Jitters Everywhere, Especially Into Apple's Print: Taking Stock

(Bloomberg) -- Stock futures are flat as the steel and aluminum tariff relief news was more or less telegraphed and earnings continue to pour in. The 10-year remains below 3% and many markets are closed for the May Day holiday.

Reactions to earnings so far include BP climbing as much as 1.9% in London to its highest since 2010, Merck seeing an uptick on a beat-and-raise, Pfizer indicated lower after a beat-and-reaffirm, and Akamai rising more than 4%. Also the KLX Inc./Boeing deal hit the wires, though the fine print clearly wasn’t as expected for KLXI holders as that stock is down over 5% premarket after a weak session yesterday.

Apple Earnings Are Finally Here

Today will be a busy one, with more results hitting this morning (Cummins, Agco, Seagate, American Tower, and more), a couple of key eco data points (Markit PMIs, Construction Spending, ISM Manufacturing), and monthly auto sales sans General Motors.

And we’ll get another dose of earnings tonight, like Snap, Juniper Networks, Western Union, and Mondelez. But all eyes will clearly be on Apple (see preview), which rose 1.8% yesterday for its biggest gain in three weeks after falling almost 9% in the prior eight sessions. Some Wall Streeters say the negativity over iPhone X concerns has been played out. Some are seeing a nice setup in the charts, while others say it’s all about the capital returns.

Morgan Stanley estimates $150 billion in returns this year, including a dividend hike of as much as 50%, while one U.K. paper got attention for a splashy headline: "Apple Boss Tim Cook Mulls $400 Billion Payout to Shareholders" -- though scrolling further down puts the figure into better context: "Several analysts have predicted that Cook will hand shareholders $300 billion to $400 billion through dividends and a share buyback scheme over two to three years."

Jitters Everywhere, Especially Into Apple's Print: Taking Stock

Some reasons for yesterday’s weakness:

  • Optimism over M&A Monday, which lifted futures in the early going, dissipated after reality set in that the largest deal announced (the $26.5 billion Sprint/T-Mobile tie-up) has perhaps 50/50 odds at best of getting approved
  • Ugly tape for the telecom behemoths thanks to the aforementioned deal, with Sprint tanking 14% and Verizon tumbling 4.3% (by far worst performer in the Dow)
  • More sizable earnings-related selloffs in industrials and materials, with aerospace name ARNC sinking 21%, tiremaker CTB -8.9% (follows weak action after GT results last week), auto parts manufacturer DAN -5%, and steel stock AKS -3.4% while a few names outside of those sectors also traded poorly after results, like specialty pharma company AGN -5.2% and chip stock ON -3.9%
  • Weaker eco data, after an inline PCE, with the Chicago PMI, Dallas Fed and pending home sales all coming in below expectations
  • Jitters over the U.S.’s strained relationship with China after the SkyBridge/HNA deal collapses, just days ahead of Mnuchin’s trip to Beijing; this can’t be a good development for risk arbs involved in several cross-regional tech takeouts, like NXPI/QCOM and CAVM/MRVL
  • Geopolitical tensions heating up over Netanyahu’s presser on Iranian nukes, which sent Crude to a near three-year high
  • Technical resistance with the S&P 500 reversing after coming with in a few handles of the 50-day moving average of 2,686
Jitters Everywhere, Especially Into Apple's Print: Taking Stock

Notes From the Sell Side

Some of the biggest calls so far... DA Davidson initiated AAPL at a buy with a price target of $220 (or nearly $30 above the average target on the Street) on potential for buybacks, dividends and strategic acquisitions to counter the continues competitive rise of Amazon and Google... Wedbush put Facebook on its Best Ideas list while Goldman added CTXS to its conviction list and bumps the target to a Street-high $122 ahead of the May 8 analyst day...

Morgan Stanley has wary earnings previews out on underweight-rated GoPro ("near-term estimates are still at risk) and FitBit ("checks saw weak restocking of older products")... and Mizuho slashed its price target on AGN to a Street-low $150 on a weaker growth outlook...

Tick-by Tick Guide to Today’s Actionable Events

  • Today -- Auto sales will hit throughout the day
  • Today -- Milken Institute Conference (Day 4), see schedule
  • Today -- Facebook Developer Conference (Day 1), see schedule
  • Today -- MNK FDA panel briefing documents, SIGA FDA panel to discuss Tpoxx
  • Today -- FNKO, ALNA, AQUA IPO lockup expiry
  • 7:00am -- ADM, GRUB, SHOP, AMT, INCY earnings
  • 7:30am -- CMI, HBI earnings
  • 7:41am -- SABR earnings
  • 7:45am -- AGCO earnings
  • 8:00am -- MRK earnings call
  • 8:00am -- CE investor day
  • 8:01am -- STX earnings
  • 8:30am -- Lighthizer to speak at China Business Conference
  • 8:30am -- ECL earnings; UA, TPR earnings call
  • 9:00am -- STX earnings call
  • 9:45am -- Markit Manufacturing PMI
  • 10:00am -- ISM Manufacturing, Construction Spending
  • 10:00am -- PFE, ETN, CMI earnings call
  • 12:30pm -- Balyasny, Eminence’s Sandler, Soros’ Fitzpatrick, BlueMountain’s Feldstein at Milken conference
  • 1:45pm -- Eminence’s Sandler scheduled to appear on Bloomberg TV
  • 2:00pm -- EMR earnings call
  • 4:00pm -- WU, ULTI earnings
  • 4:02pm -- SFLY earnings
  • 4:05pm -- MDLZ, APC earnings
  • 4:10pm -- SSNC, VRSK earnings
  • 4:15pm -- SNAP, JNPR, ALL
  • 4:30pm -- API oil inventories
  • 4:30pm -- AAPL, YUMC earnings
  • 5:00pm -- AAPL, SNAP, JNPR earnings call
  • 9:45pm -- China Manufacturing PMI
  • Tonight -- PermRock Royalty Trust (PRT) expected to price IPO

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