It was a good day for the bulls yesterday -- not the Apple bulls, but the market bulls. Shares of Apple (AAPL) plummeted 12%, yet the S&P 500 ended the day unchanged (well, actually it gained one-one hundredth of a point).
Several months ago, one would have shuttered at the thought of what Apple losing 12% in a day would have meant for the broader market since Apple had the guise of being the market several months ago. Now, it is looked at as a stock with company-specific issues.
There has been a lot of talk of late about there being a great rotation out of bonds and into stocks. In effect, what we witnessed yesterday was a great rotation out of Apple and into other stocks (although bonds were weak yesterday).
The Nasdaq couldn't overcome the weight of Apple's losses, but it was revealing that eight out of ten economic sectors closed higher on Thursday, led by consumer discretionary (+0.7%). Telecom (-0.3%) and information technology (-2.0%) were the two stragglers.
Today, the S&P 500 looks poised to make another run at 1500. The S&P futures are trading 0.4% above fair value, with news out of Europe and an encouraging earnings report from Starbucks (SBUX) contributing to the positive bias.
With respect to Europe, bourses there are trading higher following news that a bevy of banks will be repaying 137 bln euros early to the ECB as part of the 3-year long-term refinancing operation it orchestrated to avert a credit crunch.
This has been construed as an encouraging sign that financial markets in the eurozone are in a more stable state. That belief, and the report that German business confidence rose for the third straight month, have overshadowed the disappointing report that Q4 GDP in the United Kingdom declined 0.3%.
The focus is emblematic of the disconnect between the struggling real economies of the eurozone and the liquidity-fueled financial markets. The stronger euro of late could come back to haunt the markets there given the competitive disadvantage it poses for export-oriented companies.
On a related note, Japan's Nikkei surged 2.9% as a weak CPI report sparked further declines in the yen that boosted the country's exporters.
Earnings reports continue to drive the headlines in the US. As noted above, Starbucks had a good one, noting it is well-positioned to meet its full-year growth targets. Microsoft (MSFT) beat by a penny but saw its operating earnings decline 3.0% following a 15% increase in sales and marketing expenses. MSFT is trading 1.0% lower in pre-market action as it continues to get a cold shoulder from growth-oriented investors.
Procter & Gamble (PG), meanwhile, is trading up 2.0% after the consumer staples company topped the Capital IQ consensus estimate by $0.11 and boosted its FY13 guidance. That gain will more than offset Microsoft's loss in the price-weighted Dow Jones Industrial Average.
Kimberly-Clark (KMB), KLA-Tencor (KLAC), Weyerhauser (WY), Honeywell (HON), and Halliburton (HAL) are other notable companies that beat consensus earnings estimates.
Hasbro (HAS) issued downside guidance for FY12, citing the impact of lower than anticipated consumer demand through much of the holiday season in both the US and certain international markets. Its stock is trading 5% lower in premarket action.
Another early loser of note is the bond market. The 10-year note is down 18 ticks and its yield at 1.92% is re-testing highs seen at the start of the year. The money coming out of bonds could move into stocks. That line of thinking has been a support for the equity market.
Then again, just about everything right now is seen as supportive for stocks as bullish sentiment -- a contrarian indicator -- is running high.