Apple Taps Bond Market for Buyback, Dividend Cash


US equities again flirted with intraday record highs for the second day in a row. Apple (AAPL) continued to be a notable outperformer after issuing the largest amount of corporate bonds in US history. Apple sold $17 billion of corporate bonds in a 6-part offering of 3-, 5-, 10-, and 30-year fixed and floating rate notes. The final 10-year note priced at 2.45%. Apple finished the day up nearly 3%.

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US economic data went in both directions. The April Chicago PMI fell to 49 from 52.4 the month prior. There were notable declines in employment, production, and deliveries, though the more crucial forward-looking new orders index showed a very slight rise. Some of the slowdown can be attributed to the flood-like conditions in Chicago this past month, but the large drop to a reading below 50 (considered an economic contraction) is troubling. The two positive reports for the day were the Conference Board's consumer confidence index and the S&P/Case Shiller home price index. The 20-city composite of home prices rose 9.32% year-over-year in February, up from 8.08% the month prior. The consumer confidence index rose to 68.1 from 61.9 (revised up from 59.7) the month prior.

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European economic data was generally worse. March German retail sales and March eurozone unemployment were both worse. German unemployment remained unchanged for April, but Spain's GDP declined for the seventh straight quarter. In Japan, the jobless rate declined to 4.1% from February's 4.3%. The Spanish IBEX lagged, finishing down 0.38% while the German DAX finished up 0.51%.

IBM (IBM) boosted its quarterly dividend by 12% to $0.95 per share, as was expected by Bloomberg analysts, and boosted its buyback plan by $5 billion to $11.2 billion. IBM was up a bit more than 1% after dropping 9.33% in response to disastrous 1Q earnings.

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Tomorrow's Financial Outlook

Tomorrow starts a 3-day spree of important economic data and monetary policy releases. In the early morning, the ADP institute will release private payroll data from April. Recent adjustments to its survey have made it more representative of the Labor Department's nonfarm payrolls report. Economists expect a monthly gain of 150,000, up from 158,000 the month prior. The other major economic data point will be the national ISM manufacturing survey, which is expected to decline to 50.6 from last month's 51.3.

The other major release is the FOMC's monthly monetary policy decision. Minutes from its March meeting showed a tendency to slow asset purchases into the summer months, but recent economic data has reflected a slowing US economy which likely takes that option off the table. It is very likely that the FOMC will acknowledge softening economic data in its release but otherwise make no large changes as there is no press conference.

On the global economic data front, China and the UK will release their manufacturing PMIs. Economists are expecting a decline to 50.7 from 50.9 the month prior in Chinese manufacturing.

There will be 59 major US earnings released tomorrow. Major reports include Time Warner (TWX), Chesapeake Energy (CHK), Mastercard (MA), Marriott (MAR), Visa (NYSE:V), CBS (CBS), and Comcast (NASDAQ;CMCSA).

Twitter: @Minyanville

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