Stock Market Bulls Resilient in Face of Apple’s Angst

Major U.S. stock indexes and ETFs, except for Nasdaq, shake off Apple’s crash.

apple computer, apple, aapl, nasdaq:aapl, spy, qqqApple Computer (NASDAQ:AAPL) tumbled 12.53% on negative reaction to yesterday’s earnings report, dragging the stock to $450.50, down 35.8% from its September high of $702.

However, most major indexes managed to shake off the carnage with the Dow Jones Industrial Average (NYSEARCA:DIA) gaining 0.33%, the S&P 500 (NYSEARCA:SPY) finishing flat and the Russell 2000 (NYSEARCA:IWM) gaining 0.39%.  The Nasdaq 100, (NYSEARCA:QQQ) however, was unable to escape Apple’s downdraft as the index dropped 1.4%.

The S&P 500 (NYSEARCA:SPY) challenged the psychologically and technically important 1500 level, climbing to a high of 1502 during the trading day before falling back below that level into the close.

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The S&P 500 (NYSEARCA:SPY) has been here twice before, in 2000 and 2007, and both times failed to move much higher with significant bear market declines ensuing shortly thereafter…

In 2000, the S&P 500 (NYSEARCA:SPY) peaked at approximately 1522 in March, 2000, and then fell to a low of 768 in October, 2002, a decline of  approximately 50% now fondly known as the “tech wreck.”  In October, 2007, the S&P 500 (NYSEARCA:SPY) peaked in October at 1565 and then fell to 666 by March, 2008, a bear market decline of more than 50% that we now call the “Great Recession.”  

The S&P 500 (NYSEARCA:SPY) is up 4.8% year to date and current action after the recent breakout is similar to previous major breakouts for the index.

Economic reports were mostly positive today with an upbeat PMI reports from the U.S. Europe and China.First time unemployment claims for the week fell to 330,000, down from last week’s 335,000 and beating expectations.

December leading economic indicators rose 0.5% from last month’s 0.0% reading.But Apple (NASDAQ:AAPL) was the big news since it is the biggest company in the world and the 900 pound gorilla in U.S. stock indexes, composing roughly 10% of the Nasdaq and more than 3% of the S&P 500 (NYSEARCA:SPY).

Furthermore, Apple (NYSEARCA:AAPL) is a darling of mutual funds and hedge funds and so action in the company’s stock ripples far and wide.

After the close, Microsoft (NASDAQ:MSFT) reported earnings that met expectations on sales that were slightly lower than expected, and Starbucks (NASDAQ:SBUX) checked in with a well received report.

Netflix (NASDAQ:NFLX) came in at the opposite end of the spectrum from Apple (NASDAQ:AAPL) with a gain of 42.2%…

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Notable Stocks and Sectors:

Tech Sector (NYSEARCA:XLK)

Google (NASDAQ:GOOG) +1.66%

Intel (NASDAQ:INTC) -0.76%

Apple (NASDAQ:AAPL) -12.53%

Energy Sector: (NYSEARCA:XLE)

Chevron: (NYSE:CVX) +0.43%

Financial Sector (NYSEARCA:XLF)

Bank of America (NYSE:BAC) +0.96%

Wells Fargo (NYSE:WFC) +0.6%

Citigroup (NYSE:C) +1.86

Tomorrow brings the December new home sales report and earnings from Proctor and Gamble, Kimberley Clark and Honeywell.

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Bottom line: Major stock indexes and ETFs showed substantial resilience today in the face of Apple’s (NASDAQ:AAPL) crash which bodes well for the continuation of the current rally.  Psychological and technical resistance is strong at the 1500 level on the S&P 500 (NYSEARCA:SPY) and so a pause or pullback here would be normal before a new move up.  On a technical basis, major ETFs and stocks remain at overbought levels and these will also need to be unwound for more upward motion to continue.

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John Nyaradi is the author of The ETF Investing Premium Newsletter.