The equity market stayed true to form yesterday, starting slow but eventually getting in gear to record another multi-year high. There was less to the market's gains yesterday than met the eye, though, especially when one stops to consider that IBM (IBM) accounted for basically all of the Dow's gains while Google (GOOG) carried the load for the Nasdaq.
Regardless, the positive price action continued to embolden investors fearful about missing out on further gains. Word that the House passed a bill that extends the debt ceiling to mid-May helped in the effort, but that bill, which contains a "no budget, no pay" provision, must now pass the Senate.
The seeds have been planted for a similar trading pattern today, as the S&P futures are trading 0.1% below fair value. The remarkable, and hopeful, thing about that indication is that it reflects an awareness that Apple (AAPL) is trading 9.0% lower in premarket action.
Apple will be a focal point all day, as participants question on the other side of its earnings report whether the company's best growth days are indeed behind it. Worries about cannibalization, innovation, and increased competition have shot to the surface after the company posted a fiscal first quarter profit of $13.81 per share (Capital IQ consensus $13.55) on revenues of $54.5 bln (+18% yr/yr) and guided fiscal second quarter estimates below consensus estimates.
We have neither the time nor the space here to expound on Apple's report. As remarkable as some of the headline numbers are -- like the fact Apple has $137 bln in cash -- the market's judgment is our guide to suggest it simply didn't measure up in a zany stock market that pushed a stock like Advanced Micro Devices (AMD) 11% higher yesterday after that company reported a loss of $0.14 per share on a 31.7% decline in revenue and lowered guidance for the first quarter.
Speaking of zany, shares of Netflix (NFLX) are indicated to open 40% higher after its better-than-expected earnings report has sent short sellers scurrying for cover. Roughly 25% of the company's float was sold short heading into its report.
Per usual, most of the earnings reports since yesterday's close were better than expected, yet the guidance has left a lot to be desired. Sandisk (SNDK), Lam Research (LRCX), Stanley Black & Decker (SWK), McCormick (MKC, Baxter (BAX), Airgas (ARG), and Timken (TKR) are among the companies that beat estimates, but then issued earnings and/or revenue warnings. W.W. Grainger (GWW), meanwhile, flat out missed the Capital IQ consensus estimate by $0.19, but boosted its FY13 revenue guidance to reflect an acquisition.
Where the market's focus will lie today is hard to say. It could revolve around Apple; it could revolve around Netflix; it could revolve around encouraging manufacturing PMI data out of China and the eurozone or weak trade figures out of Japan.
It could revolve around reports North Korea is threatening a new round of nuclear tests with the US in its sights. It could revolve around reports that Spain's unemployment rate hit a record high 26% or it could revolve around the report that weekly initial claims in the US slipped to 330,000 for the week ending January 19 (Briefing.com consensus 355,000) from 335,000 in the prior week.
The claims figure looks encouraging, although poor seasonal adjustments appear to be playing a part. The market should have a better read on things in coming weeks, but the lackluster response in the futures market to the favorable headline suggests participants aren't taking the improvement at face value.
There is a lot to focus on today. In the end, things may just boil down to the behavior of the broader market itself. Will it continue to push ahead with a sense of aplomb or will it succumb to selling interest and pull back?
There is a long day ahead. To be sure, though, there is no shortage of market drivers.