August 1, 2018

Stocks opened higher but quickly faded after Apple earnings and a positive jobs report from ADP. The Dow is down 62 pts and the SPX is down .15%. Tech, telecom and healthcare sectors are in the green. On the other hand, utilities, industrials and energy sectors are down over 1% in early trading. Oil prices sank below $68/barrel after the EIA said US oil stockpiles rose unexpectedly last week. That’s temporary; we know that gasoline demand is very high in the US. In addition, Reuters reports OPEC oil production rose to an 2018 high in July. Bonds are falling in price as yields tick upward. The 5-year Treasury yield rose to 2.88% and the 10-year rose to 3% on the ADP report (see below).

The Federal Reserve will wrap up its monthly policy meeting today and issue a statement. Traders do not expect another interest rate hike today, but everyone will scrutinize the statement for any change in language regarding inflation expectations. 

Apple (AAPL) reported a characteristically strong quarter, once again making the bears look stupid. Total revenue rose 17% from year-ago levels and earnings-per-share shot up 39%. Average selling prices of Apple devices rose 20% from year-ago levels, and recurring services revenue rose 30%. Finally, management’s revenue guidance for the September quarter is a little higher than current Wall Street expectations. The stock is up 5.4% today. And by the way, Apple stock has returned an average of 26% per year over the last 5 years, all the while trading at a lower P/E ratio than the S&P 500 Index. This has not been one to bet against. 

Payroll processor ADP says the US private sector generated 219,000 new jobs in July, compared with economists’ forecast of 186,000. June payroll estimates were also revised higher. This is likely a positive foreshadowing of the official Bureau of Labor Statistics’ jobs report due Friday. The labor market continues to strengthen, and coupled with modestly lower taxes and moderate inflation, is boosting consumer spending. 

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