Sat. Oct 16th, 2021

Apple Higher, Apple leads the charge
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On Monday, Apple’s shares rose in a report that Google could pay Apple about $ 15 billion this year to keep its site as its default search option on iOS, according to Bernstein analyst Toni Sacconaghi. That exceeds the estimated $ 10 billion by 2020.

Sacconaghi says the deal with Google will increase Apple’s revenue from services services by 8.5 percentage points, and will account for up to 9% of the iPhone maker’s gross profits during fiscal year 2021.

Of course, it’s hard to suggest that these stocks are no longer priced. Yesterday, Apple’s valuation topped $ 2.5 trillion. To put it in context, Apple’s valuation is now about 10% of the entire U.S. economy.

Apple Higher, Apple leads the charge

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What to see today

Economy

  • 9:00 am ET: FHFA Home Price Index month to month, June (1.9% forecast, 1.7% in May)
  • 9:00 am ET: S&P CoreLogic Case-Shiller 20-City Index, month to month, June (1.80% forecast, 1.81% in May)
  • 9:00 am ET: S&P CoreLogic Case-Shiller 20-City Index, year-on-year, June (18.60% forecast, 16.99% in May)
  • 9:45 am ET: MNI Chicago PMI, August (68.0 expected, 73.4 in July)
  • 10:00 am ET: Conference Board Consumer Confidence, August (expected 123.0, 129.1 in July)

Earnings

  • 16:05 ET: Crowdstrike (CRWD) It is expected to report adjusted earnings of 8 cents per share on revenue of $ 322.78 million

Politics

  • President Biden will head to the nation at 1:30 pm ET at the end of the war in Afghanistan. Biden says he will look back on the evacuation of more than 120,000 people and his “decision not to expand our presence.”
  • Social Security and Medicare employers it is scheduled to publish its annual report. The report, the first to take into account the COVID-19 pandemic, should give a window on the program’s insolvency forecast.

Now, August is a great month for stocks

“When August began, investors were warned that history has not been kind to the stock market during the last full month of summer.

This is an annual tradition in market commentary.

Over the last ten to twenty years, the average performance of the S&P 500 Index (^ GSPC) during August has been negative, a distinction only matched by the poor September performance. And in the years since the presidential election, only February has been less kind to investors.

And, with concerns including the Federal Reserve slashing its asset purchase program, the spread of the Delta variant, and concerns about expired unemployment insurance benefits, August 2021 seemed full of potential pitfalls. for markets.

Almost none of which has been confirmed.

With the record closing of the S&P 500 on Monday, the benchmark index has reached 13 all-time highs this month. Any advance on Tuesday will set another record for the index. Until Monday’s close, the S&P 500 has risen more than 3% so far this month and is on track for its best monthly gain since April. – Yahoo

A rare occurrence

How often does the market 7 months later in a row? Not often. As we have discussed recently, the following table shows all periods in which there have been two or more months of consecutive positive return.

Apple Higher, Apple leads the charge

The table shows that almost 40% of the time, two months of positive performance is followed by at least one month of negative performance. In contrast, three consecutive positive months occur 23% of the time and only 14% of occurrences extend to 4 months.

Since 1871, there have been only 12 occurrences of positive return stretches of 6 months or more before a negative month appeared. In total, there are only 40 occurrences; of 245 periods of 2 months or more, the market operated 6 months or more without any correction.

However, the test ended at least in a month of negative returns in all periods, but the vast majority ended with much deeper corrections.

The interns are still very weak

Sentiment Trader had a couple of interesting points yesterday about the internal functions of the market.

Currently, more than 87% of the volume of the Nasdaq stock market flowed into advanced stocks, which usually precedes a setback two weeks later.

Apple Higher, Apple leads the charge

And more than 75% of the NYSE’s volume fell in advanced stocks for three days in a row last week.

Apple Higher, Apple leads the charge

More divergence

Following Powell’s speech last Friday, investors are clearly favoring Apple and other large-cap growth stocks. The S&P and NASDAQ closed 0.44% and 1.13% respectively, while the Dow is slightly lower and the Russell 2000 0.5%. Given Powell’s impoverished tone, we suspected that cyclical sectors and small caps would operate better. The breadth of the market remains poor as generals are advancing. Apple is up 3% and Facebook and Amazon are up 2%. There have been more stocks in the fall on the NYSE than the advanced ones.

Atlanta Fed-GDP now

The Atlanta Fed revised its GDP-Ara forecast from 5.7% to 5.1% largely due to the slowdown in personal consumption. The Delta variant is reducing spending on dining rooms and hotels, but that’s not the only problem. The recent torrid pace of spending is unsustainable and normalization is inevitable. In our opinion, the economic headwinds, in addition to Delta, are as follows:

  • Accumulated demand is rapidly fading
  • Concerns about inflation are slowing consumption
  • The stimulus ends quickly.
  • Weaken consumer confidence

First signs of market correction

Apple Higher, Apple leads the charge

Earnings performance warning

The following graph by Tavi Costa shows the relationship of profits over price. As it turns out, investors are paying a premium for profits. Chances are, in the future, profits will grow dramatically or prices will be right. As Tavi shows, the last four cases with similar yields were not favorable to the market. Maybe this time it will be different?

Apple Higher, Apple leads the charge

See dry paint

Typically, Wall Street traders who don’t sunbathe in the Hamptons see the dry paint in the trading rooms during the week before workday. With the Fed providing more clarity on the conical shape, this should be the case this year as well. However, the ADP and BLS employment reports come out on Wednesday and Friday respectively. With many Fed speakers making it clear that continued employment improvement is the key to starting to shrink, we may see some fireworks this week. After a relatively weak report last month, the ADP is expected to rise from 330,000 to 500,000. Economists expect the BLS to show 650,000 more jobs in the workforce. With many unemployed people losing federal and state unemployment benefits, the incentive to find a job is higher, which can lead to larger-than-expected hiring of workers.

This week will also be of interest to the Fed speakers’ reaction to Powell’s vague comments on a tight schedule. We suspect that the dissent in the ranks will become stronger in the coming weeks.



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