Pre-Market: Apple Cut by SocGen; Fed Could Reduce Asset Purchases

By Vincent Trivett  JAN 21, 2014 8:56 AM

Despite the dismal jobs report, policy makers are still bullish enough to reduce monetary stimulus.

 


Stocks headed higher on Tuesday as investors looked to earnings from major companies like Verizon Communications Inc. (NYSE:VZ) and news reports suggest that the Federal Reserve might cut its bond purchases further. Apple (NASDAQ:AAPL) shares could also come into focus after analysts cut the company to hold.

Stock futures are mostly higher following the three-day weekend. Before the start of normal trading hours, Dow (INDEXDJX:.DJI) futures were up 0.36% at 16,456. S&P 500 (INDEXSP:.INX) futures gained 0.24% to 1,838.70 and futures on the Nasdaq Composite (INDEXNASDAQ:.IXIC)  rose 0.24% to 3,601.25.

Verizon swung to a $5.07 billion profit in the last quarter. Adjusted earnings per share were $0.66, beating analyst estimates by a penny. Revenue rose 3.4% to $31.07 billion as the company added subscribers. The company also announced that it will purchase Intel's (NASDAQ:INTC) failed set-top box project, Intel Media, for an undisclosed sum. About 350 Intel employees will be transferred to Verizon. Shares of Verizon were up 0.77% after the earnings announcement hit the wires.

Another Dow component, Johnson & Johnson (NYSE:JNJ) reported earnings of $1.24 per share, beating estimates by $0.04. Revenue increased 4.8% year-over-year to $18.4 billion, also surpassing expectations. US sales rose 7.4%, but international sales rose only 2.4%. Shares were up 0.8% in pre-market trading.

Shares of Apple  were down 0.11% today after a bearish analyst report came out. Societe Generale (OTCMKTS:SCGLY) downgraded the iPhone maker to hold from buy. The bank's analysts reiterated their $575 price target, but noted that sales of the iPhone 5S are slowing. Furthermore, with the lower-priced iPhone 5C, they expect the average selling price per handset to be 4% lower this quarter. Still, the 5S is outselling the 5C by four to one.

No US economic indicators are due out today. The Wall Street Journal's Jon Hilsenrath reported today that the Federal Reserve is on track to reduce its bond purchases even more at its policy meeting next week. In December of last year, the Fed modestly reduced its monthly asset purchases by $10 billion to $75 billion. The well-sourced Fed reporter said that this month, the central bank could further reduce that to $65 billion. That the Fed is still optimistic about the future recovery comes as a surprise to many after December's unexpectedly dismal jobs report. The Federal Open Markets Committee meeting that will take place on Jan 28-29 will be the last under outgoing Chairman Ben Bernanke.

Overseas stock markets rallied overnight. In Germany, the ZEW Survey showed that investor confidence fell for the first time in half a year. The index fell to 61.7 this month from 62 in December 2013.

Equities got a boost from the People's Bank of China, which injected $42 billion into the financial system to bring down the seven-day repurchasing rate as banks face cash demands ahead of the lunar new year holiday. Yesterday, China reported that GDP growth fell to 7.7% year-over-year in the fourth quarter from 7.8% in the previous three months.

Twitter: @vincent_trivett
No positions in stocks mentioned.

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