Apple’s rebound eclipses Fed Wednesday

Wednesday was supposed to be all about the Fed, but the biggest market mover today by far was Apple, which gained $50 a share, or 9%, following its blowout earnings announcement after the market closed on Tuesday. Apple closed at an even $610 a share, regaining all it lost in the previous five sessions. Apple’s rise helped pull the NASDAQ to a 2.3% gain, nearly double the S&P 500’s 1.3% rise. The Dow, lacking Apple among its constituents, was up only 0.7%.

Besides Apple, Wednesday was dominated by the Fed’s Federal Open Market Committee meeting announcement, although little there was new. The Fed said it would continue to maintain short-term interest rates near zero at least through late 2014 (while allowing that changing conditions might upset its expectations). It also said it would continue with Operation Twist to extend the average maturity of its securities holdings. On the economy, the Fed said it “expects economic growth to remain moderate over coming quarters and then to pick up gradually,” adding that although “labor market conditions have improved in recent months” and the unemployment rate has declined, the jobless rate “remains elevated.” It said “strains in global financial markets continue to pose significant downside risks to the economic outlook,” a retreat of sorts from the language of the March statement, which described those strains as having eased. In a press conference following the meeting, Chairman Ben Bernanke said the Fed remains “prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target.”

Apple’s earnings report also helped boost European markets, a second straight day of gains. The major exchanges have now recouped much if not all of the losses they took in Monday’s massive selloff. The French CAC index, for example, jumped 2% Wednesday on top of Tuesday’s 2.3% gain, easily overtaking Monday’s 2.8% drop. The Stoxx Europe 600 gained 1% on both Tuesday and Wednesday, regaining nearly all of Monday’s 2.3% drubbing. The FTSE 100 index of London-traded stocks was one of the few laggards Wednesday, rising a relatively weak 0.2%. The U.K.’s Office for National Statistics said GDP shrank 0.2% in the first quarter of 2012 following the 0.3% drop in the fourth quarter of 2011, which means that, in a technical sense at least, the U.K. is back in recession. The pound sterling was modestly higher against the dollar, while the euro rose also slightly to $1.3217.

The Commerce Department reported today that durable goods orders dropped 4.2% in March, the biggest monthly drop in three years. The decrease was far worse than the 1.5% decline the Street was anticipating. At the same time, February’s 2.4% increase was revised downward to a 1.9% rise. The March decline was mainly attributable to a 48% drop in commercial aircraft orders, although other sectors were also lower. Excluding transportation, durable goods orders still fell 1.1%; the consensus estimate was a 0.4% increase. Treasury bond prices were largely unchanged on the day, and oil prices rose about 0.5%; oil inventories were reported to have risen by 4 million barrels, more than expected.

Reports/dates/facts/links worth paying attention to over the next week:

  1. April 26: Weekly unemployment claims; pending home sales for March; Chicago Fed national activity index for March.
  2. April 27: GDP advance estimate for Q1; University of Michigan consumer sentiment index for April.
  3. April 30: U.S. Personal Income and Consumer Spending data for the month of March.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

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