2012 Stock Predictions and Outlook
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The view that QE3 was likely off the table caused some gyrations in precious metals but the June gold contract settled down $1.50 at $1642.30 after running as low as 1625. The dollar traded slightly higher against a basket of currencies, with the dollar index up 0.08%. The benchmark 10-year Treasury note lost 2/32, with the yield rising to 1.989%.
Breadth within the Dow was positive, with 24 of the index's 30 components on the rise, led by Boeing ( BA), which rose more than 5% after its quarterly report; Alcoa ( BA), du Pont ( DD), IBM ( IBM), Intel ( INTC), and American Express ( AXP). The biggest drain on the Dow was Caterpillar ( CAT), which fell more than 4% after its quarterly report. Wal-Mart Stores ( WMT) also fell for a third straight session following revelations of its bribery scandal in Mexico over the weekend. In the broad market, winners outpaced losers by a roughly 3-to-1 ratio on both the New York Stock Exchange and the Nasdaq. The VIX, which measures market volatility through options activity in the S&P 500, fell more than 7% to 16.82, gravitating away from the 20 level, which is indicative of rising market fear. Wall Street shrugged off a weak report on durable goods orders in March. The Commerce Department said orders fell 4.2% last month following a downwardly-revised gain of 1.9% in February. The reading was the biggest decline in durable goods orders since January 2009 and much worse than the 1.7% decline expected by economists surveyed by Thomson Reuters. Excluding the transportation component, orders were down 1.1%. U.S. stocks had finished mixed on Tuesday with the Dow pushed higher by positive earnings reports and a dividend hike from IBM ( IBM). Nasdaq was tripped up by a 2% decline in Apple ahead of its report. The stock had fallen in 10 of the previous 11 sessions, losing roughly 10% along the way, with the weakness in part stemming from sell-side concerns about the iPhone. That weakness was forgotten Wednesday morning with Apple shares gaining nearly 9% to easily regain the $600 level. The company's fiscal second-quarter profit soared 93% year-over-year with heavy iPhone demand leading the way.
Apple earned $12.30 a share in the March-ended period on revenue of $39.2 billion. Analysts were expecting earnings of $10.02 a share on revenue of $36.69 billion. About $22.7 billion of revenue was from sales of the iPhone. The company sold 35.1 million iPhones, 11.8 million iPads, 4 million Macs and 7.7 million iPods in the quarter. "Is Apple the new GM ( GM)?" asks Uri Landesman, president of Platinum Partners. "There was a saying that goes, 'as GM goes, so goes America,' and not just in the market but the economy as well. Apple is not as ubiquitous as GM was in 1950 but it is a barometer in the consumer space. When you see everybody and his uncle buying an iPad, the economy can't be that bad if people have that much discretionary income to buy something which will become a necessity the day after you buy it but which you got along without previously." In other corporate news, Coca-Cola Company ( KO ) shares were up 1% as the soda giant's board voted to recommend a two-for-one stock split. The split would be the eleventh in the stock's 92-year history and the first in more than a decade. "Our recommended two-for-one stock split reflects the Board of Directors' continued confidence in the long-term growth and financial performance of our company," said chairman and CEO Muhtar Kent. Baidu ( BIDU), the Chinese Internet search company, said first-quarter earnings rose 76% but its revenue outlook for the second quarter was below Wall Street's estimates. Baidu forecast revenue of $847.2 million to $867 million for the second quarter; analysts are expecting revenue of $870 million. Shares finished down less than 1% after dropping as much as 5% earlier in the day. Caterpillar, the maker of construction and mining equipment, reported first-quarter profit Wednesday of $1.58 billion, or $2.37 a share, up from year-earlier earnings of $1.23 billion, or $1.84 a share. Analysts were estimating earnings of $2.13 a share from the Dow component. The stock dropped 4.6%. Boeing shares rallied after the aircraft maker beat the average analysts' view as revenue rose 30%, largely reflecting increased commercial aircraft deliveries. Excluding items, the company earned $1.11 a share. Analysts surveyed by Thomson Reuters had estimated 94 cents. The stock rose 5.3%.
Overseas, Hong Kong's Hang Seng shed 0.15% while Japan's Nikkei gained 0.98%. The FTSE in London gained 0.16% and the DAX in Frankfurt closed higher by 1.7%. In commodity markets, the June crude oil contract ticked up 56 cents to $104.11 a barrel.
-- Written by Andrea Tse and Shanthi Bharatwaj in New York. >To contact the writer of this article, click here: Andrea Tse.