US stock futures point to a slightly higher open as the market
looks to extend its win streak to four days. Last week indices
looked poised to perhaps test deeper support levels, but dip buyers
stepped in once again to put the market back on course for highs.
With some of the bearish patterns that formed in key sectors last
week, though, it's hard to chase three days of bullish price
action. Many traders are likely in wait-and-see mode at this stage.
We are in the thick of earnings season, and last night we got what
now appears to be a polarizing report from
). The company beat narrowly on the top and bottom lines, and beat
estimates on its key iPad and iPhone products, but saw margins come
in below expectations. Perhaps most significantly, AAPL announced
it will return $100 billion to shareholders by 2015. It announced a
$60 billion additional stock buyback and raised the per-share
dividend by 15% to $3.05.
Immediately after the report AAPL traded up around 5%, but as
investors combed through the report and listened in on the
conference call, they found many things not to like, and the stock
is now 3% lower this morning. The margin compression, decelerating
growth, and weak guidance are obvious concerns, but many also
perceived the new capital plan as a half-hearted attempt to placate
angry shareholders. The vast majority of the company's cash hoard
sits in foreign tax havens, so AAPL is borrowing to increase its
dividend because of the relative costs. The chances of AAPL ever
repatriating foreign cash seems very slim. It will take a much more
aggressive capital plan to win over value investors, and AAPL will
likely need concrete news of new, potentially lucrative product
lines to ignite the stock.
Yesterday we saw the banks emerge from their post-earnings malaise
and take a leadership role in the rally. Each earnings season,
leadership in the group often gets reset based on the who has the
cleanest earnings report.
) fits the bill this time around, and it is showing relative
strength over the past week. Yesterday Citi closed up 2.90% and has
its sights set on the $46.78 pivot, and then perhaps 52-week highs
Bank of America's
) were not quite as stellar, but an upgrade from
) yesterday propelled the stock to a 2.99% gain.