Wednesday, July 22, 2009

Due For A Rest? Plus, A Little Currency News And A Bit More On AAPL

The DJIA and S&P 500 traded down today but the Nasdaq managed its 11th straight positive close and breadth was firmly positive with 4,300 gainers to 2,300 decliners. Do we need a rest? Technology and retail stocks were the leaders today while oil and commodity trades lagged.

Some that I read are taking a short-term bearish stance; can't really argue with them too much. QCOM's out, and it's seeing a negative reaction. Qualcomm was up 10 days in a row so it isn't too surprising that it is seeing a "sell the news" reaction.

There are some solid earnings reports after the close from the likes of ISRG and VMW, but the next major one is Thursday night when MSFT reports.

In the exciting world of currencies, I suppose the biggest story today was the Swedish krona sitting off the day's highs against the euro, hurt by news from Lativa and Moody's, but also by broader U.S. dollar strength.

The Swedish krona fell after Latvia indicated it would not accept the IMF's terms, raising concerns about Swedish bank exposure to the Baltic region. That news was followed by Moody's announcement that it is reviewing four Swedish banks for a possible downgrade of only one to two notches.

Earnings reports showed that those Swedish banks with heavier exposure to the Baltic's had larger loan loss write-offs and poorer earnings results than those with less exposure to the Baltic's. The expected downgrades might have been worse Moody's said if it had not expected the banks to receive support from the government to help limit systemic risk.

It is highly likely that the IMF will not walk away from Latvia's program but at worst put the program on hold until it can be reopened. That won't alleviate concerns about the Swedish banks since without loans from the IMF and EU, the risks are higher that the banks with exposure suffer further loan loss write downs.

Given that in the broader market the U.S. dollar is trading with a firmer tone, in particular against the Swedish krona, and near early July lows, the risk is that the U.S. dollar gains ground against the krona rising back above the five- and 20-day moving averages to around 7.80.

Finally, a few more thoughts on AAPL and its quarter, announced yesterday:

As usual, the quarter was superb, and guidance this time was surprisingly strong;

The demand for 3GS phones is proving hard to meet;

The penetration of the enterprise market is really starting to kick in - once the iphone goes with VZ, this should accelerate....

20+ Fortune 500 customers have purchased 10s of thousands of iphones;

Mac sales were "better than expected" - I expect this to continue to improve and also expect market share for Mac's to start rising again;

They're probably 2 quarters away from a meaningful OS ramp, with the requisite effect on revenues and eps; they're about 2 quarters away from meaningful China sales; they're about a year away from a non-exclusive deal with T, which would allow VZ and other carrier sales

Some time in 2009 I believe AAPL trades at $225....

very long AAPL

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