If the numbers of Facebook (FB) and Twitter (TWTR) were sheer disappointments, their stocks getting clobbered in turn, Apple (AAPL) was the antidote. Apple, now a little over 40 years old, is closing in on $1 trillion, a market cap once thought beyond the reach of possibility. If Apple continues its gains into today, we could see the first publicly traded company hitting that magical number! Reporting yesterday after closing, the company showed off its marketing muscle; even in the face of a slower clip of iPhone sales growth, the company still managed to charge more, while excelling in its sale of existing and new service offerings. Even with trade fears rampant, and Trump possibly imposing blanket tariffs on all Chinese imports, Apple has managed to circumvent prospective issues by growing its revenue stream. More than anything the country of the century, revolutionizing the world of technology, the company is a favorite of hedge funds far and wide, most recently receiving the stamp of approval of Warren Buffett who’s upped his stake in huge measure.
And if the numbers weren’t promising enough, guidance couldn’t have been better. To sum it up, Apple CEO, Tim Cook, stated, “We’re expanding our reach into emerging markets and seeing strong double-digit growth in revenue, and we’re making great progress toward our goal of significantly expanding our services business.” Apple (AAPL) up 28% over the last year, is a stock that hedge fund managers almost can’t afford to not have in their portfolios. Sales of the flagship iPhone rose 20% to $29.91 billion, even though shipment growth came out at less than 1%. Service revenues were up 31% year-over-year, the company increasingly reliant on subscription and software sales. And to make matters better, the company’s revenue growth accelerated for the 7th straight quarter, coming out at $53.27 billion for the latest period. Profit also beat analysts’ consensus, up 32%. The one caveat is that Huawei Technologies, the Chinese powerhouse, has overtaken Apple as the second largest smartphone seller globally.
Economic Calendar: On the heels of Apple’s stellar report yesterday after closing, which will most certainly move markets today, comes a day chock full of economic events. First-off, at 8:15, the ADP employment report will be released, followed by the Markit manufacturing PMI final report at 9:45. Then, at 10:00, we’ll be getting two different releases, the ISM manufacturing index and the Construction spending report. Then, more important than anything, we’ll be getting the FOMC announcement at 14:00. This release will most certainly command attention, the Fed, albeit not expected to hike rates just yet, primed to release its forecast for hikes from hereon in. Also, be ready for the July motor vehicle sales report which will give an indicator into how this crucial industry at the heart of the trade war is faring.
Market Summary: All major indexes ended up, the blue-chip Dow climbing 0.43%, the S&P 500 tacking on 0.49%. The NASDAQ climbed 0.55%. The S&P 500, for its part, ended a 3-day losing streak. Up 3.6% for July, the index recorded its 4th consecutive month of gains. Yesterday, we saw broad gains on the index, 8 of its 11 sectors ending up, the biggest winners being industrials, which gained 2.1% and health care, which tacked on 1%. The NASDAQ ended the month up 2.2%, also making it its 4th straight winning month. The Dow ended the month up 4.7%.
With all of the Apple hoopla, it could very well be that Trump will upstage Cook today. Reports in all major news sites, from The New York Times to The Wall Street Journal and Reuters have pointed to Trump possibly upping the ante in the trade war, raising tariffs from 10% to 25%. With the Yuan’s depreciation, Trump’s tariff’s pinch but have yet to singe China, given the relatively lower price of China’s goods. Derek Scissors, an American Enterprise Institute China expert, who serves as a White House adviser on trade, stated, “Once you go down the road of using tariffs to disrupt the Chinese, you have to say 25% compared to 10%.”
With so many factors at play – from mid-terms, to Republican dissent, and a market that has been on pins and needles for some time – we could see volatile movement today. Of utmost important, pay attention to the precise wording of the FOMC announcement and any guidance that can be gleaned about future monetary policy.
Hot Stocks: CAKE, CPB, AAPL
Have a great trading day!