Apple, Boeing, Caterpillar, Fed will move markets

While 176 S&P 500 companies will report earnings in the week ahead, Apple will command the most attention. But Exxon, Boeing, Netflix, Amazon.com, PepsiCo and Chevron will get their due. The Fed will meet on interest rates.

By Charley Blaine Apr 20, 2012 9:13PM
Charley BlaineUpdated: 7 p.m. ET, Sunday

Get ready for a humongous week.

There's the French election that's headed to a runoff. A Nicolas Sarkozy loss could blow apart the eurozone. There's also a Fed meeting to obsess over. And there's Apple (AAPL) to worry about.

Oh, and a report or two on housing and a report on how the U.S. economy grew in the first quarter. And there's Apple to worry about.

Exxon Mobil (XOM) will report first-quarter revenue that may approach the gross domestic product of Hungary. But there's Apple to worry about.

There will be earnings reports from Amazon.com (AMZN), Boeing (BA), Caterpillar (CAT), Merck (MRK), Netflix (NFLX), ConocoPhillips (COP),  PepsiCo (PEP), Harley-Davidson (HOG), Chevron (CVX), Ford Motor (F) and Procter & Gamble (PG). And there's Apple to worry about.

The week ahead will be a case of data overload. Not that this past week was a romp in the park. The Dow Jones industrials ($INDU) and the Standard & Poor's 500 Index ($INX) stumbled through a week best described as choppy and ended with gains for the first time in three weeks. But the Nasdaq Composite Index ($COMPX) fell for the third week in a row after rising for seven straight weeks.
Apple was a big reason for the decline, falling fell for the second week in a row. Its 5.3% decline was its largest since the week of Oct. 17. Apple just won't go away and hide.

All Apple, all the time
Which brings us to Tuesday, after the close, when Apple is scheduled to report fiscal-second-quarter earnings. There are a couple of reasons why there's a big obsession with Apple's earnings.

Apple is the world's most valuable company, with a market capitalization of $524 billion or so. Exxon Mobil, which reports earnings on Thursday, is second with $402 billion.

Apple's share price had soared briefly to as high as $644 during the day on April 10. That represented a 59% gain from the end of 2011. But the stock is off more than 11% since.

Maybe it's investors taking profits. The stock had become wildly overbought. Its peak close of $636.23 on April 9 was 47% above its 200-day moving average. Normally, a 20% premium to the moving average will trigger some selling.

Its relative strength index hit as high as 96 in February; a reading above 70 suggests a stock is overbought. Apple's RSI didn't fall below 70 until April 3. The index level was 42 on Friday when the stock closed down $14.46 at $572.98. That price is just above its 50-day moving average, a key measure of investor confidence.

And as the stock fell, the volume moved up, never a positive signal. In fact, Apple's daily volume this past week averaged 38.98 million shares, up 51% from its 13-week average.

Maybe it's that Texas Instruments (TXN), with a market capitalization of $37.1 billion, is replacing solar-panel maker First Solar (FSLR), with a market cap of $1.79 billion, in the Nasdaq-100 Index ($NDX) and the Nasdaq-100 Equal-Weighted Index ($NDXE) on Monday. That will reduce Apple's dominance of the indexes slightly. On Feb. 29, Apple represented 17.5% of the Nasdaq-100's market capitalization.

But maybe the issue is that Apple's numbers almost certainly won't be as gaudy as in the fourth quarter, when revenue was up 73% and earnings jumped 115%. There were hints of that possibility this past week when Verizon Communications (VZ) said iPhone sales fell from 4.2 million units in the October-December quarter to 3.2 million units in the January-March quarter.

In any event, analysts expect sales of about 12 million iPhones, Apple's most profitable product, during the entire quarter. That would be down from the last holiday quarter but more than double the sales in the same period last year.

But you don't know. The consensus is that earnings will be $9.99 a share, with a high estimate of $11.30, compared with $6.40 a year ago. Revenue is seen jumping 24.7% to $36.6 billion, but the high estimate is $41.1 billion.

There are some tensions in iPhone land. A big one is that the phone companies are getting tired of subsidizing Apple. They buy an iPhone at $600 or so from Apple and charge customers $200 or so, with the hope of making the cost back over the course of a two-year contract.

These costs are weighing on AT&T (T) and Verizon because they're forced to upgrade their networks to handle all the smartphone traffic. Verizon wants to charge $30 if you upgrade.

There's one more thought to consider in why Apple shares are falling. Apple has been the single most popular stock among hedge funds. Maybe the funds are having trouble elsewhere and are selling Apple to fix other problems.

Markets for the week



4/20/2012

4/13/2012

% chg.

YTD chg.
Dow Industrials

13,029.26

12,849.59

1.40%

6.64%
S&P 500

1,378.53

1,370.26

0.60%

9.62%
Nasdaq 

3,000.45

3,011.33

-0.36%

15.17%
Russell 2000

804.05

796.29

0.97%

8.52%
Crude oil 

$103.05

$102.83

0.21%

4.27%
(per barrel)











U.S. Dollar Index 

79.31

80.55

-1.54%

-1.50%
10-yr. Treasury

1.97%

2.00%

-1.40%

5.29%
Gold

$1,642.80

1,660.20

-1.05%

4.85%

The rest of the earnings
 This will be a huge week, with seven Dow companies reporting. The earnings season so far has been quite good. Of 113 S&P 500 companies that have reported results so far, 81% have beaten Street estimates. That's a record, according to Thomson Reuters. In addition, 76% have beaten revenue estimates. The average beat is 9%, also a record. The typical beat since 1994 is 6%.

Which means companies are doing better than thought, or analysts were too conservative.

Here are the week's key reports:

Monday: Homebuilder D.R. Horton (DHI), ConocoPhillips, Netflix and Texas Instruments (TXN). Netflix has been a wildly up-and-down company for the past year after it tried to change its pricing strategy. Texas Instruments is a supplier to Apple. Its results will hint at what to expect from Apple.

Tuesday: Apple (of course), AT&T, 3M (MMM), U.S. Steel (X) and Baker Hughes (BHI). The latter will hint at how bad the natural gas depression is.

Wednesday: Boeing, Caterpillar, iron-ore producer Cliffs Natural Resources (CLF), Corning (GLW), Harley-Davidson, health insurer Wellpoint (WLP) and auto renter Zipcar (ZIP). Boeing and Caterpillar are true barometers of the health of the global economy.

Thursday: Exxon Mobil, Amazon.com, Starbucks, PepsiCo and Royal Dutch Shell (RDS.A). Listen to Exxon Mobil about its comments on the natural-gas market, which has been glutted over the past six months. Amazon.com shares are off 7.5% since March 27 and 23% since peaking on Oct. 14 because of concerns about its heavy spending on infrastructure. And there are concerns that its Kindle business faces heavy competition from Apple's iPad.

Friday: Chevron, Ford, Procter & Gamble, Newmont Mining (NEM) and Goodyear (GT).

The Fed, France and the rest of the economy
Can't forget the Fed next week. It has an important two-day meeting where the argument will be if the economy needs more help now in the form of more asset purchases.

A decision by the Fed's Federal Open Market Committee is due at 12:30 p.m. ET on Wednesday, with a news conference with Fed Chairman Ben Bernanke at 2:15 p.m.

The economic data have been weaker than expected, especially housing. Housing starts were down in March from February. So were existing-home sales. But building permits were higher, and a home-sales measure for March that doesn't adjust for seasonal patterns was actually higher than in February.

The March unemployment and payrolls report also was weaker, and other reports have suggested that a surge in January and February boosted by an exceptionally mild winter has started to run out of gas.

Your best bet on the Fed is that the central bank won't raise rates. The Fed won't offer any new stimulus measures because officials want more data.

Outside of the Fed was the French election. Socialist candidate Francois Hollande was the leader in returns announced late Sunday; he and Sarkozy will be in a runoff in two weeks that may be quite close.

Marine Le Pen of the far-right National Front finished with an estimated 19.9%, above most recent polls. Jean-Luc Mélenchon, the candidate of the far-left Front de Gauche, came in with a less-than-expected 11% share of the vote.

Hollande wants to raise taxes and renegotiate the European Union's fiscal accords to help economies grow.

The potential of Hollande's ultimately winning may have contributed to the market fade late Friday. The uncertainty created by Sunday's results may be the reason why futures trading suggests U.S. stocks will open lower on Monday.

Elsewhere in the economy:

S&P/Case-Shiller Home Price Index for February, due Tuesday. Look for prices to have fallen 3% year over year.

New-home sales, due Tuesday. Look for a small increase, Nomura Securities says, perhaps to an annualized 335,000-unit rate. But new-home sales require a gutting of the inventory of foreclosed homes to grow to normal levels of about 800,000.

Consumer Confidence for April, due Tuesday from The Conference Board. Rising stock price and a peak in gasoline prices have likely lifted household spirits, to use IHS Global Insight's description. AAA's Daily Fuel Gauge Report says the gas peak occurred March 31-April 2, when the price peaked at $3.925 a gallon. 

Durable-goods orders, due Wednesday. Look for a drop, largely because of a decline in orders at Boeing.

Initial jobless claims, due Thursday. The Labor Department report will get more scrutiny because revisions have suggested the economic bloom is fading.

Gross Domestic Product for the first quarter. Analysts are looking for growth to come in at an annualized 2.8% or so. The growth will be due to strong business investment and consumer spending, growth in exports and inventory building that outweighed a drag from government spending, Nomura Securities says.

University of Michigan Consumer Sentiment Index for late March. Look for little change, with the index at about 75.
27Comments
Apr 21, 2012 12:00AM
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Hmmm..... I see the stock market is going to rise based on Apples earnings. This will make gas go up 30 cents per gallon, because the stock market is going to go up 100 points and so commodities will rise with it. Then Exxon will show earnings topping last quarter and everyone will cry and be up in arms about Exxon's earnings being the largest any company has ever had on record in the history of the world. Then on Friday gas will drop 20 cents per gallon and all will be forgotten by next Wednesday. Same stuff different year.
Apr 21, 2012 1:25AM
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The anti-apple comments are so out of line.  I buy apple because it works flawlessly.  I don't get bugs or viruses.  I don't care about fashion, but I enjoy simplicity.  I could careless about SD cards or any of that crap.

The anti-republican comments have amounted to wanting to shut down a voice in our country.  I think the democrats are anti-constitutionalists and obstructionalists.  They call names, create lies, and run away from placeing their votes when they know they'll lose.  We won't be a democracy or a republic if the democrats have any say - we'll be slaves.
Apr 21, 2012 1:51PM
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Why are people worrying about Apple.  I think its pretty common knowledge that its going to comfortably hit 700.  Unless the iphone is a dud.  Wait whens the last time Apple had a dud?
Apr 21, 2012 1:55AM
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The US corporate tax rate has become a new cause for companies to move overseas to avoid what is the largest tax burden in the industrialized world.  At 35%, the US tax rate on companies and businesses is nearly triple the rates in some places, and well above the tax requirements of countries such as Ireland and Switzerland.

In an expose on March 27th by CBS's 60 Minutes, hundreds of companies, and over $1.1 trillion dollars, are now being kept overseas providing nothing to the US economy due to stringent tax laws and regulations which make it difficult to invest, create new jobs, and find profitability if incorporated in America. A sure way to get less productivity and less Jobs is to Tax it more,

some how democrats do not understand this. Big Government is not functional.



Apr 22, 2012 6:10PM
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That injection could raise "all boats" here and abroad ?? IMO.

Doubt it.  The dollar will still be 1.3ish vs the euro, more inflation, and more of the same crappy job market.

Apr 20, 2012 11:13PM
Apr 22, 2012 9:39AM
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Whether Apple has or has not been a good investment for many, is and will be the pockets of the holders...Corrections are always imminent, if a stock/company is over bought or built on hype...

And any mis-step of stature can certainly freak the money holders.

 

As far as consumers go, they will continue to buy the next "soft ice cream" as long as they want to try a new untasted flavour....Over saturation of the flavors and the fickle customer will search somewhere else.

When fair trade and monopolistic values come under scrutiny, eventually some deals or corrections will ensue and in the end business will go on as usuall. Too much money, too much power.

 

Hardly think or consider about Apple being a TBTF entity, when much of it's manufacturing may be accomplished overseas??...Didn't think we bailed out workers in Foreign Countries...

And also don't think the Billions that Apple is worth, could go away over night?

 

Apr 22, 2012 9:00PM
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They need to stop before and after market trades and do that trading in the middle of the market from 11:30 to 1:00 this way all investors would know what is going on, and they need to duplicate all trading information, one would be for the markets, and simultaneously the duplicate trading information would go to a watch dog site to oversea the markets!

 

 

 

 

 

 

 

 

 

 

 

 

 

Apr 22, 2012 6:15PM
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Apple is/was probably GOOD for investors making money off her...     ?         Open-mouthed

Apple is/was probably OKay for some riding the wave late....                ?      Nerd

Apple is/was probably D&G for those not invested.....                             ?             Crying

Apple is/was probably JUST something to blow about, if you are not an investor....?       I don't know

Apr 22, 2012 10:10AM
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Active RIA wrote, a lot of nothingness but this part "continue to warrant that high multiple..." needs correction.

 

Apples PE is below the PE average of the S&P 500. If you understand stock evalutations, understand company fundamentals you would not remotely have an opinion that includes "High Multiple" when it comes to Apple since Apple does not have a high multiple in ANY of its metrics....Look it up before posting.

 

 

Apr 22, 2012 9:06PM
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Or just eliminate all trading after hours, and before hours!
Apr 23, 2012 1:35AM
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The Republicans have decided to move all their offices and operations overseas.

Apr 23, 2012 2:33AM
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Surprised hey noble - how 'bout this newsire depiction of the last 24 hour political scuffles in the Netherlands (land of the dikes, and home of the frugal):

 

"The poll also showed that a majority favor smaller budget cuts than those stipulated by the European Union, a further sign that the notoriously frugal Dutch are suffering from "bailout fatigue" and resent the high cost of rescuing profligate peripheral euro zone countries."

 

'bout time somebody started comingto their senses before the Weimar Syndrome sets in ...

Apr 22, 2012 4:17PM
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sissors cut paper, paper covers rock, rock breaks sissors .. cut the paper and it won't cover the rock.  It might be a good time to get out of the paper shuffle and buy some tangible stuff.  I don't expect the Fed to increase interest rates, but might do some money shuffling with the IMF and G-20 meeting coming up this week.  Big bank stocks are not impressive with the debt load of EU and the housing market .. so consumer staples and ag industry are looking promising.  I might even pick up some electronic gagets to keep tabs on the magic bean stock, I planted. 
Apr 22, 2012 2:41PM
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Sarcastic well that is certainly my bad there "someone" (my own personal stalker-troll) ....

 

i forgot that there were still simpleton, pollyannaish, neophyte stock investors out there who blindly put there finances at risk by putting their trust in the future earnings projections (that would be the "E" in P/E used to derive the multiple).  these future earnings are projected by the companies themselves and the industry broker analysts who remain incestuously wrapped up in promoting the stock valuation to maintain current and future financial compensation.

 

and then they blindly compare the P/E of a specialized company (mammoth, once-in-a-decade, mega-cap tech stock) to the diversified S&P 500 ratios - like comparing a giant watermelon to a bunch of grapes ..... yeeesh ... they walk among us truly ....

 

did i hear someone say "crouton" ....    

Apr 23, 2012 11:03AM
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Of course this morning's opening was an aberration. Unreal but we see it so often....These pieces of excrement having the time of their lives down here doing and undoing at will....Lets see how long it lasts...Its just market manipulation at its highest and these scumbags making tons and tons of dough while most Americans out there are losing it. Oh well, its still early, as horrible as it looks we will never give up...People, its not all Europe, or China or whatever these garbage want to blame it on...Its just market manipulation...More later.
Apr 22, 2012 8:30PM
Apr 22, 2012 8:21PM
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Re-TOG .. Thumbs up China made an overture to EU countries when the G-20 meeting was at Cannes France last fall, for accelleration to Market Status for China.  Japan has made a sizable commitment with this G-20 ($60 billion), in part to thank the world for assistance with last year's tsunami.  I think a lot of the speculation for the EU / IMF hinges on our Fed and Treasure  making the commitment.
Apr 21, 2012 11:14PM
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I don't know  Hmmm .....

 

"Why are people worrying about Apple."

 

indeed.  and when was the last time a rocket pointed skyward for fame, fortune and in defiance of the natural laws of gravity came crashing back to earth?  amazing - it's like some investor''s have never even heard the names microsoft, samsung, or android ... Mobile Phone

 

no predictions here .... apple is certainly like a stock market or small nation unto itself and may continue to warrant that high multiple - just one big miss and watch 'em scatter ... Disappointed

 

in the end good allocation will win out and those who have sold portions into the rising price will likely benefit most ....  Money

Apr 22, 2012 6:06PM
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Doug.....Look for a few Fireworks....at the G-20.....The BRIC Countries,will throw more money at the problems in the Eurozone, (through the IMF)BUT they want more say in Worldly Affairs and more control involvement..........They no longer want to be treated as "beaten stepchildren."

And let's face it, money is the "Power behind the Throne"; Really, always has been....Money Hot

B-Brazil

R-Russia

 I-India

C-China........for those that care?

That injection could raise "all boats" here and abroad ?? IMO.

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