Wednesday, May 2, 2018

Markets pause, waiting for the Fed to speak

Dow fell 45, advancers slightly ahead of decliners & NAZ gained 12.  The MLP index was little changed om the 258s & the REIT index added 2+ to the 331s.  Junk  bond funds drifter lower & Treasuries inched higher.  Oil was about even in the 67s & gold hardly budged at 1305.

AMJ (Alerian MLP Index tracking fund)


Crude Oil67.27


Gold   1,305.80
 -1.00 -0.1%

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Stocks opened flattish, as traders digested the latest corp earnings & a reading on the employment sector, while awaiting the conclusion of the Federal Reserve's 2-day policy setting meeting.  The Fed is not expected to raise its benchmark interest rate when it emerges from its May policy meeting.  But the central bank could make changes to its statement, setting the table for a rate hike in Jun.  Also, investors will be looking for changes in the language on inflation.  Economic data released today included the ADP jobs report, which showed the US added 204K private sector jobs in Apr, just above expectations for 200K.  The report is a prelude to the official nonfarm payrolls report on Fri.  Current expectations are for an increase in that report of about 195K.  Top stock movers included Apple (AAPL), a Dow & NAZ stock, which was climbing after the tech giant topped earnings expectations & announced a $100B boost to its share buyback program.  The rally came even as iPhone sales fell slightly short of expectations.  Oil futures were mixed after the commodity rallied to a multi-year high.

Stocks waffle ahead of Fed decision

Apple (AAPL) revenue jumped 16% to $61.1B in its Q2, up from $52.9B for the same period a year earlier.  Analysts had expected revenue of $60.82B.  EPS rose 30% to $2.73, ahead of projections for $2.67.  IPhone unit sales of 52.2M, were slightly below the consensus estimate of 52.3M.  The company also announced a 16% increase of its quarterly div to 73¢, up from 63¢, as well as a stock buyback program that will extend into Q3.  The company was widely expected to reward investors after repatriating most of its more than $250B in overseas cash after the passage of corp tax reform.  The average sale price for iPhones rose 11% to $728, driven by the release last year of the $999 iPhone X, a premium version of the flagship smartphone.  “Customers chose iPhone X more than any other iPhone each week in the March quarter, just as they did following its launch in the December quarter,” CEO Tim Cook said.  “We also grew revenue in all of our geographic segments, with over 20% growth in Greater China and Japan.”  Several analysts had slashed their expectations for iPhone unit sales in the 2nd & 3rd fiscal qtr after several of the company's parts suppliers reported weak demand or sales forecasts, particularly in China.  Some suggested the iPhone X's price point was causing "sticker shock" among consumers.  Cook downplayed the notion of a brewing trade war between the US & China, noting that the iPhone was "the most popular smartphone in all of China" in Q2.  "I'm a big believer that both countries can win and grow the pie," Cook said.  Cook added the company is committed to protecting the data of its users, saying AAPL believes "privacy is a fundamental human right."  The CEO added that customers are "not our product."  AAPL sold 9.1M iPads & 4.08M Mac computers.  The company released an updated version of the iPad aimed at teachers & students earlier in 2018 as part of a push to capture market share in the education space.  The company set revenue guidance for Q3 of $51.5-$53.5B.  Analysts expect revenue for the Jun qtr of $51.6B.  CCFO Luca Maestri said the company has a net cash balance of $145M.  Maestri previously said the company would seek to reduce the balance to "approximately zero" over time thru potential mergers & acquisitions, buybacks & divs.  The stock jumped up 7.10 (4%).

Apple boosts buyback, rallies on earnings beat

US private-sector employers hired 204K workers in Apr, the smallest monthly increase since Nov, a report by a payrolls processor showed.  The increase was more than what had been expected.  The forecast for ADP National Employment Report was for a gain of 200K private jobs.  Private payrolls in Mar were revised down to an increase of 228K from the previously reported 241K gain.  The report is jointly developed with Moody's Analytics.

US April private-sector jobs up 204,000, smallest rise since November: ADP

Stocks are in a hold pattern ahead of the announcement by the Fed.  AAPL earnings were taken as a positive, even though it looks like the market for smartphones is becoming mature.  The  jobs report on Fri looks to be uneventful.  And the Dow is staying close to the 25K level, finding it difficult to break away from that trend line.

Dow Jones Industrials

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