Bulls gobble up Apple’s mixed corporate confessional and take a bite out of a bear, despite less durable economic data and a looming FOMC decision. As of 10:55 ET the SP-500 (SPY) is up 1.07% as Day 11 of the market’s rally attempt takes a turn for the better in the other trader’s bear flag.
Street crushing top and bottom-line results from mega capper Apple (AAPL) led by dizzying iPhone and iPad sales have won the hearts, if not the wallets of market bulls Wednesday. Shares of the iShares Bull ETF are up 9% and once again above the $600 level despite management warning of below views profit [$8.68 vs. est. $9.93] and sales [$34.0B vs. est. $37.45B] guidance for Q3.
According to public sources, an all-too-happy consensus see Apple’s weak outlook as par for its historical pattern of issuing conservative guidance, which like today, it then proceeds (mostly) to knock out of the ballpark.
An expected move of about 9% in AAPL shares based on the ATM Weeklys April 570 straddle implied volatility of 85% from Monday evening and discussed in detail in our Earnings Front column, has proven spot on, though a couple days of trading until expiration do remain. Intraday, the straddle has improved slightly from Monday night’s $40 per spread to about $41 as it does an impression of a deep in-the-money call.
In sympathy and in the “iMake” components stratosphere, shares of Cirrus Logic (CRUS) are up and on-par with the iShares Bull ETF at 9% in front of tonight’s earnings report. OmniVision (OVTI) is sporting gains of 6.50%. Avago (AVGO) is up 6%, as is Triquint (TQNT), while Broadcom (BRCM) and Skyworks (SWKS) are up about 5.0% and Qualcomm (QCOM) adds 1.50% to its shareholder sense of worth.
Elsewhere on the corporate confessional side and assisting bulls towards the closely-watched, in some circles, goal of a market follow-through day or FTD; shares of Boeing (BA) are enjoying a nice tailwind of 3.85%. The Dow constituent and airline manufacturer saw profits fly past Street views of $0.95 with earnings of $1.22 on better-than-forecast revenues and reaffirming its FY12 sales outlook.
Technically, with shares of BA up near $76, bulls have encountered a bit of technical cloud cover defined by three months of lateral resistance on their charting radars. Separately and off the radar of most bulls Wednesday, shares of fellow Dow constituent and global machinery giant Caterpillar (CAT) are off nearly 5.0% after delivering a mixed report.
Bullish highlights for Caterpillar include a $0.22 profit beat and management raising its FY12 EPS forecast to by a quarter to $9.50 and roughly match consensus views of $9.55. Bulldozing morsels of greater interest include lighter-than-expected sales growth of 23.4%, China contributing only 3% of its quarterly revenues and it’s reaffirmed, bracketing FY12 sales outlook.
And in passing too, shares of global air delivery and freight operator CH Robinson (CHRW) are off 6.75%. Technically speaking, bears are taking the opportunity to break shares below weekly descending triangle support after the outfit announced in-line profits, slightly below views sales growth of 7.9% and management remaining quiet on its outlook.
On the officially-sanctioned economic front, a report of durable goods for March proved much weaker-than-expected. Estimates calling for a dip of 1.7% proved optimistic compared to an actual drop of 4.2%. At the same time, February data saw a downward revision to a slighter increase of just 1.9%.
And looking ahead, the countdown to this afternoon’s FOMC decision on interest and monetary policy is nearing. No shift to a longstanding 0.00% - 0.25% fed funds range is expected and in fact, is all but written in stone. That said, eyeballs will be searching for language shifts, subtle or otherwise, in the attached policy statement and ensuing press conference at 2:00 ET regarding policymakers view on the economy and possible future Street handouts with attention paid to the “on again, off again” QE4 program.
Finally and in those sometimes accurate heat-seeking option markets, US Air (LCC) is up about 3% and option traders appear to be “handling” it’s sector-leading, up-from-the-technical-tarmac, cup base optimistically on above-average call volume.
Most active on the session, nearly 1,000 out-of-the-money June 10 calls have traded. Compared to much larger open interest of 7,000 and penny wide markets, it’s anybody’s guess as to whether the action is driven by closers, openers, buyers or sellers. That said and for $0.57 and time still on the clock, if the broader market were to follow-through in a bigger sort of way this afternoon; the idea of new leadership and a long call strategy in US Air looks like a decent way to travel.
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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