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 (^DJI 0.11%) 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 Amazon.com (AMZN -0.01%) 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 (AAPL 0.32%) 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.
