Spotlight squarely on Apple – Economic Highlights

The Fed surprised the markets last month with its non-Taper decision and no one expects them to make an announcement on that front on Wednesday at the conclusion of their two-day meeting. The consensus expectation is for no changes to the QE program at least through March next year, given data issues in the wake of government shutdown and the coming leadership change at the Fed. Many in the market would be hoping that the coming episode of budget brawl in Washington early in 2014 would push back the Taper even further. Any commentary in the Fed’s post-meeting statement on Wednesday about the shutdown’s impact on the economy will be read for clues about their next step.

Apple is in the spotlight on the earnings front today. Zacks Earnings ESP or Earnings Surprise Prediction, our proprietary leading indicator of earnings surprises, is showing the iPhone maker coming out with a positive earnings surprises this evening. Consensus estimates have been steadily moving in recent days, with the current Zacks Consensus estimate of $7.89 up 3 cents in the past week and 5 cents in the past month.

Including this morning’s reports from Merck (MRK), Roper Industries (ROP), and Biogen-Idec (BIIB), we now have Q3 results from 248 S&P 500 members that combined account for account for 56.1% of the index’s total market capitalization. Total earnings for these 248 companies are up +7.8%, with 68.1% coming ahead of consensus earnings expectations. Total revenues are up +3.4% and 48% are beating top-line expectations. This is better performance, particularly on the earnings side, than what this same group of companies reported in Q2 and the 4-quarer average. Revenue growth and beat ratios are bit a weaker relative to Q2, but not by much.

The composite earnings and revenue growth rates for Q3, combining the results for the 248 companies that have reported with the 252 still to come, are +3.3% and +1.3%, respectively. This puts Q3’s earnings growth rate on track to be along the lines of what we saw in the first two quarters of 2013, likely a little better. Expectations for 2013 Q4 have started coming down, but they still represent a material ramp up in the growth pace, with total earning for the S&P 500 expected to be up +8.9%, down from +9.1% last week and higher than +10% at the start of the reporting season.