Wednesday, April 25, 2012

Earnings Trump Economic Data In Early Trade

The markets are nicely higher in early trading on the heels of some better than exepcted earnings reports.  There was a disappointing economic report this morning in the form of durable goods, which fell -4.2% in March.  But investors are giving the data a pass and focusing on earnings.

The big earnings report last night was of course Apple (AAPL).  In case you missed it, AAPL blew out the numbers by more than $2.  It also sold 5 million more iPhones than the analysts were forecasting, and gross margins also posted significant upside.

I had been saying coming into the report that the recent action in AAPL seemed to me to be reflecting dramatically lowered expectations for the earnings report.  So I felt the stock was poised to bounce on the report, even if they only posted a mild beat.  But the stock has ramped on the earnings announcement, up by more than $50 (or 10%) back above the $610 level.

Stocks rising on earnings reports:
Stocks falling on earnings reports:

Asian markets were mixed overnight, while Europe is higher this morning.  The dollar is also a little bit lower, while commodities are mixed.  Oil prices are flattish near $103.50.  Gold prices are lower near $1638, still having difficulty getting above that $1650 resistance level.

The 10-year yield is getting another small bounce, but is still bumping its head at the 2.00% level, which has been resistance all year, despite a few brief spikes above those levels.

And the VIX is down 4% to 17.36.

Trading comment: The market is up a lot in early trading, but it remains to be seen if the strength can last into the close.  We also have the FOMC announcement today, and I think many are looking for the Fed to provide some hints about QE3.  I don't think the Fed is going to go there right now.  My guess is that they remain on point with what they have been saying recently.  I think they will reiterate holding rates low into 2014, and again say that they see inflationary pressures as temporary. 
KAM Advisors has long positions in AAPL


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