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Today's Market: Dow Dips and Nasdaq Fights for Gains After Breathtaking Rally

<LI>Computer makers drop on Apple earnings warning.</LI> <LI>Home Depot gains as it snags former GE exec.</LI>

(Updated from 9:40 a.m.)

Maybe it's vertigo. After ringing up the single-largest point and percentage gain in its 29-year history yesterday, the

Nasdaq this morning was fighting to maintain its perch. The broader market, which rocketed up some 2.88%, was turning weaker.

The Nasdaq was edging 11 lower to 2878. The

S&P 500 was falling 7 to 1370.

An earnings

warning from


(AAPL) - Get Apple Inc. Report

last night helped to dizzy tech investors, reminding them why the Nasdaq was down so low in the first place. Apple said it expects to miss its fiscal first-quarter sales and earnings targets. Really miss them. The maker of colorful computers was one of the first high-profile tech companies back in September to warn it would

miss fourth quarter earnings targets. It was that earlier warning that helped spark initial investor concerns about slowing computer demand, a slowdown that has shredded stocks in the sector during the past two months.

So it's no wonder that the analysts were swinging into action.

Bear Stearns

this morning cut its revenue and earnings estimates on Apple.

Lehman Brothers

also lowered Apple's EPS estimates. And

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Credit Suisse First Boston

stepped in to lower its ratings of computer-makers Apple,







PC-makers everywhere were being punished for Apple's mistake. Gateway,



and, of course, Apple, were all lower. Apple was off 13.2%.

Yesterday, encouraging words on the economy from the

G-man and a bit of perceived resolution on the elections front sent the tech-heavy Nasdaq up a record 10.48% to 2889.8. The blue-chip

Dow rallied up 338.62 to 10,898.72. The Dow was lately losing 83 to 10,817.

Greenspan's speech raised hopes that the

Fed will change its outlook -- sometimes called its bias -- on inflation to neutral at its Dec. 19

Federal Open Market Committee meeting. The Fed's outlook on the economy currently holds that the risks of inflation are greater than the risks of recession.


took a separate look at

Alan Greenspan's speech yesterday.

A neutral outlook on the risks of inflation is great, but some market-watchers think yesterday's rally may have already priced in an interest-rate cut at the Dec. 19 meeting. And that's far from guaranteed. A neutral bias is only a first step in the direction of a potential interest rate cut.

Meanwhile, Monday's court rulings may have made it harder for Al Gore to win his quest for the presidency, but they didn't put an end to the elections mess. Class-action suits being brought in Florida about contested votes could still play an important part in this battle -- and those could drag on for a bit longer.

In other words, yesterday's not-so-modest rally may have gotten ahead of itself as money managers with a lot of cash on their hands jumped back in to the market -- not wanting to miss their chance at a year-end rally. Just a few months ago, most pundits were convinced the market wouldn't get through December without one.

While not a major market-mover, revised third-quarter

productivity numbers gave futures a little boost when they came out this morning at 8:30 a.m. Productivity came in at a 3.3% rise vs.


consensus forecasts of 3.5%. Unit labor costs, which are a key indicator of inflation, rose 2.9%, just above forecasts for 2.8% rise for the quarter. The productivity numbers measure growth in labor output per hour, while unit labor costs measure labor costs per unit of output. The numbers show that the efficiency of U.S. workers continues to grow, but at a slower pace than in the second quarter.

But productivity plays into corporate profitability. And coming full circle is the reminder that no investor -- O.K., except the shorts -- likes an earnings warning. This has been particularly true in the computer sector.

Now some companies even have two earnings warnings under their belts. Last week, it was specialty chipmaker


(ALTR) - Get Altair Engineering Inc. Class A Report

, which warned for the second time in quick succession about its fourth quarter. Double warnings like these are particularly worrying because they indicate how off the mark analyst and company earnings projections have been -- and will likely continue to be.

In fact, fourth-quarter's earnings "confession" season -- when companies that expect to miss earnings targets let investors know -- is likely to be a minefield for investors, according to a report out this morning from earnings tracker


. Last week's warnings of slow sales from Gateway and Altera are just the tip of a very large iceberg, the report said. Their news flattened the Nasdaq like a pancake last Thursday, taking the tech index to a new 52-week closing low.

"It is not a bold assumption on our part to declare this will be the busiest confession season since we started collecting this data in 1996," said the I/B/E/S report. So far I/B/E/S has collected 300 earnings warnings, and that is before the confession season even officially begins next week.

Forecasts for the S&P 500 fell last week to $14.49 from $14.54. This figure represents 8.1% growth for the year's last quarter, down from a forecast of 13.3% just a month ago. For the full year, analysts are projecting pro forma growth of 17.5%, down from 18.3% just a month ago. Next year, analysts are projecting 8.5% growth, but because analysts tend to overshoot, I/B/E/S thinks this figure is too high.

Elsewhere in the market,

Home Depot

(HD) - Get Home Depot, Inc. Report

became the third and latest Dow component to have a recent

General Electric

executive at its helm. The home improvement retailer yesterday announced that Robert Nardelli, another executive who was recently passed over for General Electric's top post, will leave the company to become chief executive of Home Depot. And


(MMM) - Get 3M Company Report

confirmed that it named GE executive James McNerney Jr. chairman and CEO, effective Jan. 1. Last week, GE named Jeffrey Immelt to succeed famed Chairman and Chief Executive Jack Welch, when Welch steps aside at the end of 2001. Home Depot was up 2.9%.

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Treasuries were higher this morning following market-friendly words from the Fed chairman yesterday. The benchmark 10-year

Treasury note was lately down 1/32 at 102 11/32, yielding 5.435%.

Treasuries staged a huge rally yesterday that dropped yields to new lows for the year in response to the indication from Greenspan that the central bank would likely lower interest rates in the months ahead.

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An early rally in Europe had deflated by midsession influenced by the outlook for a weaker open on Wall Street.



was down 17.6 to 6281.40. Across the channel, Paris'


was 4.39 higher to 5999.28, while Germany's

Xetra Dax

was up 35.80 to 6672.89.

The euro was strengthening again after taking a breather yesterday. It was lately trading up to $0.8832. It has been gaining in the past few weeks as the U.S. dollar weakens in the face of a slowing domestic economy.

Asian markets surged overnight on optimism about the Nasdaq's jubilant ride higher on Tuesday and the prospects of a U.S. interest rate cut in coming months. Japan's

Nikkei 225

rallied, but pared its gains into the close on the Apple warning. It closed up 194.32, or 1.32%, to 14,889.37. Hong Kong's

Hang Seng

rose on strength in property shares, closing up 3.61%, or 525.74 points, to 15,098.95.

The greenback was lower to 110.77 yen.

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