Stocks continued to tip-toe higher Wednesday as volume and volatility remain low. Strong earnings from IBM (NYSE:IBM) last night helped the Dow lead the charge with a 0.49% gain on the day, in fact the stock accounted for all of the index's gains. The S&P gained 0.16%.
Google (NASDAQ:GOOG) and IBM were the big names to report earnings last night and they did not disappoint. Both companies topped consensus expectations after disappoint last quarter, and both opened more than 4% higher and surged in the morning session. Both pulled back off highs in the afternoon, but that will be of little concern to shareholders. GOOG finished with a 5.50% gain, while IBM finished 4.41% higher.
Beyond those two earnings standouts there was not a lot to write home about in the market today. Intraday traders continue to be frustrated by the lack of volatility, but swing traders and investors could be pleased with some of the calmest seas we have seen in a few years. The saying goes, "you never short a dull market," but you also don't chase stocks at five-year highs with little sign of institutional buying taking place.
The biggest names to report after the close today were Netflix (NASDAQ:NFLX) and, obviously, Apple (NASDAQ:AAPL).
NFLX led off just after the bell with a blockbuster report that handily topped expectations. The company was expected to report a loss of $0.13 cents per share, but instead made a profit of $0.13 cents per share and topped revenue expectations. Guidance was also very bullish, showing expectations of a profit next quarter, when previous expectations were for another loss. NFLX is up more than 31% after hours!
AAPL's report was unimpressive as the company beat on EPS, but missed on revenues and iPhone sales estimates, and guided lower. The latter three factors were the ones being weighed most heavily, as AAPL EPS guidance is often viewed as conservative in the first place. The stock is trading around 5% lower at the time of this writing, slightly shy of the implied volatility that options had been pricing in ahead of the report. [5:30pm AAPL Update: The stock continues to cascade lower following its report and is now down over 10% after-hours. The next key level to watch now is $443-453.]
AAPL has been heavily underperforming the market over the past few months as it sold off from above $700 to below $500. The recent sharp sell-off perhaps suggested lowered expectations for this earnings report, and it appears AAPL couldn't even beat those standards. As far as levels to watch based on the after-hours sell-off, $483 is the recent pivot low, and then there is longer-term support until around the $450 area.
Tomorrow the market could liven up a bit as traders and investors grapple with AAPL's earnings. Indices are likely to open sharply lower as AAPL continues to fall after hours, so it will be interesting to see what type of resilience we show. If the gap down is bought aggressively, the market could limit the damage, but if the stock fades further after the bell then deep support areas could come into play. The market has also been able to shrug off AAPL weakness to this point, and it will be interesting to see whether that continues.
*DISCLOSURES: Evan Lazarus is short DDD, NUS.