Opening Bell: Apple Drags Down Equities; Dollar Awaits FOMC

by Pinchas Cohen

Yesterday, Apple (NASDAQ:AAPL) reported it sold fewer iPhones during the quarter ending April 1—50.8 million, down from 51.2 million units YoY and significantly fewer than the 51.4 million expected by a Bloomberg survey of analysts. During yesterday's conference call, CEO Tim Cook blamed the waning demand on reports about the much heralded, 10th anniversary iPhone 8, which will actually have a design makeover and is expected to be introduced later this year, in either September or October.

AAPL Daily

Apple shares have soared this year, up 27% on the ashes of Samsung's (KS:005930) (OTC:SSNLF) exploding Note 7 mobile phone. Yesterday, however, in response to the disappointing numbers, Apple shares dropped 2% in extended trading. It even dragged down NASDAQ Futures; the index fell 0.43% to 5616.25 after-hours.

Asia-Pacific

AXJO Daily

While Asia-Pacific countries—including Japan, South Korea and Hong Kong—are closed for holidays, Australian equities took one for the team. The S&P/ASX 200 Index, Australia’s benchmark stock index, dropped 1.15% to 5882.200, its biggest drop since March 22nd, following a 1.7% decline in the price of Iron ore to 523, the country's top export.

MVIS Australia Banks Daily

The ASX 200's banking sector dipped as well. The MVIS Australia Banks Index fell 2.25% to 2332.93, its second day of declines, stopped by the 50dma. This is the worst one-day decline for the index since June 24, when the slippage was driven by the equity fallout in the aftermath of the unexpected results of the Brexit vote.

The Shanghai Composite resumed its downward trajectory which started last month on tighter government financial regulations and weaker economic data. The index has lost up to 0.6%, falling to a low of 3123.751. All told, it's down about 5% since the April highs.

Today's surprising winner is the Taiwan stock exchange, which not only managed to avoid declines but actually was able reach its highest price since April 29 2015, at 9979.91. It should be noted that this is monumental, considering this index is hyper-sensitive to Apple. The largest companies listed on the index—Semiconductor Manufacturing (NYSE:TSM) and Hon Hai Precision Industry Co. (TW:2317)—help build iPhones.

Last year, iPhone's future was a prime mover for this index; it plummeted on a weaker outlook for the device. While other global indexes declined today, the one that should be most sensitive to the fortunes of the smartphone behemoth did not. Are there other, unknown factors supporting the price, or is it being held aloft by forward-looking investors who specifically accumulate the stock on dips, in advance of Apple launching its much anticipated iPhone 8 upgrade?

Europe

European stock futures also slipped after yesterday’s disappointing earnings report from Apple alongside lower than anticipated Total US Vehicle Sales. The Euro Stoxx 50 is down 0.11%, at 3574.00, the FTSE 100 Index is down 0.32%, at 7227.39 and the DAX is down 0.21% at 12484.00

US Futures

S&P 500 Futures are down 0.16% at 2382.00, DJIA futures are down 0.12 at 20839.00. The biggest loser right now, naturally: the NASDAQ 100 futures index losing 0.34% to 5620.75.

Today’s Market Drivers

• FOMC rate decision: The rate is expected to remain between 0.75% and 1.00%, but investors will scrutinize the statement for clues to the Fed's future expectations.
• US Treasury quarterly refunding of longer term debt. Treasury Secretary Steven Mnuchin expressed interest in selling bonds with maturities beyond 30-years.
• Facebook (NASDAQ:FB) releases earnings after the market closes. Alphabet's (NASDAQ:GOOGL) record paid-click growth via Google is a leading indicator for Facebook’s ad revenue and earnings growth for 1Q. Bloomberg’s survey has 43 analysts providing a buy signal, and only four suggesting a hold signal, with one lone analyst calling it a sell. Yesterday, the stock hit a record high of $153.44 but its trading pattern formed a Hanging Man candlestick which has bearish implications, but only if confirmed today with a lower close.
• Time Warner (NYSE:TWX) also releases earnings, though theirs are pre-market. Has momentum shifted regarding subscription losses? Though it’s expected to have seen double digit gains in HS affiliate fees and a single-digit ad revenue boost, gains from the company's new NBA deal have already been spent, leaving TWX in a hole.

Currencies

• While the NZD advanced 0.5% on lower unemployment, the kiwi pared it all back, now trading at 0.6935.
• The US dollar gained, with the euro and yen each falling 0.2%. It's the 5th consecutive decline for the Japanese currency.

Bonds

• US 10-Year Treasury Yields are up one basis point to 2.30 percent
• Equivalent maturity European bonds, on the other hand, gained – Italy's 10-Year fell four basis points to 2.27 percent and Bund yields fell one basis point to 0.32%

Commodities

• Oil rebounded 0.8 percent following Tuesday’s 2.4 percent decline. Of note, yesterday the commodity fell the most it's ever declined below its 200dma, 3.46%. The last time it slipped almost as far, 3.45% below the 200dma, was September 3, 2016. Today it fell to its lowest level in over a month, after Saudi Arabia suggested it could handle the lower prices.
• Gold dropped 0.3 percent to $1,253.17
• Copper fell 2.4 percent, its sharpest decline since April 14, to $257.60