Market Insider

Apple earnings will steer stocks

Thursday's data dump

Apple dazzled investors with a big earnings beat, a dramatic 7-for-1 stock split, another big buyback and dividend hike that should boost sentiment up and down Wall Street.

Besides the afterglow from Apple's news, dozens of earnings reports will steer the market Thursday—including early morning reports from Caterpillar, 3M and Verizon, and Microsoft report after the close.

Apple earnings also beat on the top and bottom line—with earnings of $11.62 per shares on revenue of $45.6 billion, well above the expected $10.18 per share and revenue of $43.53 billion. IPhone sales were much stronger, but iPad sales were weak.

The stock, after a brief halt, shot up more than 8 percent in after-hours trading to $567.50, and could lift stocks Thursday.

The moves clearly pleased activist shareholder Carl Icahn who holds a major stake in the company and had been agitating for action from Apple's board. Shortly after the news, a message came via Icahn's Twitter account: "Carl Icahn ‏@Carl_C_Icahn Agree completely with $AAPL's increased buyback and extremely pleased with results. Believe we'll also be happy when we see new products."

Apple announced another $30 billion share buyback and bumped its dividend 8 percent to $3.29 per share.

Apple stock, once a major darling widely-held by stock and even bond funds, has lost its shine. At the close Wednesday, the stock was down 25.6 percent from its all-time high reached on Sept. 21, 2012, when it hit $705.07. So far this year, Apple, as of Wednesday's close, had the most negative impact on the Nasdaq 100, with a 6.5 percent decline year to date.

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"It's a shareholder friendly move. I can't deny that, but I think for the long term you want to see companies invest in new products and growth," said Michael O'Rourke, chief market strategist at Jones Trading. "It falls in line with the financial engineering and aspects like that that are driving the tape and I don't think it's healthy." But he said the Apple news should be a positive for the market.

Traders on the floor of the New York Stock Exchange.
Getty Images

"It's the largest weight within the S&P 500 at 2.8 percent. In the Nasdaq 100, it's 11.8 percent. It definitely has the ability to influence things," he said. "It should be interesting to see if investors look through it, and see this as the last tricks to pull out the of the book as far as more buybacks and the stock split."

Apple beat expectations on iPhone sales, selling 43.7 million units, well above the 38 million expected for the quarter. But iPad sales missed the mark, with 16.5 million unites sold compared with 19.8 million expected.

IPhone revenue for the second fiscal quarter were down 20 percent from the prior quarter, but were up 14 percent from a year ago. First-quarter sales are traditionally much stronger. Mac unit sales were down 14 percent from the prior quarter but up 5 percent from a year ago. IPad unit sales were down 37 percent from the first quarter and down 16 percent from a year ago.

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"Those are really—surprisingly good numbers, especially on the iPhone. I think it goes without saying, that you gotta take a little bit into context of the negative surprise there on the iPad, but the iPhone is more important," said Gene Munster, senior research analyst at Piper Jaffray. "I think it's a bigger part of their business and a bigger part of their growth story longer term, and so I think investors should feel a sigh of relief on these numbers."

Besides Apple, the focus Thursday will be on the flood of earnings releases. General Motors, Eli Lilly, AstraZeneca, American Airlines, United Continental, Raytheon, PutleGroup, Starwood Hotels, JetBlue, Dunkin Brands, Peabody Energy, Novartis and Celgene are among the many pre-market reports. Starbucks, Visa and Baidu report after the bell.

There are also unemployment claims and durable goods data at 8:30 a.m. Thursday. The Treasury auctions $29 billion in 7-year notes at 1 p.m. ET.

—By CNBC's Patti Domm. Follow her on Twitter @pattidomm.