Apple and Boeing Beat Analyst Estimates and Keep Markets Supported; USD/CAD Vulnerable Below 0.9840

Equity futures in the US (suggesting a second consecutive day of gains) after Apple (AAPL) released corporate earnings and beat market expectations once again.  The positive performance was matched by other major names as well (Boeing was another example) ahead of the monetary policy meeting from the Federal Reserve.  Apple, however, was clearly the main story, as the stock rose more than 10 percent as Chinese demand for the iPhone helped bring an increase in quarterly profits of 94 percent.

Boeing was seen trading 2.6 percent higher, as their earnings report surpassed estimates as well on increases in commercial jet sales.  The strong reports helped keep the S&P 500 supported, as June futures contracts rose 0.6 percent to trade near 1380 during the session.  The Dow Jones Industrials are also modestly higher by 0.2 percent to trade just below the widely watched 13,000 level.

Corporate earnings continue to be one of the bright spots indicating economic recovery in the US, and, as a result the S&P 500 has seen a rally of more than 9 percent so far this year.  Macro data (especially jobs figures) have been supportive as well but the main story continues to be the performance in the corporate sector, as US companies are passing analyst estimates for earnings reports at the highest rates in more than 2 years.  So far, 82 percent of the companies listed in the S&P 500 have beaten earnings estimates in the current cycle, and yesterdays reports showed average profit increases of 12 percent.  Each of the 10 industry sectors in the index beat consensus estimates, as materials, financials and technology posted the biggest gains.

Essentially, these numbers are showing that the potential debt contagion from the Eurozone is having only a limited effect and today’s Federal Reserve meeting will provide the market with additional forecasts for GDP growth, inflation and jobs figures.  Other key issues during the meeting will center on the possibility of renewed quantitative easing or early increases in interest rates but at the moment, the market is not expecting any major shift in policy bias from what was seen during the previous meeting.  As of now, the Fed is expected to maintain near-zero interest rates into 2014 and any suggestion that this policy will end earlier could limit some of the gains seen in equity markets.

Technical Analysis:


 

The USD/CAD continues to operate within its descending triangle but it is becoming more and more apparent that we will see a downside break in the near term.  Prices are currently grinding through support seen at 0.9840 and a daily close here will suggest a full retracement of the latest rally on the daily charts.  From here, rallies are expected to be capped by 1.0040 but an upside break here would take pressure off of the downside.

The S&P 500 is now seen trading within a clearly defined range, with support coming in at 1350 and resistance now seen at the triple top at 1390.  These are now the clear areas to watch going forward, as an upside break will target the monthly highs at 1420 (a double top) and a downside break will accelerate losses, bringing a test of the 100 day EMA into focus.

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