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Strange Days at the Exchange - Money Matters for 10/17/05 Don Bravo | 10/17/05
Last week, Apple Computer (AAPL) increased their quarterly profits to record levels - something on the order of a 300% gain over the previous year - and investors sent the stock reeling.
This morning, prior to the market open, General Motors reported third quarter results. The automaker posted a loss of $1.6 billion, or $2.89 per share. Excluding special items, the loss was pared to $1.92 per share, still far south of average analysts' estimates of a loss of 81 cents per share.
At the same time, GM and the United Auto Workers (UAW) announced a deal to cut employee health care benefits by as much as $3 billion annually.
Investors could not get enough GM stock and sent the share price soaring by as much as 3.52 points, before finally settling for a gain of 2.11 for the day.
Now, if all of this sounds as backwards as it did to me, consider what happened to Apple stock as an object lesson in market dynamics. On Tuesday, October 11, the stock closed at 51.59. They released earnings after the bell. On Wednesday, October 12, Apple opened at 48.65, down nearly 3 points, bounced around throughout the day and ended at 49.25.
On THE VERY NEXT DAY, Thursday, October 13, Apple opened at 49.44 and gained ground all day, closing at 53.74, more than two points higher than the close prior to earnings - which, as I said, were spectacular - and more than 5 points higher than the after-earnings opening on Wednesday.
With the knowledge of hindsight, can we assume that GM - since it was extraordinarily higher on bad news - will come down commensurately? That would seem to be the order of the day, and judging by how the stock has traded (recently at 26, today closing just above 30), a pullback is warranted.
The market is tricky and always changing. With today's action on GM duly noted, I would not accept the minor gains on the major exchanges as anything more than wishful thinking. After all, oil and gold were sharply higher and those GM earnings were quite ugly. The company is still in big, big trouble, and the overall market may be masking real, more serious problems within the economy, but it can do so for only so long.
Dow Jones: +60.76; 10,348.10 close
NYSE Advancers: 1765
Nasdaq Advancers: 1414
NYSE New Highs: 31
Nasdaq New Highs: 45
Gold: +4.80; 476.60 close
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