Futures Starting to Weaken as Investors Sour on Apple (AAPL)

US stock futures point to a slightly higher open as the market looks to extend its win streak to four days. Last week indices looked poised to perhaps test deeper support levels, but dip buyers stepped in once again to put the market back on course for highs. With some of the bearish patterns that formed in key sectors last week, though, it’s hard to chase three days of bullish price action. Many traders are likely in wait-and-see mode at this stage.

We are in the thick of earnings season, and last night we got what now appears to be a polarizing report from Apple (NASDAQ:AAPL). 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.

Immediately after the report AAPL traded up around 5%, but as investors combed through the report and listened in on the conference call, they found many things not to like, and the stock is now 3% lower this morning. The margin compression, decelerating growth and weak guidance are obvious concerns, but many also perceived the new capital plan as a half-hearted attempt to placate angry shareholders. The vast majority of the company’s cash hoard sits in foreign tax havens, so AAPL is borrowing to increase its dividend because of the relative costs. The chances of AAPL ever repatriating foreign cash seems very slim. It will take a much more aggressive capital plan to win over value investors, and AAPL will likely need concrete news of new, potentially lucrative product lines to ignite the stock.

Yesterday we saw the banks emerge from their post-earnings malaise and take a leadership role in the rally. Each earnings season, leadership in the group often gets reset based on the who has the cleanest earnings report. Citigroup (NYSE:C) fits the bill this time around, and it is showing relative strength over the past week. Yesterday C closed up 2.90% and has its sights set on the $46.78 pivot, and then perhaps 52-week highs are $47.92.

Bank of America’s (NYSE:BAC) were not quite as stellar, but an upgrade from Morgan Stanley (NYSE:MS) yesterday propelled the stock to a 2.99% gain.

Disclosure: Scott Redler is long AAPL call spread (long 405, short 430), C, BAC, LNKD, SSYS, TBT, DDD. Short SPY.

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About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

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