After declining for four straight days, the S&P 500 is trading higher in premarket activity here on Friday. Apple (AAPL) reported better-than-expected revenues and earnings and provided positive guidance. That isn't too surprising as it typically does a very nice job of managing expectations, and the stock is trading up a bit more than 2%.
Apple enjoys a unique position in the market. It is the largest market capitalization at around $2.6 trillion and impacts cap-weighted indexes more than any other stock. It is often viewed as a safe place to park funds, although it is not at all cheap. Apple trades with a trailing price-to-earnings (P/E) multiple of 28, but earnings per share this quarter were flat and revenue fell by about 3%.
We will see how well Apple holds up as the day progresses. It is a good measure of overall market sentiment, and if it starts to lose support it will be a signal that the market mood is shifting and concern is growing about the economy.
Regional banks are seeing a rebound this morning. There has been talk that many names have been manipulated lower by aggressive shorting, but there obviously are substantial issues in the sector, where there may be at least $500 billion in unrealized losses due to the sharp increase in interest rates over the past year. I expect to see bargain hunters sift through the wreckage for names that have been unfairly included in the sector selloff, but there is real liquidation taking place and a rebound may take time.
At 8.30 am ET, the April jobs news will be reported. It is expected that nonfarm payrolls will drop to around 180,000 from 236,000 in March and that the unemployment rate will tick higher to 3.6% from 3.5%. What is most important about this report is the response will indicate the degree to which market concerns shift from inflation to economic growth. We will see if a soft report is good news because it is disinflationary or if it is bad news because it is recessionary.
After the Fed interest rate decision this past week, the market is data-depended because the Fed said that it is data-dependent. The general view is that the Fed is done hiking rights for the year, but the big question is how fast the economy is cooling and whether it will force the Fed to cut rates later this year.
Technically speaking, stocks are a bit oversold here and ready for relief, but charts are under pressure. The Russell 2000 looks particularly vulnerable as it hovers near the year's lows and looks poised to retest the bear market lows.
Breadth continues to be quite poor and there was an expansion in new 12-month lows to more than 650 names on Thursday. This was largely due to weakness in the financial and banking sector, but that doesn't help matters.
We'll see what the market reaction is to jobs news before the open, and then we will see how well Apple can hold on to its gains.
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