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On Apple This Week
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 0.00%) 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 0.00%) 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 0.00%), Boeing (BA 0.00%), Caterpillar (CAT 0.00%), Merck (MRK 0.00%), Netflix (NFLX 0.00%), ConocoPhillips (COP 0.00%), PepsiCo (PEP 0.00%), Harley-Davidson (HOG 0.00%), Chevron (CVX 0.00%), Ford Motor (F 0.00%) and Procter & Gamble (PG 0.00%). 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 ($INDU +0.50%) and the Standard & Poor's 500 Index ($INX 0.00%) 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 0.00%) 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 0.00%), with a market capitalization of $37.1 billion, is replacing solar-panel maker First Solar (FSLR 0.00%), with a market cap of $1.79 billion, in the Nasdaq-100 Index ($NDX 0.00%) and the Nasdaq-100 Equal-Weighted Index ($NDXE 0.00%) 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 0.00%) 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 0.00%) 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 0.00%), ConocoPhillips, Netflix and Texas Instruments (TXN 0.00%). 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 0.00%), U.S. Steel (X 0.00%) and Baker Hughes (BHI 0.00%). The latter will hint at how bad the natural gas depression is.
Wednesday: Boeing, Caterpillar, iron-ore producer Cliffs Natural Resources (CLF 0.00%), Corning (GLW 0.00%), Harley-Davidson, health insurer Wellpoint (WLP 0.00%) and auto renter Zipcar (ZIP 0.00%). 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 0.00%). 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 0.00%) and Goodyear (GT 0.00%).
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.
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