Stocks rallied overnight, with the momentum carrying beyond the opening bell, after the International Monetary Fund (IMF) increased its 2014 growth estimate for the U.S. economy to 2.6 percent from 2.5 percent. Also helping to feed bullish sentiment, Apple led the Nasdaq higher on the announcement of its deal with China Mobile.
Much derision is heaped on organizations like the IMF for their forecasts, which are regularly revised and mostly wrong. But remember forecasters of all stripes are usually wrong. Recall last year, when most analysts were expecting stocks to rise a relatively meager 8 to 10 percent; meanwhile, the S&P 500 is actually up 27 percent so far. This year, once again, forecasters are expecting stocks to rise 8 to 10 percent.
This was a big deal for Apple: Baird estimates Apple could sell 20 million-plus incremental phones to China Mobile in 2014. China Mobile is the largest wireless carrier in the world, with 763 million subscribers.
How much will it add to the bottom line? It's unclear since we don't know the pricing, but Stifel estimated this morning it could add $4 to $8 to Apple's bottom line. The 2013 earnings per share was about $39, so we are talking 10 to 20 percent addition. Apple sold roughly 147 million iPhones in fiscal 2013, with year-over-year growth of 17.5 percent, according to Baird.
One anecdotal note: I bought an iPad Air for my wife for Christmas this weekend. The clerk at the Apple store said that business was "booming," and that the iPad mini was the hot item of the moment, followed by the iPhone 5S.
China Mobile was the last big carrier that didn't offer the iPhone. Given the over-saturation of its products, from here on out Apple will have to rely on: 1) taking share from competitors, 2) further growth in worldwide penetration of smartphones.
1)Tomorrow is the official start of the Santa Claus rally...the tendency for stocks to rise in the last five days of the trading year, and the first two of the new year.
There's been a lot of concern that last week's Federal Reserve rally will take away from the Christmas rally, but the environment is very conducive for an advance. Much of the short- and intermediate-term concerns have dissipated.
1) the Fed has begun its tapering program;
2) the Senate has passed a two year budget deal;
3) Janet Yellen is about to take the reins of the Fed, providing leadership continuity; and
4) Third quarter growth was much stronger than expected, suggesting the economy is expanding.
Bottom line: the Fed may have begun tapering, but it will remain highly accommodative, and an improving economy will provide a supportive backdrop for stocks. If the economy does not show measurable improvement in the next months, the Fed will simply suspend its taper program.
—By CNBC's Bob Pisani