Investment Commentary – April 30, 2019

Year to Date Market Indices as of Market Close April 30, 2019
Dow 26,183 (14.00%)
S&P 2,867 (17.51%)
NASDAQ 7,850 (22.01%)
Gold $1,285 (-0.94%)
OIL $63.47 (33.96)
Barclay Bond Aggregate (2.81%)
Fed Funds Rate 2.50% (last increase was 12/19/18)
All World Cap Index (15.18%)
Real Gross Domestic Product (+3.2% Q1 2019)

Apple stock gains after earnings, outlook top expectations

Company announces further $75 billion buyback authorization, boosts dividend

Apple Inc. shares were gaining in after-hours trading Tuesday after the company beat earnings and revenue expectations for its fiscal second quarter, while also issuing a revenue forecast for the current period that exceeded expectations.

The smartphone giant reported fiscal second-quarter net income of $11.6 billion, or $2.46 a share, down from $13.8 billion, or $2.73 a share, in the year-earlier period. Revenue fell to $58 billion from $61.1 billion.

Analysts surveyed by FactSet had been modeling $2.36 in earnings per share and $57.5 billion in revenue, on average.

For the second-quarter, Apple AAPL, +4.92% expects revenue of $52.5 billion to $54.5 billion, compared with the $52.1 billion that analysts had been modeling. The company announced that its board authorized a further $75 billion in share repurchases and a 5% increase to its dividend. The new quarterly dividend will be 77 cents a share.

The stock was up 4.2% in after-hours trading. Shares of Apple would have to close up 5.7% in Wednesday’s session for the company to reclaim a $1 trillion market value.

Apple has stopped reporting iPhone units sales, but it matched expectations with its iPhone revenue, which came in at $31.1 billion. Analysts tracked by FactSet had been projecting $31.1 billion.

The company posted $5.5 billion in Mac revenue, $4.9 billion in services revenue, $5.1 billion in wearables and home revenue and $11.5 billion in services revenue. The smartphone maker is expected to provide more detail about its forthcoming services offering on the earnings call.

China was a source of trouble for Apple during the holiday quarter, and the company saw another big decline there this time around. Apple reported $10.2 billion in revenue from Greater China during the March period, down from $13.0 billion a year earlier.

Shares fell 1.9% in Tuesday’s regular session, though they’ve gained 27% so far this year. The Dow Jones Industrial Average DJIA, +0.15% of which Apple is a component, has risen 14% in that time.

Around the web:

GDP surprise The U.S. economy grew at a faster pace in the first quarter than most economists had expected. The government’s initial estimate released Friday pegged the annual growth rate at 3.2%, exceeding expectations for around 2.0%. In last year’s fourth quarter, GDP expanded at a 2.2% clip.

Earnings lift: While quarterly profits are expected to decline modestly this earnings season, a large proportion of companies are surpassing analysts’ expectations, providing some lift for stocks. Nearly 80% of the S&P 500 companies that had reported first-quarter results as of April 24 had exceeded expectations, according to FactSet.

Fed ahead: The U.S. Federal Reserve is expected to keep current interest rates unchanged when it concludes a two-day meeting on Wednesday. The Fed is sorting through mixed signals from the economy; while inflation has recently remained tame, Friday’s first-quarter GDP report indicated the economy may be regaining momentum.

Recovery story: The market’s climb above its previous record high set last September is remarkable in part because of the depths that stocks sank to just four months ago. Since a recent low on December 24, the S&P 500 had climbed nearly 25% through Friday’s market close.

Upcoming this week:
Wednesday: U.S. Federal Reserve Board concludes two-day policy meeting,

This Day in Market History:

Priceline’s Unbelievable First Month
On this day 20 years ago, hit its Dot Com market peak, gaining more than 914 percent in a single month.
Where The Market Was: The Dow finished the day at 10,789.04. The S&P 500 traded at 1,335.18.

Other Notable Indices (YTD)

Russell 2000 (small caps) 19.01
EAFE International 12.75
Emerging Markets 12.13
Shiller Annuity Index 8.41

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.