Market Preview: The Bulls Finally Blink (Correct)

As for Wednesday's scheduled news, Apple's big day finally arrives with its latest product launch event out in sunny California. The stock is lagging ahead of the fanfare, which is expected to include the next version of the iPad, along with a host of nifty new features, and possibly Apple TV. Apple shares finished Tuesday at $530.26, off 2.7% this week. Not exactly a freefall.

Given the recent rally to all-time highs, a 'sell the news' reaction seems more likely than anything else though, likely leaving the start of the stock's next winning streak for another day.

On the earnings front, American Eagle Outfitters (AEO) is slated to report its fiscal fourth-quarter results before the opening bell. The average estimate of analysts polled by Thomson Reuters is for a profit of 35 cents a share in the January-ended period on revenue of $1.04 billion.

Shares of the Pittsburgh, Pa.-based young people's fashion apparel and accessories retailer are flat in the past year and down nearly 4% so far in 2012 based on Tuesday's close at $14.06. That level is at the high end of the stock's recent range though, above both its 50-day and 200-day moving averages of $14.04 and $13.20 respectively.

That signals some anticipation ahead of this report despite the company's lowered outlook on Jan. 5 when it forecast earnings of 33 to 35 cents a share for the quarter, down from a prior projection for a profit of 40 to 45 cents a share.

The sell side is mostly on the sidelines though with 18 of the 29 analysts covering American Eagle at either hold (16) or underperform (2). The median price target of $16 implies potential upside of 12% from current levels, and the stock trades at a forward price-to-earnings multiple of 13.8X vs. 15.4X for rival Aeropostale (ARO), which is due to report its quarterly results on Thursday.

Brean Murray previewed American Eagle's report on Tuesday, reducing its full-year earnings estimate to 95 cents a share from $1 per share and saying the latest results aren't nearly as important as what the changes the company plans to make to improve over the long haul.

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