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The S&P 500 and Russell are at all-time highs, however the Dow Jones is 0.8% from an all-time high. Apple and Merck are the big names to report tonight, although Apple is not in the Dow Jones index and Merck themselves only have a 1.9% weight on the index.
The stock has rallied 35% from June 28 and traders will be keen to watch results tonight. Price action looks positive, but the company will need to deliver in what has been billed by the Business Insider publication as the ‘most exciting earnings result of the year’. Consensus expectations currently stand at $7.89 for EPS, while revenue is anticipated to be $37.1 billion. Of course margins across its divisions will be in full view, while earnings guidance for Q4 could be a catalyst. Apple has detailed its products, so more colour on these and how its range of products is tracking could also be interesting.
The pair closed below the 200-day (97.39) moving average on Friday, a level that a number of real-money accounts would have been looking at. It’s going to be a big week for the pair with both the Fed and BoJ meetings on Thursday. Trend support on USD/JPY drawn from the June 13 low kicks in at 97.04, and it will be interesting to see if the pair can hold this level this week. The interesting price action will come if the Fed changes its language back to what we saw in May when it detailed that it had the flexibility to increase or decrease asset purchases.
On a weekly chart there isn’t any negative red flags for the bulls to take profits, however there has been some modest indecision on the daily chart. Still, the market will use today to adjust positioning ahead of tomorrow’s full-year earnings. As things stand the market expects cash earnings of $6.447 billion (range $6.348 billion to $6.561 billion) and a dividend of 86c. Net interest margins will always be interesting and these should be lower on the previous corresponding period, but we will be keen to look out for any commentary on trends. The stock seems fairly valued at present on 12.7x 2014 earnings, but could use a catalyst and perhaps some positive commentary around Asia could help.
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