Apple Whiffs on Earnings, but Avoids Tumbling Off Cliff

By Minyanville Staff  OCT 25, 2012 5:16 PM

Today's financial recap and tomorrow's financial outlook.


MINYANVILLE ORIGINAL It was a very slow day today that the bulls attempted to take control of at the start, but by late morning they had already lost the initiative. Pre-market, S&P futures rose as much as 10 points and continued this rally under Pending Home Sales data at 10:00 a.m. After that, the bears took the driver's seat and pushed the S&P down to slightly negative territory. The day finished up around the flat line, but it certainly marks another victory for the bears.

Initial jobless claims data showed a small decline to 369,000 from last week's 392,000, but this was relatively in line with the 4-week average of 368,000. Durable goods orders showed a sharp snapback to a monthly gain of 9.9%, mostly due to a large increase in aircraft orders that had been put on hold last month. However, all of the economic data that was reported this morning reflected a negative revision of the prior month's data.

Apple (Nasdaq:AAPL) reported earnings after the close of $8.67 vs $8.75 estimates. Revenues slightly beat at $35.97 billion vs $35.82 billion estimates. However, forward guidance was dramatically lower, causing an initial plunge in the stock as much as 7% before recovering to nearly unchanged during after-hours trading. Earlier in the trading day, it was also reported that Apple would seek a new Internet radio service in 2013, with an announcement as early as mid-November 2012. Internet radio provider Pandora (Nasdaq:P) got slaughtered in immediate trading after the announcement, twice tripping volatility circuit breakers on the NYSE.

Fixed-income continued to distance itself from equities. Since October 17, the S&P 500 has fallen by 50 points (3.5%), but the 10-year Treasury yield has risen by one basis point. Continued bond and equity weakness is highly negative.

Tomorrow's Financial Outlook

The US will report the first estimate of 3Q GDP tomorrow morning, including the core PCE figure, which is the measure the Federal Reserve uses to calculate inflation. Economists are expecting a rise from 1.3% last quarter to 1.8%. Personal Consumption is expected to rise to 2.0% from 1.5%.

In Europe, the German GfK Institute will report consumer confidence.

In terms of earnings, Legg Mason (NYSE:LM), First Solar (NASDAQ:FSLR), and Weyerhaeuser (NYSE:WY) will report.

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