Tech Rally Leaves Apple 14 Cents Lower

It was a good day for the markets today as the Dow, the Nasdaq, and the S&P all ended the day higher. The catalyst for todayis rally was data suggesting that consumer spending is on the rise. Juneis spending grew by 0.4%, which topped expectations of 0.3%, and that coupled with some sort-of-positive earnings reports (sort-of-positive being defined as "not horrible" in this case) got traders all-a-giddy. From a Reuters report:

"The numbers indicated that the consumer is still carrying the economy," said Alan Ackerman, a market strategist at brokerage Fahnestock & Co. "As we started to near the end of the earnings period, and some positive economic data surfaced, the market showed that it was not too pooped to pop."

Not everyone was so confident in the long term prospects, however. Some analysts saw todayis move as a short term pop. From the same Reuters report:

"We get one day of this and then it goes back the other way," said Donna Van Vlack, director of trading at Brandywine Asset Management, which oversees $7 billion. "I donit believe what I see until I see something more, like companies saying business is getting better -- or I see some insider buying or something a little more substantive this."

Volume was moderate across the Dow and the Nasdaq. The Dow posted a 121 point gain, while the Nasdaq lost momentum in afternoon trading to close 9 points higher.

Industry News

The big news of the day in the computer industry is that Microsoft has backed off from earlier moves last month to open up the Windows desktop. Microsoft announced last month that PC vendors could remove the Internet Explorer icon from the desktop of the PCs they sell. Today the company announced that while PC vendors would be free to include absolutely no icons on the desktop, if they dared to include other ISP icons on their desktops, they must also include an icon for MSN. AOL and other Microsoft foes are screaming foul and hurling about a few "We told you they were big stinkini monopolists!" too. It will be interesting to see how, or whether, this impacts the ongoing anti-trust trial.

Apple Industry News

RAM chip maker Hynix, the main supplier of RAM components to Apple, Compaq, Gateway, according to the Wall Street Journal, is in a financial crisis. Many of those reading this will have noticed the fact that decking your Mac out with 128 MB of extra RAM is cheaper than a night at the movies, and this has directly translated to financial problems for all of the RAM vendors around the world. The company is seeking refinancing and restructuring for its debt. From the Wall Street Journal article:

Prices for 128-megabit DRAM memory chips have plunged 90% over the past year, to under $2 from $18. Manufacturing the chips now costs more than they sell for, and industry analysts say the technology sector is experiencing its worst cyclical downturn ever. Revenue from DRAM sales is expected to slide to $14 billion this year from nearly $32 billion last year, according to industry analyst Gartner Dataquest.

"If market forces were allowed to work, the number of players in the semiconductor industry would definitely be reduced," says Jonathan Ross, head of Asian technology research at Goldman Sachs Group Inc. in Hong Kong. "If Hynix isnit around, it would be beneficial" to global prices.

The current glut induced price drop is literally not sustainable. Should Hynix or one of the other big manufacturers go under, it will mean higher component prices, lower margins, higher consumer prices, or a combination of all three for Apple. Itis inevitable, however, so buy RAM now and hope it doesnit become obsolete before you need it.

Apple started the day off 20 cents higher, but quickly sank to the dayis low of 42 cents under yesterdayis close. The stock reversed course again and headed into a rally that peaked at 11:30 AM some 49 cents into positive territory. AAPL could hang on to the gains, however, and spent the rest of the day moving lower to close 14 cents under. Volume was light, and the dayis trading range was 18.51 - 19.42.

Apple closed at 18.79, down 0.14 (-0.74%), on light volume of 4,197,000 shares trading hands.

The Nasdaq closed at 2027.13, up 9.29 (+0.46%), on volume of 1,622,925,000 trading hands.

The Dow closed at 10522.81, up 121.09 (+1.16%), on volume of 1,141,905,000 trading hands.

The S&P 500 closed at 1211.23, up 6.71 (+0.56%).

Adobe closed at 37.49, a loss of 3.05 (-7.52%), on very strong volume of 5,956,200 shares trading hands.

Akamai closed at 7.75, up 0.15 (+1.97%), on light volume of 884,700 shares trading hands. Apple is a large shareholder of Akamai.

Earthlink closed at 16.37, down 0.54 (-3.19%), on light volume of 1,322,400 shares trading hands.

IBM closed at 105.21, down 0.64 (-0.60%), on light volume of 5,603,000 shares trading hands.

Macromedia closed at 17.20, up 0.16 (+0.94%), on light volume of 545,900 shares trading hands.

Motorola closed at 18.69, down 0.34 (-1.79%), on volume of 14,711,900 shares trading hands. Motorola manufactures the processors used in Appleis Macintosh line.

Dell closed at 26.93, off by 0.53 (-1.93%), on strong volume of 32,471,600 shares trading hands.

Gateway closed at 10.49, up 0.56 (+5.64%), on strong volume of 3,520,500 shares trading hands.

Intel closed at 29.81, higher by 0.77 (+2.65%), on strong volume of 50,205,500 shares trading hands.

Microsoft closed at 66.19, up 0.39 (+0.59%), on light volume of 29,516,600 shares trading hands.

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