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Apple earnings — What you need to know in markets on Tuesday

Myles Udland
Markets Reporter

The biggest event of the week — Apple (AAPL) earnings — is set for Tuesday afternoon.

Apple will report results for its fiscal second quarter after the market close on Tuesday. This is typically Apple’s weakest quarter of the year.

Wall Street analysts expect the iPhone maker to report earnings per share of $2.02 on revenue of $53.1 billion, according to data from Bloomberg. Sales of iPhone are expected to total 51.4 million units.

Business Insider’s Kif Leswing also notes that its fiscal second quarter is when Apple tends to address capital returns. The company’s cash hoard is expected to exceed $250 billion as of quarter-end, and an increase either in its dividend or share repurchase program could be coming.

The company is also likely to be asked on its earnings call about how any repatriation tax holiday out of the Trump administration could impact its plans.

Apple is on the clock on Tuesday.

Elsewhere on the economic calendar on Tuesday, we’ll get auto sales of the month of April rolling in all day. Expectations are for sales to hit an annualized pace of 17.1 million vehicles. Auto sales, which have been among the most positive economic indicators since the recession, have started to slow in recent months.

Also in corporate earnings on Tuesday we should get results from Aetna (AET), Merck (MRK), Altria (MO), Mastercard (MA), and Gilead Sciences (GILD).

A 20-month high in bullishness

According to Bank of America Merrill Lynch, Wall Street bullishness hit a 20-month high in April.

The firm’s Sell Side Indicator, which measures bullishness on the stock market by tracking recommended equity allocations among Wall Street strategists, hit 53.5, the highest since August 2015.

This is still, however, way below where the firm’s reading was at the height of the tech bubble and, in fact, barely above where investor sentiment was at the bottom of the post-crisis crash in March 2009. At current levels, BAML’s indicator is implying a 16% 12-month total return for the S&P 500, which would put the benchmark index at 2,737.

Investor enthusiasm has ticked up in recent months, but is still nowhere near the two most recent market tops. (Source: Bank of America Merrill Lynch)

This recent perk up, however, could be a worrying development for those looking for any signs of burgeoning euphoria on Wall Street. “The recent inflection from skepticism to optimism could be the first step toward the market euphoria that we typically see at the end of bull markets and that has been glaringly absent so far in the cycle,” the firm writes. 

The “blow-off top” idea was perhaps best captured by Jeremy Grantham of GMO Capital, who in a 2016 letter to investors wrote that, “The ability of the market to hurt eager bears some more is probably not exhausted. I still believe that, with the help of the Fed and its allies, the U.S. market will rally once again to become a fully-fledged bubble before it breaks.”

The S&P 500 is 23% higher than when Grantham’s note was circulated.

Last week, tech banker Frank Quattrone circulated a stat on how long the Nasdaq took to reach certain milestones that shows the accelerating bullishness investors see at the end of asset bubbles.

It took the tech index four years to move from 500 to 1,000, two years to go to 2,000, one year to go from 2,000 to 4,000, just six months to move past 5,000, and then 17 years to eclipse 6,000. And between the first and second crosses above 5,000? A nearly 80% drop.

After Trump’s election win, stocks rallied sharply, but after topping out near the end of February U.S. equity indexes have been largely treading water. The Nasdaq has, however, recently made a new record high.

BAML’s current barometer for Wall Street bullishness, while at a near two-year high, doesn’t look quite as overheated when compared to the height of the tech bubble, when its Sell Side Indicator was north of 70. Now that is enthusiasm.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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