 921 new 52-week lows and 16% of the Nasdaq 100 at 52-week lows or below. Only 254 million shares traded up, while down volume was 2.5 billion. 728 stocks advanced with 3322 stocks closing lower.

The Dow slipped 265 points (-2.51%) to 10318 on volume of 1.4 billion shares. The Dow utilities (.DJU) hit a new 52-week high as investor sought shelter from the storm.

The S&P 500 fell 40.86 points (-3.13%) to close at 1264.74 for a second 52-week low in as many days.

In Apple related businesses: Akamai lost 4 1/16 to close at 23 15/16, a new all-time low. Adobe lost 6 3/4 to close at 57 1/4, as CS First Boston took the unusual step to initiate coverage of the stock with a "hold" rating.

Merrill Lynch downgraded IBM and Hewlett Packard saying that corporate IT spending will slow in 2001 significantly. IBM fell 3 9/16 to 86 9/16. HP lost a dollar to 30 5/16.

Gateway lost 0.67 to 17.03. Dell lost 1 5/8 to 16 5/8, a new 52-week low. Compaq lost 1.52 to close at 15.49. Microsoft lost 3 5/16 to close at 41 1/2.

In economic news: Housing starts grew a greater than expected 2.2% in the largest gain in 9 months. Building permits also climbed 2.6%.

For other stories regarding Appleis stock activity, visit our Apple Stock Watch Special Report.