A Spaghetti Western of earnings and economic data in front of tonight’s Apple main course finds bulls nibbling Tuesday. As of 12:15 ET the SP-500 (SPY) is up 0.45% as day ten of the market’s rally attempt takes a slight turn for the better following a testing, test of the other trader’s bear flag.
Clint Eastwood would be proud with Tuesday’s “Good, The Bad and The Ugly” serving of corporate confessionals. For bulls attracted to today’s modest round of bargain-hunting, good reports and well-received results in Dow constituents 3M (MMM) and AT&T (T) are likely assisting. Shares of MMM are up 2.50%, while T adds nearly 3.75% and leading the Dow back above the 13,000 level and narrowly above its 50SMA.
For its part and by the numbers, 3M managed a profit beat of $0.11 on earnings of $1.59, matched sales forecast on revenue growth of 2.4% and issued above-views FY12 EPS guidance of $6.35 - $6.50 versus Street views of $6.29 per share.
Other good or decent enough results to inspire a bit of “Buy, Buy, Buy!” portfolio slinging include Illinois Tool (ITW) with its gain of 2.25% and above-views profit forecast and Baker Hughes (BHI) 7.50% share gusher from some deep exploratory technical drilling following a $0.06 profit beat.
In the “bad” or not good enough category of motif operandi, shares of Texas Instruments (TXN) are off 1.25% and reversing from an initial gap bid. The semi giant topped profit views by $0.03 on earnings of $0.32 per share, beat revenue forecasts narrowly on a sales decline of 8.0% and issued in-line, bracketing earnings guidance of $0.36 - $0.44 versus $0.40 for its upcoming second quarter.
Coach (COH) is suffering a similar fate by its shareholders. COH stock is off 3.35% despite the luxury goods outfit issuing a two cent profit beat, in-line sales growth of 16.6% and announcing an increase of 33% to its dividend. Technically speaking, a well-tanned and aged bull has signaled confirmation of a top from a bearish flag set beneath 50SMA resistance.
And in the “ugly” category of bulls wishing there was a rewind or reset button to go back to 2010 – 2011, shares of Netflix (NFLX) are off 13.75%. The fallout comes after issuing disappointing guidance, narrowly besting sales views with growth of 21% and topping Street forecasts by $0.21 but still falling short of a profit with a loss of ($0.08) per share.
The report for the erstwhile growth juggernaut facing continued competition and shrinking margins saw mixed analyst reaction with Pac Crest bumping up NFLX shares to “Outperform” from “Sector Perform”, Canaccord reiterating its “Sell” rating and fund manager / CNBC regular Whitney Tilson adding to his position on his belief in the company’s international growth prospects.
On the officially-sanctioned economic front, good news has greeted bulls living underwater in the American Dream. New home sales for March hit an annualized 328,000 versus forecasts of 318,000, while February data saw an upward revision to 353,000.
By some measures, consumer confidence came in “bad” with its narrow and slightly worse-than-expected dip to 69.2 for April versus March’s 70.2 and compared to estimates of 69.5. And likely a bit more ugly, but we’ve seen worse, median housing prices courtesy of the Case-Shiller 20-City Index fell by a worse-than-expected -3.5% compared to forecasts of -3.4%.
In those often intertwined markets of influence and likely being watched on your iPhone or iPad, it’s all about the iShares Bull ETF i.e. Apple (AAPL) as investors await tonight’s closely-watched and very well-played earnings release. In front of the report and one which bar none, has the potential to move the broader market like no other company today, shares are showing signs of skittish behavior with an intraday loss of 2.25% near Monday’s 13.5% corrective hammer low.
In those sometimes accurate heat-seeking option markets, premiums are frothy in Apple as traders / investors brace for a larger-than-normal reaction to tonight’s report. Given the stock’s meteoric rise of 55% this year and $600B market cap at recent highs and traders waiting on the next, next, next big thing from Apple sans Steve Jobs, can we blame them?
Theoretically and compared to past range reactions of about 2.5% to 6.25% over the past year, ATM Weeklys implieds of 95% tell us option traders collectively expect a 1SD or 68% chance AAPL will remain within 8.50% of Tuesday’s close through expiration this coming Friday. For further detail on Apple, today’s released Earnings Front column features additional nuts and bolts inside of Apple, just not the iPad.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
