Apple Earnings In Focus, But Fed Meeting, Auto Sales Also Could Grab Headlines

Several key earnings releases hit the tape today, but AAPL is arguably the biggest story as the tech company reports after the close. Shares of AAPL rose Monday, and tech sector performance in general has been solid lately. Several major tech firms beat quarterly estimates last week and the tech-heavy Nasdaq set another record high Monday. Leaders Monday included Alphabet Inc GOOG GOOGL, Microsoft Corporation MSFT, and Facebook Inc FB.

AAPL is expected to report earnings of $2.02 per share, up from $1.90 in the same period last year, on revenue of $52.61 billion, according to consensus third-party analyst estimates.

The big focus is on the company’s flagship smartphone products. iPhone sales are expected to increase 4.3% from a year ago, according to Wall Street estimates. But some analysts say smartphone demand appeared to weaken in Q1, and AAPL’s earnings could go a long way toward answering that question. In general, AAPL has a lot of momentum going into earnings, so we’ll see if it can live up to expectations.

One of the more interesting narratives emerging among economists is the idea that U.S. Q1 earnings have been positive partly due to strong international demand. Economies in Europe and Asia have improved even as U.S. economic data shows signs of a slowdown, and some of the best-performing U.S. companies have large overseas sales. AAPL earnings today could shed further light, since AAPL has a big international presence.

The Fed meeting today and tomorrow isn’t expected to result in any interest rate policy changes, according to the futures market (see below). Because of that, it’s getting a little lost in the news, but it’s still important to pay attention to anything the Fed might say on Wednesday.

April auto and truck sales are another big event today. In March, U.S. light vehicle sales fell on a monthly and an annual basis. Combine weak auto sales with other recent declining economic data and you could have a recipe for concern. But if there’s better news from the auto lots today, it might give the market something to latch onto in the wake of disappointing economic data Monday (see below). Consensus is for an improved annual light vehicle sales rate in April, according to Wall Street analysts.

Not everything is back-loaded today. Two of the biggest health companies, Pfizer Inc. PFE and Merck & Co., Inc. MRK, reported this morning, with MRK beating Wall Street analysts’ top- and bottom-line estimates but PFE pulling up short on revenue. On the energy side, ConocoPhillips COP fell in pre-market trading after reporting an unexpected adjusted loss. Earnings across the board have generally been solid, and continue to help drive indices to record or near-record highs.

European and Asian stocks look mostly higher, and oil rebounded a bit but remains below $50 a barrel. Ten-year Treasury yields climbed back to 2.33% in the early going, and the dollar made modest gains against the euro and yen. Volatility is practically non-existent, with VIX just above its yearly lows near the 10.2 mark.

New Month; Same Sluggish Data

The new month started off with a hefty batch of data Monday, and unfortunately, every reading pointed toward slower than expected economic growth. One of the key inflation factors, the core Personal Consumption Expenditures (PCE) price index, fell 0.1% in March, below expectations for a flat reading. That means core PCE prices are up just 1.6% year over year, well below the Fed’s 2% inflation target. Combined with the March decline in the consumer price index (CPI), it’s another sign that inflation doesn’t seem to be much of a factor. One possible bright spot: The ISM report — which includes responses from businesses across a number of industries — showed business leaders sounding generally positive about demand.

What if the Fed Met and Nobody Came?

It feels a bit that way, with Fed leaders gathering this week amid virtually no chance of a rate hike, according to futures prices. What should investors look for in Wednesday’s statement? Any explanations the Fed might have for the slowdown in economic data over the last month would be welcome. A lot of people are trying to determine if the weak spate of data is a blip caused by bad March weather and typical Q1 sluggishness, or something more pronounced. The Fed said at its March meeting that the labor market was strengthening and that economic activity had continued to expand at a “moderate” pace. It also observed moderate gains in household spending, and said business fixed investment had “firmed somewhat.” Any deviations from this language in tomorrow’s statement could prove very telling. 

Could Auto Sales Signal Consumer Optimism?

Despite low unemployment and rising wages, consumers remained tight with their wallets in March, at least judging from the government’s personal spending data released Monday. Spending on goods fell 0.1% during the month. Today’s April auto and truck sales data could signal whether consumers decided to lighten those wallets a little once the chilly month of March ended. Auto sales have been slow lately, and even the classic and antique car market is starting to feel some of the chill, according to industry media. Tail fins, anyone?