The end of the third quarter is just a few hours away, and for most money managers, the period will not be missed. The culprit for today's misery is


(AAPL) - Get Apple Inc. (AAPL) Report

; the computer maker warned of a significant slowdown in third quarter earnings, and the shares have lost half their value.

The fundamental focus has shifted dramatically in the last few weeks, as high-profile companies have warned of earnings shortfalls due to increased fuel costs and diminished demand. The major indices, perhaps with the Olympics in mind, are doing their best "agony of defeat" impression, with the

Dow Jones Industrial Average losing 98 to 10,726. The

S&P 500 was off 10 to 1448, and the

Nasdaq Composite Index dropped 64 to 3715. The

Russell 2000 dropped 3 to 521.

"The macro outlook continues to have investors pinned down," said Jon Olesky, head of block trading at

Morgan Stanley Dean Witter

. "People are nervous as can be that there's more and more evidence that the economy is slowing at an alarming rate."

Apple, the most actively traded stock on the

Nasdaq Stock Market

, was lately down $27.56, or 51.5%, to $25.94, cutting the company's former market cap of $17.4 billion in half. Its price-to-earnings ratio has dropped to 12.8, comparable to your average smelly industrial company like


(AA) - Get Alcoa Corp. Report



(CAT) - Get Caterpillar Inc. Report


Computer stocks were taking it hard today, although the losses are most significant in Apple and



. Unlike other box makers, which use


(MSFT) - Get Microsoft Corporation (MSFT) Report

software, Apple is kind of an entity to itself, some

contend. However, a slowdown in revenue can't be good for other PC makers, as


(IBM) - Get International Business Machines (IBM) Report

was downgraded several weeks ago on demand-related issues.


(DELL) - Get Dell Technologies Inc Class C Report

was lately down 6.9% and Gateway lost 13.1%.

IBM's losses caused 35 points of negative drag on the Dow, and



was knocking it down 59 points.

It's hard to dismiss the various earnings warnings as company- or issue-specific problems like higher fuel costs, problems with a currency, or bad weather -- which it seemed investors were doing a couple weeks ago. Apple plainly stated that it saw significant slowing of demand in September, similar to comments made by

Eastman Kodak


a few days ago.

"It seems the magnitude of shortfall came in September, and that's what Kodak alluded to," said Olesky. "To a degree, this slowdown stuff seems to be accelerating."

United Airlines



(UAL) - Get United Airlines Holdings, Inc. Report

also issued an earnings warning today, blaming revenue shortfalls on fuel costs, labor issues, and flight delays (something more than a few people are familiar with). United lost 5.7%.

Following warnings from


(MCD) - Get McDonald's Corporation (MCD) Report



(INTC) - Get Intel Corporation (INTC) Report

, and


(G) - Get Genpact Limited Report

TheStreet Recommends

, the environment is gloomy right now.


Federal Reserve's efforts to slow the economy no longer exist in a vacuum, as the tightening of credit has cut off demand for products.


reported today that Intel is delaying delivery of its Pentium 4 processors, which only enhances that thesis. Intel was down 5.6%.

"The market has conditioned itself for these companies to be gangbusters all the time, both in earnings growth and performance," said Brian Belski, market strategist at

U.S. Bancorp Piper Jaffray

. "We need to realize that's not reality."

The negative action will probably magnify fund managers' desire to sell losers out of their portfolio by the end of the day in an effort to make their quarter-end figures look as good as possible. Yesterday's rebound was seen as an example of the gamesmanship that goes on during quarter-end

window dressing, when portfolio managers try to prop up various stocks. But today, they're more focused on dumping losers.

Market Internals

Breadth was negative on moderate volume.

New York Stock Exchange: 1,375 advancers, 1,310 decliners, 544 million shares. 102 new 52-week highs, 41 new lows.

Nasdaq Stock Market: 1,513 advancers, 2,261 decliners, 967 million shares. 86 new highs, 119 new lows.

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Most Active Stocks

NYSE Most Actives

Nasdaq Most Actives

  • Apple: 92.5 million shares.
  • Intel: 39.2 million shares.
  • Dell: 32.2 million shares.

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Sector Watch

The seesaw of

money from tech to drugs that's persisted through most of the year continues today, as investors dump technology stocks in favor of the defensive growth stocks, drugs. The

American Stock Exchange Pharmaceutical Index

is lately up 1.1%, led by a 2.1% gain in Dow component


(MRK) - Get Merck & Co., Inc. (MRK) Report


Also moving up today are the tobacco stocks; the

Amex Tobacco Index

rose 1.5%.

Fiber optics stocks are among the few technology names scoring well, as


(GLW) - Get Corning Inc Report

gained 2.4%.

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Treasuries are stronger thanks to slumping stocks and the calendar, which traditionally favors the Treasury market on the last business day of the quarter. Pressure to own safe, liquid assets for appearance's sake often prompts buying of Treasuries by portfolio managers who report their holdings on the last day of the quarter, bond market analysts say.

The day's most important economic indicator, the

Chicago Purchasing Managers' Index


definition |

chart ), was stronger than expected. It rose to 51.4 in September from 46.5 in August, indicating renewed expansion in the manufacturing sector.

The benchmark 10-year

Treasury note lately was up 9/32 at 99 23/32, dropping its yield to 5.787%.

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European markets were generally weak. In London, the

FTSE 100

was off 30.1 to 6294.2. Across the channel, the

CAC 40

in Paris was 44.40 lower to 6266.63, and the

Xetra Dax

in Frankfurt lost 57.01 to 6775.75.

Asian markets jumped on Friday as U.S. markets recovered overnight, but most traders are viewing the bounce as a one-time event.

In Japan, local fund managers buying selected tech shares before the close of the fiscal first-half Sept. 30 helped the

Nikkei 225

index rise 120.30 to 15,747.26.

Hong Kong's

Hang Seng

index bounced 233.23, or 1.5%, to 15,648.98 as property and banks shares rallied.

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