U.S. large-cap stocks melted to another record high on Tuesday, the sixth consecutive gain, despite disappointing auto sales and tepid economic data. The real highlight came after the close, however, with Apple Inc. (NASDAQ:AAPL) up more than 6% after reporting better-than-expected revenues and earnings.
The stock market’s performance, and the Dow’s approach of the 22,000 level, has attracted the attention of President Trump who is touting the gains since Election Day on Twitter; contrasting sharply with his pre-election warnings of a ugly market bubble.
In the end, the Dow Jones Industrial Average gained 0.3%, the S&P 500 gained 0.2%, the Nasdaq Composite gained 0.2% and the Russell 2000 gained 0.2%. Treasury bonds climbed, the dollar was mostly higher reversing some recent weakness, gold gained 0.5%, and oil reversed lower for a decline of 2%.
Click to Enlarge Breadth was positive with 1.5 advancers to every decliner with NYSE volume at 103% of the 30-day average. Financials led the way with a 0.8% gain while healthcare was the laggard, down 0.2%.
Sprint Corp (NYSE:S) gained 11% on a top- and bottom-line beat as management teased an announcement on merger talks in the “near future.” Under Armour Inc (NYSE:UAA) lost 8.6% as margins missed estimates and forward guidance disappointed.
Diesel engine maker Cummins Inc. (NYSE:CMI) lost 6.2% on weaker-than-expected results on higher warranty costs. And General Motors Company (NYSE:GM) fell 3.4% on a 15.4% year-over-year decline in auto sales vs. expectations for an 8.8% drop as inventories remain bloated.
And troubled online music pioneer Pandora Media Inc (NYSE:P) fell 3.4% as user metrics fell below estimates amid a management refocus on audience growth vs. subscriptions.
On the economic front, July’s ISM manufacturing report came in at 56.3 vs. the 56.4 expected on a slowdown in production and employment. Personal spending came in soft. And construction spending fell 1.3% from the prior month on a 5.4% drop in public construction activity.
After the close, AAPL reported earnings of $1.67 per share vs. the $1.57 expected on revenues of $45.4 billion. Both iPhone and iPad shipments beat estimates, with iPads particularly strong at 11.4 million units vs. 10 million units a year ago and the nine million analysts expected. China sales were soft, down 9% from a year ago and 25% from the prior quarter.
Still, it was as solid performance considering the impact on iPhone demand from the release of the iPhone 8 next month. Forward guidance was also very optimistic.
Conclusion
Click to Enlarge AAPL’s after-hours rise stands in stark contrast to the weakness being demonstrated by other big-cap tech stocks including Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL) — both of which are falling away from the $1,000-a-share level.
There is also a sharp contrast underway between the Dow’s meltup and the rollover in U.S. “hard” economic data which will eventually impact corporate earnings growth. You can see this in the situation with the automakers and consumer retailers.
The market is eager to focus on stocks like Facebook Inc (NASDAQ:FB) and ignore the plight of the likes of GM or General Electric Company (NYSE:GE), which has entered a bear market down nearly 21% from its December high. But remember that many of the dot-com 2.0 stocks rely on ad spending by traditional industrial and consumer companies for revenue. If consumer spending is down, and revenue pinched at GM and others, expense cutting will kick in.
The tech bulls cannot ignore economic gravity forever.
Check out Serge Berger’s Trade of the Day for Aug. 2.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
