The Overnight Report: Apple Pie With Cream

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By Greg Peel

Given yesterday's holiday in Australia we've had two overnight sessions since the local market closed. The two are easily combined. With no new news from Europe over the period the focus was on the US, particularly US earnings and the Fed.

And the focus was squarely on Apple. The world's biggest company posted its iResult after the bell on Tuesday night and Wall Street was nervous, continuing to sell the stock down ahead of the result on fears Apple would have to have sold a large number of iThings in order to justify its runaway share price – a price which had already retreated 4% from its blow-off top. But not only did Apple sell enough iThings to satisfy the pundits, it blew the pundits away with a doubling of profits.

Apple's share price shot up in the after-market, and last night the enthusiasm kicked on to a 9% gain. The Nasdaq had been down 0.3% on Tuesday but last night surged a whopping 2.3% as Apple sucked everything tech along in its wake. Perhaps the most important feature of the result was that better than expected iThings sales numbers could be attributed to China.

The Dow “blue chip” average does not include Apple, but let's face it – what's good for Apple is good for America. Yet the Dow's 74 point or 0.6% gain on Tuesday was helped along by solid results from components AT&T and 3M. The S&P 500 finished up 0.4% on Tuesday to 1371.

Last night it was Boeing's turn to provide more impetus for the Dow, although Boeing's 5% gain was matched by a similar fall for Caterpillar which beat expectations but clearly not by enough. The Dow nevertheless closed up another 89 points or 0.7% and the S&P, which does include Apple, rose 1.4% to 1390.

The best way to look at the two sessions is via the S&P, which posted consecutive gains of 0.4% and 1.4%. The SPI Overnight closed on Tuesday in the knowledge the Apple result would send the market surging on Wednesday, yet still the SPI's 36 point gain was matched last night with a further 19 points. So the SPI Overnight is up a net 55 points since Tuesday's close locally.

With all the attention on earnings, US economic data have taken a bit of a back seat.

The indices did nevertheless wobble last night on the release of the March new durable goods orders number which fell 4.2% – the biggest decline since January 2009. Economists had expected a fall of 1.7%. On Tuesday night the Case-Shiller house price index showed a fall of 0.8% to be down 3.5% year on year. The average house price in the top 20 US cities is now back at levels not seen since 2002.

New home sales also plunged 7.1% in March, but then a revised February number showed a 7.3% gain. There it is in a nutshell – warm weather brought spring forward. Consumer confidence slipped only slightly, to 69.2 from 69.5 a month ago.

There was at least some good news in the form of the Richmond Fed manufacturing index, which rose to 14 from last month's 7 when economists had expected a 6.

The next point of focus last night was the Fed.

The Fed monetary policy meeting last night was one of the four per year which is accompanied by a press conference as well as the usual statement. In the statement, Bernanke suggested the US economy was showing moderate growth but nothing yet to write home about. He believes there is no point in trying to push down inflation as lingering high unemployment will have that affect. The Fed sees the unemployment rate at between 7.8% and 8.0% by year end.

The funds rate was kept on hold at near zero with the 2014 commitment intact. Such a policy is “appropriate”, Bernanke suggested. This caused a brief dip in markets as it realistically signalled yet again that there would be no QE3. However when questioned later at the press conference, Bernanke (with Europe the clear factor) hinted that the Fed would respond appropriately to whatever came along. So QE3 was back again, at least in the ammunition belt if not in the barrel.

When will Wall Street traders finally recognise this obvious point out and stop running around like little girls scared of the dark?

So the Fed's impact last night was largely neutral, leaving the earnings results and data to speak for themselves. Net movements in other markets in the past two sessions have been far more benign than those of the stock markets.

The US dollar index has had a couple of tick-downs to reach 79.08 while the Aussie has had downs and ups to be sitting at US$1.0352. Gold is up a net US$5.40 to US$1643.80/oz. Base metals ticked up with mostly sub 1% gains in both sessions, while the oils are relatively steady to slightly higher over the period. Brent is sitting at US$119.12/bbl and West Texas at US$104.10/bbl.

The US ten-year bond yield is hanging around at 1.98% while the VIX volatility index has fallen back to 16.

As noted, a double session sees the SPI Overnight up 55 points or about 1.2%.

The local market will see more resource sector production reports out today, with OZ Minerals ((OZL)) the highlight.

Rudi will appear on Sky Business today at noon.

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