The Difference A Day Makes

Tuesday's tech triumph may have interrupted December doldrums on Wall Street, but it didn't cure them, as stocks plunged Wednesday on an earnings warning from computer giant Apple.

As several other computer makers have claimed in previous earnings reports, Apple blamed low autumn sales for revenue below target, leading to its first loss in three years.

That news spurred a sell-off. The Dow Jones industrial average closed down 234.40 points to 10,664.30. The Nasdaq was off 93.30 points at 2,796.50, while the Standard & Poor's 500 was lower by 25.08 to 1,351.46.

On Tuesday, the Dow and S&P gained 3 percent each, while the Nasdaq soared 10 percent, for its biggest-ever one-day point and percentage gain.

According to CBS MarketWatch, Apple said it would report revenue of $1 billion, short of the Street estimate of $1.6 billion; a loss of between 62 cents and 69 cents a share, well-lower than the Street estimate of 3 cents profit-per-share; and fiscal 2001 revenue of between $6 billion and $6.5 billion, down from the $7.5 billion to $8 billion forecast previously for the full year.

Also Wednesday, government reports showed Americans' productivity, the main ingredient for rising living standards, rose at a healthy 3.3 percent clip in the summer.

However, labor costs accelerated at the fastest pace in more than a year, a potentially worrisome development.

The Labor Department said the increase in productivity was slightly lower than an original estimate a month that productivity was rising at an annual rate of 3.8 percent.

Greenspan's remarks were the firmest signal yet that the central bank is switching its chief concern from fighting inflation by raising interest rates to worrying that its credit tightening has gone too far and could prompt an outright recession.

In a hot economy, demand for good and workers pushes prices and wages up, causing inflation, a general rise in the price level. Because inflation can complicate business decisions and hurt people on fixed incomes, the Fed works to keep the economy from overheating by raising interest rates. Higher rates make it harder to borrow money to buy things or invest, and slow the economy down.

One of the primary reasons the Fed has given for its recent rate increases was concern that the demand for workers was outstripping the supply because of an unemployment rate that has fallen to a three-decade low of 3.9 percent.

The Fed has raised interest rates six times, beginning in June 1999, in an effort to slow the booming economy to a more sustainable pace in order to keep inflation in check.

Responding to those rate increases, economic growth slowed abruptly to an annual rate of just 2.4 percent in the summer, less than half the sizzling 5.6 percent pace of the spring.

But in the Labor Department's Wednesday report, it said unit labor costs, a key measure of wage pressures, rose at a 2.9 percent annual rate in the third quarter, the fastest pace since a 4.3 percent jump in the April-June quarter of 1999.

Worker productivity, measured by the amount of output per hour of work, is the key to improvements in the standard of living. As long as workers are becoming more efficient, their employers can afford to pay them more without having to boost the cost of their products.

Many analysts believe the Fed, at its next meeting Dec. 19, will recognize those concerns by moving its policy statement from one leaning toward further rate cuts to a neutral stance, indicating it is as likely in coming meetings to cut rates as to raise them.

Economists believe that the Fed will not actually cut rates at the December meeting. But most believe the Fed will lower rates in the first quarter of 2001, with some now predicting a rate cut as early as January.

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