IBM Can’t Hold Stocks Back; AAPL Pops After Hours

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Stocks continued their rebound from last week’s lows, as tech-sector strength led the Nasdaq Composite to finish with a 1.4% gain while the Dow Jones Industrial Average struggled to finish positive after a 7.1% drop in IBM (IBM) on an earnings miss weighed on the index.

Big Blue reported revenue declines across its key product segments and in all geographic regions. Investors came to the realization that much of the company’s recent stock price performance was tied to its heavy emphasis on share purchases. The pace of those buybacks would be jeopardized by continued top-line declines.

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The energy sector provided a lift, despite another decline for crude oil futures, thanks to a 0.6 percent gain in Halliburton (HAL) on better than expected earnings and revenue. Indications that the U.S. Ebola situation is coming under control boosted transport stocks thanks to gains by airlines like United Continental (UAL), which added 5.8%.

Volume was light as investors hold steady ahead of Wednesday’s big Federal Reserve policy announcement concerning the future of the QE3 bond purchase stimulus.

The consensus is that the program ends, as expected, given that the unemployment rate has fallen to 5.9% — hitting the Fed’s year-end target months ahead of schedule — and that the job openings rate has reached a height not seen since the dot-com bubble.

The market’s three-day rebound has been encouraged by the thought that maybe, just maybe, the Fed would extend QE3 given the recent weakness in stocks. So expect fireworks following the announcement no matter the decision.

Overnight, Japanese stocks surged as Tokyo moves closer to increasing the public pension investment in stocks (seems like a last ditch effort to juice the Nikkei Average) while protests took a turn for the worse in Hong Kong. And in Europe, markets were relatively calm as attention was focused on the mystery Russian naval distress signal off the coast of Sweden.

After the close, Apple (AAPL) reported better-than-expected earnings and revenues and increased forward guidance on strong sales of iPhones (39.3 million units vs. 38 million expected and 33.8 million last year) and Macs (5.5 million vs. 4.8 million expected and 4.6 million last year). Sales of iPads were disappointing, at 12.3 million vs. the 13 million expected and the 14.1 million last year.

After gaining 2.1% in the day session, AAPL was up another 0.2% after hours.

On deck is a set of economic reports out of China overnight including a report on GDP growth, industrial production, and retail sales that will be closely watched to see if the economic weakness in Japan and Europe is pinching the export-oriented Chinese economy.

GLD

With the situation still in flux, and evidence that the selloff isn’t over yet, I’ve been recommending investors nibble on gold and silver and the related mining stocks. Examples include the leveraged VelocityShares 3x Long Gold ETN (UGLD), which is up 9.4% for Edge subscribers this month as well as Agnico Eagle Mines (AEM), which is up 3.2%.

Anthony Mirhaydari is the founder of the Edge and Edge Pro investment advisory newsletters, as well as Mirhaydari Capital Management, a registered investment advisory firm.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/10/stocks-ibm-aapl/.

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