Traders Focus Away From Europe As 2nd Quarter 2012 Earnings Decline, Investors Await Apple Q3 2012 Earnings:
The Dow Jones Industrial Average has had three days of three digit losses or more in a row and investors have been unimpressed by lackluster second quarter 2012 earnings. Bell-weather stocks like GM and Ford are at multiyear lows while U.S. economic data has been trending downward. Investors are anxiously awaiting Apple’s 3rd quarter earnings after the bell but the stock has dropped slightly below the psychologically meaningful ’round number’ $600 in late day trading around 3:00 pm EST. Apple’s stock did make a comeback a half hour later above $600 and investors are eager to parse through the numbers.
The market has been weak since Ben Bernanke ended his testimony last week and there have been only a few opportunities for bullish trades. The patient investor will take these last few days as an investment entry point but short-term bullishness may be on the sidelines until the market shows some resilience. Second quarter 2012 GDP may come in this Friday slightly below 1.3 percent +- 0.3 percent and economists are now lowering their estimates for the third quarter. We will wait until the GDP number is released because we have already lowered our economic outlook from mixed-positive to mixed and are considering a downgrade to mixed-negative.
Apple Earnings Macro and Micro Considerations, Trading Sentiment
Apple’s earnings may be a unique story because the consumer has been tapped out and retail sales have consistently declined for the last few months. Apple’s stock price does impact trader sentiment regardless of macroeconomic assumptions and if the company can convince traders to go long- there will be positive spillover effects that will encourage market participants to purchase other stocks. Apple is a micro/macro story that should be analyzed both as an economic guiding tool and a trading sentiment gage. A significant amount of traders, mutual funds and hedge funds own Apple so it’s important to consider the firm’s earnings from both sides. Strong earnings from Apple may be good/neutral for the overall market in the short run but a drop could signal more weakness for U.S. equities.