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Two Ways To Play: Apple's Strongest-Ever Quarter


Mac sales up, iPod sales flat, but opportunity abounds

Digesting Apple's Numbers

According to the New York Times, CEO Steve Jobs called Apple's (AAPL) quarter the strongest in the company's history as it continues to defy an economic slowdown in the U.S. Net income rose 36% to $1.05 bln, or $1.16 per share with revenues jumping 43% to $7.51 bln; analysts were expecting $1.06 EPS on sales of $6.96 bln. The company reported 33.7 mln visitors to its retail stores, up 57% from the same quarter a year ago. In addition, Apple sold 2.3 mln Macintosh computers, an increase of 54% and iPod sales came in at 10.6 mln, but those figures were flat signaling that the product was maturing. For more analysis, see Professor Sean Udall's Quick Hits: Ho Hum on Apple

From the Bull Pen: Those bullish can go long Apple with near-term sell-stops below $152.

From the Bear Cave: Bears looking for a downside play in the tech sector see the downtrend in Texas Instruments (TXN); buy-stops above $30.50.

Fed Weighs Rate Cut

The WSJ reports the Fed is likely to cut its overnight lending rate by 25 basis points next week. The move would mark its seventh cut in eight months, but some argue another cut would simply add to inflationary pressures with little benefit for growth. As such, the option of leaving rates unchanged is on the table. Although the Fed believes inflation is expected to decline, it is still concerned over inflationary psychology and could signal a pause in rate cuts to show that it takes inflation risks seriously. The futures market imply a 90% chance of a 25 bps cut and a 10% chance that the Fed will keep rates unchanged. For more context, see Professor Kevin Depew's Five Things You Need To Know.

From the Bull Pen: Professor Lance Lewis said the important thing to consider is not how much, but how long the Fed will leave rates at such low levels. Bulls expect upside in the gold miners ETF (GDX) from inflationary pressures; sell-stops below $45.

From the Bear Cave: Regardless of the Fed's actions, bears see a downside play in Blue Nile (NILE); buy-stops can be set above $48.

For more ideas, check out Minyanville's Spotlight Stocks.

Quick Check Around the World

Asian trading closed with the Hang Seng +1.55%, Nikkei -0.28%, Sensex +0.14%, Taiwan -0.20% and Shanghai surging +9.29%.

Glancing towards Europe, we see the CAC -0.88%, DAX -0.30%, FTSE -1.34%

As of 8:44 AM EST, S&P futures are lower +0.1 points to 1378, and Nasdaq futures are lower -0.25 points to 1905.

A Look At Commodities

In commodities, crude is down -0.85 to 117.45. Gold is lower -6.7 to 899.50. Silver is off -0.30 to 17.150, and copper is higher +1.30 to 396.00.

The dollar index is higher +0.387 to 72.206.

On the Radar


Durable Goods Orders: -0.3% vs. 0.1% cons.
Durable Goods ex Trans: 1.5% vs. 0.5% cons.
Initial Jobless Claims: 342 k vs. 375 k cons.
Continuing Claims: 2934 k vs. 2984 k prior.

10:00 Help Wanted Index: 20 cons.
10:00 New Home Sales: 585 k cons.
10:00 New Home Sales (m/m): -0.8% cons.

Click here for the full trading radar.

Good luck and have a great day!
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