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Last Update: 24-Apr-13 09:02 ET
A Questionable but Typical Performance
The stock market was up 1.0% yesterday, yet it would not be a stretch to say many investors were put off by yesterday's action, which can best be described as a machine-like performance.
The major averages all rose by a like amount, with the exception of the Russell 2000 which gained 1.6%. Separately, there was a brief moment of panic selling that saw the major averages drop instantaneously and sharply in response to a fake AP tweet saying bombs went off at the White House and that President Obama had been injured.
As soon as the tweet was exposed as a fake, the major averages rose instantaneously and sharply to get back near their best levels of the day, which had been reached in a fit of optimism that weak economic data in the eurozone and a stream of earnings reports from US businesses showing weak revenue growth would keep central banks pushing on the easing pedal.
The market's performance was questionable, yet altogether typical as it provided another reminder that the default view continues to be that central bank support trumps all else.
Today isn't much different on the fundamental side of things. Economic data has again flashed signs of deterioration and first quarter revenue growth reported by many US businesses continues to be weak.
The focal point on the earnings front has been Apple (AAPL), which beat lowered earnings expectations on 11.3% revenue growth. The latter would be good for most companies, but Apple isn't most companies. That marks a major deceleration from the 59% year-over-year growth registered in the same period a year ago. In turn, Apple experienced gross margin pressure and issued fiscal third quarter guidance that was well below the current Capital IQ consensus estimate.
Shares of AAPL rallied initially in after-hours action as news of a 15% dividend hike and a major boost in the company's plan to return capital to shareholders helped. However, AAPL is now indicated to open 3.0% lower in a trade that, dare we say, reflects disappointment over the company's fundamental position. The weakness in AAPL is going to weigh on the broader market. The S&P futures are currently 0.1% below fair value.
Other companies have been unable to pick up Apple's slack. There are too many earnings reports to cover here, but this may sum things up well in terms of an unfolding picture of weakening demand: Eli Lilly (LLY), General Dynamics (GD), Procter & Gamble (PG), Rockwell Automation (ROK), Sprint Nextel (S), Norfolk Southern (NSC), Corning (GLW), YUM Brands (YUM), Boeing (BA), and Whirlpool (WHR) were among the companies that topped earnings expectations, and out of that bunch, Procter & Gamble had the strongest revenue growth at just 2.0%.
The same picture of relatively weak demand was embedded in the March Durable Goods Orders report. Orders fell 5.7% after increasing a downwardly revised 4.3% (from 5.6%) in February. The Briefing.com consensus expected orders to fall 3.1%.
The wild swings in orders over the last few months have been the result of big moves in aircraft orders. In March, total aircraft orders -- defense and nondefense -- fell 43.5% after increasing 65.0% in February.
Excluding transportation, orders fell 1.4% after dropping a downwardly revised 1.7% (from -0.7%) in February. The consensus expected these orders to remain flat. The drop in these orders should not have been too surprising. Most of the regional manufacturing surveys showed a marked deceleration in orders growth last month.
Large declines were reported in primary and fabricated metals (-3.0% and -1.5%) and machinery (-1.4%).
Surprisingly, business capital demand remained positive even though orders from just about every durable sector contracted in March. Orders of nondefense capital goods excluding aircraft increased 0.2% in March after falling 4.8% in February.
Shipments of nondefense capital goods excluding aircraft were up 0.3% after increasing 1.2% in February. That gain will contribute positively to first quarter GDP growth. Future shipments growth, however, may be in doubt unless orders strengthen from their current level as the number of unfilled orders declined 0.2% for a second consecutive month.
--Patrick J. O'Hare, Briefing.com
The major averages all rose by a like amount, with the exception of the Russell 2000 which gained 1.6%. Separately, there was a brief moment of panic selling that saw the major averages drop instantaneously and sharply in response to a fake AP tweet saying bombs went off at the White House and that President Obama had been injured.
As soon as the tweet was exposed as a fake, the major averages rose instantaneously and sharply to get back near their best levels of the day, which had been reached in a fit of optimism that weak economic data in the eurozone and a stream of earnings reports from US businesses showing weak revenue growth would keep central banks pushing on the easing pedal.
The market's performance was questionable, yet altogether typical as it provided another reminder that the default view continues to be that central bank support trumps all else.
Today isn't much different on the fundamental side of things. Economic data has again flashed signs of deterioration and first quarter revenue growth reported by many US businesses continues to be weak.
The focal point on the earnings front has been Apple (AAPL), which beat lowered earnings expectations on 11.3% revenue growth. The latter would be good for most companies, but Apple isn't most companies. That marks a major deceleration from the 59% year-over-year growth registered in the same period a year ago. In turn, Apple experienced gross margin pressure and issued fiscal third quarter guidance that was well below the current Capital IQ consensus estimate.
Shares of AAPL rallied initially in after-hours action as news of a 15% dividend hike and a major boost in the company's plan to return capital to shareholders helped. However, AAPL is now indicated to open 3.0% lower in a trade that, dare we say, reflects disappointment over the company's fundamental position. The weakness in AAPL is going to weigh on the broader market. The S&P futures are currently 0.1% below fair value.
Other companies have been unable to pick up Apple's slack. There are too many earnings reports to cover here, but this may sum things up well in terms of an unfolding picture of weakening demand: Eli Lilly (LLY), General Dynamics (GD), Procter & Gamble (PG), Rockwell Automation (ROK), Sprint Nextel (S), Norfolk Southern (NSC), Corning (GLW), YUM Brands (YUM), Boeing (BA), and Whirlpool (WHR) were among the companies that topped earnings expectations, and out of that bunch, Procter & Gamble had the strongest revenue growth at just 2.0%.
The same picture of relatively weak demand was embedded in the March Durable Goods Orders report. Orders fell 5.7% after increasing a downwardly revised 4.3% (from 5.6%) in February. The Briefing.com consensus expected orders to fall 3.1%.
The wild swings in orders over the last few months have been the result of big moves in aircraft orders. In March, total aircraft orders -- defense and nondefense -- fell 43.5% after increasing 65.0% in February.
Excluding transportation, orders fell 1.4% after dropping a downwardly revised 1.7% (from -0.7%) in February. The consensus expected these orders to remain flat. The drop in these orders should not have been too surprising. Most of the regional manufacturing surveys showed a marked deceleration in orders growth last month.
Large declines were reported in primary and fabricated metals (-3.0% and -1.5%) and machinery (-1.4%).
Surprisingly, business capital demand remained positive even though orders from just about every durable sector contracted in March. Orders of nondefense capital goods excluding aircraft increased 0.2% in March after falling 4.8% in February.
Shipments of nondefense capital goods excluding aircraft were up 0.3% after increasing 1.2% in February. That gain will contribute positively to first quarter GDP growth. Future shipments growth, however, may be in doubt unless orders strengthen from their current level as the number of unfilled orders declined 0.2% for a second consecutive month.
--Patrick J. O'Hare, Briefing.com
