It was an impressive market on Tuesday that could have seen a recent weakness in NASDAQ bring down the Dow Jones Industrial Average. Instead, blue chips continued to hold up nicely once again. It was led by financials; this time, it was big banks such as Citigroup (C), Bank of America (BAC) and JPMorgan Chase & Co. (JPM). Meanwhile, the NASDAQ found its footing and led with Xerox (XRX) that climbed into the closing bell.  Okay, so Xerox isn’t the kind of stock with coattails; however, I am impressed with its multi-year stealth rally. 

The move in Apple (AAPL) actually had a greater influence as investors jumped on the bandwagon ahead of the earnings announcement after the close. Those investors were not disappointed. After the closing bell, Apple posted its revenue of $45.4 billion (+7%) from a year earlier, their earnings per share were $1.67 (+15%) year to year, and 10 cents above Wall Street consensus. It was the internals and guidance that popped the shares higher.

We saw the pricing power in iPhones and Macs, and a record quarter for service revenue, which climbed to $7.3 billion (+22%) from a year ago.  This adds credence to its management’s goal of growing services 100% by 2020.  Even iPad sales were impressive with a net unit growth after a massive decline in unit and revenue from a year ago basis in the prior quarter.

The only red flag was a 9.5 decline in Greater China’s revenue of $8.0 billion. Overall, Asia was strong as the growth in the Americas.  The international revenue was 61% of the total.  Apple continues to confound its critics.

By the same token, Apple success continues to generate criticism and debate over its role as a good corporate citizen.  Management has returned $11.7 billion to shareholders during the quarter, bringing its cumulative return to $223 billion. Meanwhile, the company is sitting on $262 billion, most of it offshore, and Tim Cook says they have no plants to build factories in the United States.

The company will invest in businesses, particularly app businesses. They are not the kind of investments that puts the masses to work. 

Dirty-Fingernail Rally Update

Manufacturing data from the Institute for Supply Management (ISM) showed July holding up better than expected and hanging near June’s number, which was the highest in three years.  Manufacturing has extended its growth expansion for 11-months and could be on the verge of a major leg higher.

According to the ISM, 15 out of the 18 manufacturing industries reported growth in July:

• Plastics & Rubber Products
• Electrical Equipment
• Appliances & Components
• Wood Products
• Fabricated Metal Products
• Machinery; Chemical Products
• Paper Products
• Food, Beverage & Tobacco Products
• Printing & Related Support Activities
• Computer & Electronic Products
• Nonmetallic Mineral Products
• Furniture & Related Products
• Miscellaneous Manufacturing
• Primary Metals
• Transportation Equipment

With technology and industrials moving in the same direction at the same time, we have a perfect economic momentum coupled with an upside stock market bias going into the July jobs report.

Today’s Sesssion

There’s a fair amount of mainstream media scuttlebutt over the White House being close to take trade action against China.  While investors have welcomed Donald Trump’s presidency with open arms, their greatest fear is a potential trade war.  I don’t think that would happen, but there will be some action after campaign promises and saber-rattling. 

There should be action to balance the playing field, but not a full fledged trade war that at the end would have no winners.