Chillin' out till it needs to be funded
Markets headed down, last weeks result impact
Dow near 14.5K and its quite ready for a rocky road down the mountain, though it’s still not “Sell in May and go away” especially with Apple already ruling
below 400 before the week ago and ending 4% higher with higher investments in India and 37 MM iPhones /19.5 MM iPads in the quarter barely enough but not that sad a story at the right price.
Apple results last week, brought forth into glaring focus the drying up on the innovation horizon and a probable reinvention of retail and distribution focus at the company under Tim Cook after a loss of face on share returns engendered a supposedly appropriate $50 B buyback program from Apple. Of course as the company cannot repatriate its international stash without paying more taxes, it would actually be borrowing for the buyback program.
Amazon’s results on the other hand , almost followed the spot taken by Coke and McDonald on Friday last as they started falling soon after earnings calls had finished. Unlike many other retailers in the non digital world, Amazon grew sales 22% from $13 B to $16 B in the just ended quarter topping off a great quarter with apparently at least $4 B in Capital investments including warehouses and new digital content for its online streaming service competing wwith
Netflix. Expectedly, even with EGM (Electronics and General Merchandise) now accounting for 2 in 3 $ in Sales, profits nosedived but were still ahead of expectations at 18 cents a share. Apple reported $10 a share and that is just underlining the digital divide in its entirety as the companies define so differently. The continuing 5% contribution of cloud services could have been a reason for the stock to fall, but one would think at $271 the stock would not have much more upward potential and is simply a better investment again in a month or so at $226 or around $230 when investors return to the stock.
Apple’s Q3 guidance is much more achievable at $33.5 Billion and Gross margin could stabilise at around 36% after its fall from 47% to 37% this quarter. Amazon would continue to grow in double digits in the June quarter to revenues of $16.5 B at the upper end representing a 26% rise on the year ago quarter Also one expects feedback on its 30 pilots launched in the instant video service of which 14 were costed in Q2
Samsung has comprehensively beaten Apple inC smartphone sales in key markets but the App store sales for Apple track to 74% of the equivalent market, the busy Android just taking three fourths of the remaining market. Samsung smartphone sales have grown 60% in April 2013 to 70 million in Q1 2013 against Apple’s growth of 7% recorded by IDC implying less than half the number. Samsung reported $6.7 B profits on $47 B in sales globally while Apple reported $9.5 B on $43 B in Sales in the quarter
Busy week ahead
Even without the Central bank meetings scheduled this week, the end of month data has enough tantalising trends this week for markets to get even more undecided about the rosy future for corporate America and the counterparts across the pond. Housing starts data come in before market open tomorrow to back up the first inferences from Pending Home sales data later today, as a cut in both in month/month data is unlikely to threaten the broader recovery with year/year growth in double digits though a 1% uptick is the consensus in Pending Home Sales and a 5% rise in the low march readings in Housing starts tomorrow.
Similarily the personal spending data showing up higher by 0.2% would have been a cause for worry but the data point being positive is in itself quite a surprise after the bad series in March and most naysayers and US households pulling a thumbsdown after the sequester was announced. Much of the expected US recovery will continue in trade data as General Motors announce results in the footsteps of Ford which lost to the dole in sharp cuts in European Auto Sales while Chrysler did not cut much of itself courtesy its absence from markets across the pond.
If the ISM data on Wednesday can indeed survive the slowdown in Chinese PMI data it would be good news but barely for US Manufacturing and Services (Friday) but Wednesday is likely to go into a stall with the FOMC finishing on the status quo and Thursday announcements from the ECB already expected to mask the bad economic data from Europe following on German cut in output expectations last week all week. Italian spreads in the meantime are headed further lower nearer to the disastrous 1.2% yields on the Bundesbank 10-Y Gsecs in the next few months with the coalition continuing the good work
Friday’s Jobs report could be the final blow for optimistic equities markets as Fixed income markets continue to try and get interest rates higher and set the tone as March’s 80k NFP performance is expected to be forgotten by the consensus and the effect of sequester could surprise more than the 30k cut to 150k jobs a month in the much followed BLS report. The ADP report is also expected to report 150K new jobs on Wednesday while the Challemger job cuts report could make it interesting on a Thursday dominated by European PMI releases before the ECB meet the press expected to announce the rate cut despite a face off with Germany on easing off austerity restrictions. However one might consider that ECB is unlikely to take interest rates near the 0 mark and the current rate at 0.75% has been regrded by us and ECB as a low enough and sfe threshold for interest rates
Facebook reports mid week esp as it gets upgrade for a better than expected performance in mobile ads and even The Sage of Omaha will take the microphone once again at the Berkshire Hathaway AGM. USD trade data comes in on Thursday while April Auto sales aided by imports likely to come above the 15MM per year runrate
European Banks follow into 2013
Brclays cut out its inconvenient european retail and small business banking infrstructure to report a huge investment banking led Q1 with more debates on its pay agreements and its plans to revamp internally with Rich ricci carrying off on his pet horse with the largest share of the stash but Deutsche Bank and UBS are likely to follow this week with continuing losses and capital troubles following them, UBS hving scuttled its investment banking operation instead in line with SNB wishes. RBS and Lloyds Bank also report likely just trivial profits in their trading statements. Barclays actualy reported detailed financial results for H1 with the Financial Year starting in October 2012