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Apple (AAPL) Spending Cuts Drain Rally; IBM Beats Again

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Sometimes entities have a hard time enjoying prosperity, and this latest bear-market rally would appear to fit this description. Starting off the day and the new trading week up big, a report regarding Apple Inc. AAPL slowing its pace of hiring and spending in some (as yet undetermined) segments sent shares down -2% during the course of the trading session.

Because Apple makes up around 7% of the total Dow 30 and is an outsized component of the Nasdaq and S&P 500 as well, this one simple story — which, to be fair, does conclude that an economic downturn is on its way — pretty much single-handedly turned what looked like the second day of market participants feeling their oats into something resembling a typical trading day in 2022: the Dow finished -216 points (from north of +350 earlier) or -0.69%, the Nasdaq dropped -0.81%, the S&P -0.84% and the small-cap Russell 2000 -0.34%.

Apple does not report fiscal Q3 earnings for another week and a half, but in the meantime we’ve got plenty of big names ready to usher quarterly verdicts in the coming days, including Johnson & Johnson JNJ Tuesday morning, Netflix NFLX tomorrow afternoon, Tesla TSLA after Wednesday’s closing bell, and Twitter TWTR — which has spent much of the last quarter under the considerable shadow of Elon Musk’s promise to reform the social media giant — on Friday morning.

IBM Corp. IBM reported Q2 earnings after today’s closing bell, beating on the bottom line as almost always (IBM has only one earnings miss in more than five years) while also outpacing revenues in the quarter. Earnings of $2.31 per share topped Zacks consensus by 2 cents on $15.54 billion in revenues, which improved on the $15.12 billion expected.

The tech giant saw a currency impact to revenue (on a strong U.S. dollar worldwide) of $900 million in the quarter, and the company lowered its guidance on free cash flow through the end of 2022 on currency issues, as well as exiting the Russian market. But Gross Margins in the quarter grew +56.5%, higher than analysts were expecting.

Overall, this was a solid quarter for IBM, which has led business growth with its Red Hat acquisition in the hybrid cloud market. This has been a solid move for the company, which had spent much of the several years trailing its Big Tech brethren in terms of stock market performance. Shares are down -3% on the new in late trading; clearly a “sell the news” situation, as IBM had been up +5% over the past six months.

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