Market Preview: Just Plain Risky

The falling expectations for first-quarter earnings got ignored in the first three months of 2012 in part because the U.S. economy was showing real signs of improvement, especially in the employment picture. There was also a belief that the Federal Reserve, which starts a two-day policy meeting on Tuesday, would come across with QE3 sometime in the second quarter.

Add in the European Central Bank's moves to calm sovereign debt contagion fears with another bailout for Greece and its massive long-term refinancing operation, which many consider a kind of backdoor quantitative easing, and there's your rally.

Now that the actual so-so earnings are here, even if they are a little better than expected, the market is resetting a bit. Guidance hasn't been great, and ponying up for stocks -- even some of the fundamentally sound ones -- after 25%-plus gains over the past six months suddenly seems, well, risky.

As for Tuesday's scheduled news, it's all about Apple (AAPL), and it's worth asking where the doubters were a few weeks ago when the stock was getting cheered to new highs day after day?

After closing on April 9 at $636.23, Apple shares went on to hit an intraday all-time $644 on April 10, and it's been mostly downhill from there. The stock has fallen in nine of the past 10 sessions, including Monday's finish at $571.70. It's down 10% in that span, not exactly reminiscent of confidence ahead of its fiscal second-quarter report, which is due after the closing bell.

Wall Street isn't worried about a miss though. It's more a case of getting ahead of guidance in case there's a not-so-incredible quarter coming later in the year because of the timing of various product launches.

"Despite a likely very strong March Q, we do think Apple's stock will consolidate in the June Q, given q/q declines in iPhone sales in the June Q and some risks to iPhone sales in the September Q, depending on the timing of the new iPhone launch," said BMO analyst Keith Bachman on Monday. He has an outperform rating on Apple with a $750 price target.

The issue of carriers deciding to slash subsidies for future iPhone models is also addressed by Bachman, who estimates if subsidy levels were cut by $100 per phone, his estimate for fiscal 2013 earnings -- currently $50.35 per share -- would come down by $7.50.

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