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Dow Jumps as Amazon and Apple Flirt With $150 Billion

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Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) finished up 96 points, or 0.6% today, as Wall Street was buoyed by strong earnings reports and bullish economic data from China. Ford, 3M and several others posted upbeat earnings this morning, while Microsoft and (NASDAQ: AMZN  ) delighted the market after hours. Meanwhile, HSBC's measure of manufacturing activity in China moved up from 50.2 to 50.9 this month, indicating that the improved level of GDP growth in the third quarter may continue into the current period. In jobs data, the initial unemployment claims tally for last week was artificially elevated, as California officials are still working through a backlog in claims created by a computer switch. The official total came in at 350,000, down from 362,000 last week, but above expectations of 341,000.

Amazon stole the show after hours today, jumping 8% after beating revenue expectations in its quarterly report. The online retail giant said sales increased 24%, to $17.09 billion, topping estimates of $16.76 billion. Excluding foreign currency translation, sales would have improved 26%. The company, again, reported a loss, which matched estimates at $0.09 a share. On the earnings release, CEO Jeff Bezos touted his company's new Paperwhite and Kindle Fire devices, as well as the just-released Mayday button, which provides live tech support to Kindle Fire users. Still, the major question for investors in the e-commerce juggernaut has to be its valuation. With today's jump, the stock ballooned to a market cap of $150 billion, yet consistent profits still seem to be out of sight. Amazon guided operating income for the holiday quarter around a break-even midpoint, while its revenue guidance range was so broad as to be essentially useless. The company is known for conservative guidance, but investors wouldn't be remiss to wonder when its burgeoning market power is going to trickle down to the bottom line.

Amazon rival Apple (NASDAQ: AAPL  ) found a different meaning in $150 billion today as its shares ticked up 1.3% after activist investor Carl Icahn today made public a letter urging CEO Tim Cook to initiate a $150 billion share buyback program. Icahn revealed in the note that he had upped his stake in the iPhone maker by 22% since the end of September, to a total near $2.5 billion, and insisted that the market is "dramatically undervaluing" the stock. Icahn said that if Apple went ahead with the $150 billion buyback, he expected shares to hit $1,250 within three years, representing a gain near 140% from today's price. The billionaire investor also noted in the letter that Apple has no investment professionals on its board, and said on CNBC that he would consider a proxy fight if the company rejected his proposal. Apple declined to comment on the letter. Since Icahn declared a large stake in Apple on August 13, shares have increased 14%, even with a tepid response to its iPhone release. Icahn's push seems to be the major force behind the recent appreciation. Apple will report earnings on Monday. Analysts are expecting EPS of $7.92, on $36.8 billion in revenue.

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Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 24, 2013, at 11:37 PM, yragsapo wrote:

    9,000,000 units sold in the first weekend is a tepid response to Apple's iPhone release? I'm wondering if the author has some bias against Apple.

  • Report this Comment On October 25, 2013, at 2:21 AM, thethreestooges wrote:

    Here are what some Apple basher will continue to say.

    - Apple no innovation after Steve Jobs died

    - Apple stock and new devices not compelling enough to buy

    - Apple not selling cheap device to gain market share

    - Apple has not MAYDAY button

    - iPhone 5C is not selling

    - iPadAir has not Gold Color

    - Apple profit not growing, continue to stay at $10-$11 billions every quarter. While Amazon and others growing over thousands times% from loss of $270 millions to loss of $100 millions (or whatever)

    - Apple has no iWatch

    - Apple has no foldable flexible curve screen

    - Apple giving free softwares will reduce revenue and profit

    - Apple free software is not really free, it is built into the price of the hardware

    - Apple abuse human rights in Chinese factory

    - Apple stole Samsung and Google ideas

    - Apple hates Microsoft, that's a new one

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