Big News from Apple

Morgan Stanley (NYSE:MS), McDonald’s (NYSE:MCD), Boeing NYSE:BA), United Technologies (NYSE:UTX), Apple (Nasdaq:AAPL) – all beat earnings expectations in the latest round of quarterly reports.  


Yes, earnings estimates appear to have been too low. But at the same time, the economy is surprisingly strong. I’m not sure there’s much reason to think analysts should have seen these numbers coming.   


Apple was the star of the bunch. It reported $3.33 a share in earnings, when analysts were looking for a measly $2.45. That’s a humongous beat by Apple. And the stock is moving 6% higher this morning.   


Apple is setting the bar awfully high going forward.   


So far, 89% of companies have beaten earnings expectations, according to Bloomberg. If that pace continues, it would be a record.   


Despite concerns that stock prices have come too far, too fast, corporate earnings are supporting valuations. And economic data has been just positive enough to keep the recovery story going without forcing the Fed to raise interest rates.   


The brief dip in prices after the Goldman Sachs news has helped to slightly relieve overbought conditions. And the recent dip in oil prices has done the same.   


It wouldn’t be a shock to see some profit-taking sometime soon. But overall, we should expect the rally to continue.   


Airlines have resumed flights in Europe after the volcano eruption in Iceland. (No, I’m not going to try and spell the name.) It’s estimated that airlines lost $1.7 billion in revenue while planes were grounded.  


I’m interested to see if oil prices will rally now that these planes are flying again. Oil prices are up slightly today. But the question for investors is: have oil prices seen their seasonal highs ahead of the summer driving season?   


The recent high for oil is just above $87 a barrel. Another new high would almost certainly carry oil into the $90s and push gas prices above $4 a gallon.   


So far, the economy has handled stronger than expected oil prices well. But $4 a gallon for gas is one of those psychological price levels that gets consumers talking about cutting back on driving.   


If you’re buying oil stocks, stick with the small exploration companies and avoid oil services. Oil services stocks have been underperforming.    


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