The market rallied for the third straight session Tuesday after holding key upper support levels last week. Key sectors showed significant weakness last week and the broader market was in its most erratic form of 2013, but resilience continues to be the prevailing sentiment for stocks. The bounce-back gained momentum today, with the S&P, Dow and Nasdaq all finishing more than 1% higher.
After the close Apple (NASDAQ:AAPL) reported quarterly earnings and delivered a solid, but not spectacular, report. The company beat narrowly on the top and bottom lines, and beat estimates on its key iPad and iPhone products, but saw margins come in below expectations. Perhaps most significantly, AAPL announced it will return $100 billion to shareholders by 2015. They announced a $60 billion additional stock buy-back and raised the per-share dividend by 15% to $3.05. The stock is up nearly 5% after-hours.
Many of the sectors that looked most broken last week have snapped back to help lead this market bounce. The banks stocks as a whole beat on “consensus estimates” in their earnings reports, but traded lower in the following days. Many traders took that as a sign that the banks were priced for perfection and could be headed lower, but they have been impressive since Friday.
Today the Financial Sector SPDR ETF (NYSE:XLF) showed relative strength, gaining 1.77%. The bounce today was fueled at least in part by several upgrades within the sector. Morgan Stanley (NYSE:MS) upgraded Bank of America (NYSE:BAC) this morning, and the latter finished the day up 2.99%. Citigroup (NYSE:C) had perhaps the strongest earnings numbers in the sector and reacted the best following the report. Today C finished up 2.90% and looks like it could be poised to lead the group this quarter.
This morning we talked about how both the bulls and the bears could make a decent case at these levels, but today’s action obviously boosted the bull thesis significantly. Now traders will be watching to see whether we make a lower high or whether it’s a fast track back to historic levels.
Disclosure: Scott Redler is long AAPL call spread (long 405, short 430), C, BAC, LNKD, SSYS, TBT, DDD. Short SPY. Traded but flat AAPL, GOOG, FSLR, BBRY, NFLX, AAPL 395 calls.