Recent Bounce In Stocks Came On Light Volume

The stock market is slightly lower in early trading on the heels of a solid 3-day bounce.  But for the most part volume levels have been relatively light on these rallies.  Investors prefer to see volume lighten up on selloffs and then pickup during rallies.  That signals some conviction behind the buying.  Yesterday's volume was slightly higher, but the AP Twitter glitch likely boosted volume figures.

Earnings reports continue to roll in, with this probably being the busiest week.  The big report last night was obviously Apple.  AAPL beat on the top and bottom lines, but gross margins were a little light and guidance for next quarter was pretty conservative (below consensus).  That said, I was surprised that the company sold as many iPhones as they did (37.4 million) given how everyone thought that number was going to be weak.  iPads sold was also solid. 

And the capital return was pretty good also.  AAPL boosted their stock buyback from $10 billion to $60 billion.  That's a big jump and the buyback should start soon, which could help put a floor under the stock.  Also, management upped the dividend by 15% pushing the current yield on the stock to 3.0%.  That's a pretty solid yield and I think one that long-term investors will find attractive.  AAPL now trades at less than 10x next year's earnings, a discount to its growth rate.  Seems like a pretty good bet at these levels.

Stocks rising on earnings: BRCM, USNA, YUM, GD, BA, LO, LL, NOC, WM, WLP, TMO

Stocks falling on earnings: AMGN, T, CREE, AWAY, JNPR, PNRA, VMW, LLY, PG, TROW, TUP, WHR

Asian markets were higher across the board overnight.  The Reserve Bank of New Zealand held its key rate steady at 2.50%.  S&P said Australia runs the risk of losing its 'AAA' rating if it doesn't start to show more commitment to reducing its budget deficit.

Europe's markets are mostly higher, while Italy continues to underperform.  The German business climate index fell to 104.4 from 106.7 last month.

Commodities are higher today as the dollar index is weak.  Oil prices are up to $90.33 and gold prices are higher near $1426.  Copper prices are bouncing today also.

The 10-year yield is up just a touch to 1.71%.  And the VIX is flattish near 13.55.

Trading comment: Earnings season continues to be a mixed back for the most part.  The list above shows as many stocks falling on earnings as rising.  That makes it tough to try to game a stock's earnings report.  We prefer to focus on stocks that report solid earnings reports and then look to buy or add to those stocks on pullbacks.  Leadership in this market has mostly come from defensive sectors like healthcare, utilities and consumer staples.  If the market remains strong, we would expect more traditional growth stocks to start to take a leading role.

KAM Advisors has long positions in AAPL, AMGN, LL