The Virtuous Tech Cycle (aapl, intc, ge, ibm)
Only 20 companies from the S&P 500 have reported earnings so far. 15 of them beaten expectations by 0.7%. The pace of reporting for S&P 500 companies picks up today.
Goldman Sachs (NYSE:GS) beat expectations this morning. After the bell today, we’ll hear from IBM (NYSE:IBM) and Intel (Nasdaq:INTC). Then, tomorrow, we get results from Apple (Nasdaq:AAPL).
While banks and industrial conglomerates like GE (NYSE:GE), which reports on Thursday, hold some sway over the indices, investors will be focused on technology earnings.
That’s because the current wave of technology – smart-phones and tablets – tap into both consumer and the corporate spending. But not only that, the smart-phone/tablet boom is driving spending in new equipment for semiconductor companies and network upgrades for wireless network providers and data center companies.
And Apple is at the forefront of this virtuous cycle. iPhones and iPads are selling like hotcakes. To show you how Apple is driving investment and hiring, it’s opening a 500,000 square foot data center in North Carolina. 500,000 square feet. That’s just ridiculously huge. And it means servers, software, and jobs.
*****Apple stock has been somewhat weak lately, as its weighting on the Nasdaq 100 was changed to make it less influential on the overall level of the index. Before the change, Apple accounted for 20% of the Nasdaq 100.
Even though expectations for Apple’s quarterly earnings are high, I suspect there is upside for the stock given the recent selling. Apple’s forward P/E is 12.4, for cryin’ out loud. It’s hard to imagine Apple ever trading with a forward P/E of 20, like some tech companies do.
*****I’ve added a couple companies that are smack in the middle of the smart-phone/tablet boom to the Top Stock Insights portfolio. One is a $10 chip stock that supplies both the iPhone and iPad. The other is a $5 wireless network equipment stock that’s testing new wireless antenna technology with Sprint.
Each stock has significant upside, and I think it would be good to get them ahead of Apple’s earnings on Thursday. If you are so inclined, you can get the details HERE.
******The S&P 500 closed above support at 1,301 yesterday. Despite the heavy selling,
Interesting that the day after that sharp decline, there’s talk that the Fed will continue investing maturing bond money in Treasury bonds as growth is still below target levels.
Right now, the Fed has around $17 billion in maturing debt every month that it could use to buy Treasuries. That’s far less than the $90 or so billion it’s been putting into Treasuries as part of QE2. But it’s still something.
Word is that the Fed is concerned about what will happen if the market has to kick its liquidity addiction “cold turkey.”
I doubt this new round of Treasury buying will get dubbed QE3, but that’s clearly what it is. Let’s also make no mistake that the Fed is watching the stock market. It knows full well that a sharp decline in stock prices does not put people in the best mood, and people don’t spend money and hire when they are in a bad mood.
That may sound simplistic, but let’s never forget that an economy is a belief system. We spend and invest when we believe there is a better future. I could also point out that investors don’t sell stock as quickly when the Fed is backstopping the stock market.
*****For the next two days, TradeMaster Daily Stock Alerts trading whiz Jason Cimpl will be sharing his thoughts on the current market with you. Jason’s analysis has been darn near perfect for the last 12 months, and he’s led his TradeMaster subscribers to outstanding short-term profits with impressive regularity. I’m sure you’ll enjoy his thoughts.
