Apple's Slower Sales, Oil Weakness, Fed Uncertainty Keep Street Defensive

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Includes: AAPL, BA, BIIB, EBAY, FB, QCOM, T, TUP, UTX
by: JJ Kinahan

Summary

The U.S. stock trading day follows a mild rebound on Tuesday and mixed Wednesday trading around the globe.

Few on Wall Street expect the Fed to follow up December’s rate hike with a move this week.

AAPL shares are lower, and are having a psychological drag on the broader market, after its latest earnings report’s details hinted at a slowdown from the boom days.

U.S. stocks tipped lower early Wednesday as Apple (NASDAQ:AAPL) and Boeing (NYSE:BA) dropped post earnings, oil dipped back under $31 a barrel, and the Federal Reserve's interest rate meeting conclusion looms.

The U.S. stock trading day follows a mild rebound on Tuesday (figure 1) and mixed Wednesday trading around the globe. China's Shanghai Composite Index finished down 0.5% at 2,735.56. That was its lowest close since December 2014. It dropped as much as 4% earlier in the session. Japan's Nikkei Stock Average rose 2.7%. Europe's leading stock averages are largely lower so far in their session.

Investors are waiting for the latest policy decision from the Fed, due at 2 p.m. Eastern. Few on Wall Street expect the Fed to follow up December's rate hike with a move this week. But the group's statement could carry plenty of punch for markets. After all, since the central bank lifted rates in December for the first time in almost a decade, the economic and market landscape has been redrawn. Oil prices sit at a 12-year low, more evidence of Chinese economic weakness has emerged, and the stock market kicked off its worst start to a trading year ever.

The CME Group's FedWatch Tool suggests futures traders have priced in a rather slim 14.3% possibility of a rate hike today. Stay tuned for more from the Fed.

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Figure 1: Back-and-Forth Action. The S&P 500 (SPX), plotted here through Tuesday on TD Ameritrade's thinkorswim platform, continues to churn over recent sessions, still largely tethered to moves in the oil market. Data source: Standard & Poor's. For illustrative purposes only. Past performance does not guarantee future results.

iPhone Sales Slow. Apple shares are lower, and are having a psychological drag on the broader market, after its latest earnings report's details hinted at a slowdown from the boom days. Apple said iPhone sales-which account for roughly two-thirds of Apple's revenue, company documents show-grew at the slowest pace since its introduction in 2007. The company forecast that revenue in the current quarter will decline at the steepest rate in 15 years.

Boeing's Guidance Stings. Dow-component Boeing is sharply lower after the aerospace giant issued 2016 guidance below Wall Street's expectations. Boeing said it expects to post adjusted earnings between $8.15 and $8.35 in 2016, while analysts polled by Thomson Reuters had forecast $9.43 a share in earnings. The company forecast revenue between $93 billion and $95 billion, while analysts had called for $97.2 billion in revenue. For the current quarter ending March, Apple said it sees revenue of $50 billion to $53 billion, well below estimated revenue of $55.47 billion from analysts polled by Thomson Reuters.

Earnings Round-Up: Biogen (NASDAQ:BIIB) stock gains after profit and sales beat the Street view; Tupperware (NYSE:TUP) earnings fell, as strong dollar blamed; United Technologies (NYSE:UTX) missed the Street view with sales; AT&T (NYSE:T) came up short with latest revenue figure. Post-close earnings releases include: Facebook (NASDAQ:FB), eBay (NASDAQ:EBAY), Qualcomm (NASDAQ:QCOM), and others.

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Figure 2: Economic Agenda. This week's U.S. economic report calendar. Source: Briefing.com.

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Disclosure: I am/we are long AAPL, T.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.