Premarket: Apple is green -- updated with CPI pop

From the CNBC’s "Stock futures nudge higher as investors brace for July inflation report" posted early Wednesday:

Stock futures were slightly higher early on Wednesday as investors looked ahead to a key inflation report set to be released Wednesday...

Investors are awaiting the latest consumer price index report, which could confirm or dash hopes that rising prices have leveled off. Economists expect the report to show that inflation has cooled slightly, led by slipping oil prices.

“In terms of reactions, the market will initially get more excited by a downside core CPI surprise than an upside surprise, especially as it relates to risk appetite,” Alan Ruskin of Deutsche Bank wrote in a Tuesday note. “A downside surprise plays to ‘hopes’ that an oil/food commodities peak, plus slower demand, will filter quickly into US inflation data.”

Charts: Yahoo!Finance sees a bearish RSI. Max pain stays at $165 with the same call mountain at $170.

Update: Inflation Slowed in July. It’s Still Historically High posted early Wednesday in Barron's.

12 Comments

  1. Bart Yee said:
    On Yahoo! Finance:

    “The drop in gasoline prices has been very welcome, but that doesn’t solve the inflation problem,” Bankrate Chief Financial Analyst Greg McBride said in emailed comments, pointing to a core reading that remained up nearly 6% over the past year. “Consumers are getting a break at the gas pump, but not at the grocery store.”

    Agree, but high fuel and transportation costs factor into everything produced or shipped into grocery stores and practically all industries. Theoretically, if gasoline and diesel fuel prices continue their downward trend over the quarter and into fall, coupled with decreasing demand as summer driving tapers off, then savings “might” get passed onto factories and producers, ending up with moderating prices to consumers and businesses. The higher interest rates’ bites have yet to fully ripple into demand and slow the economy sufficiently IMO so there’s still prospects for rate increases but at a slower rate or lower value. So there’s still possibility of softer landing assuming we don’t have more black swans and countries can do orderly things to address inflation. Theoretically.

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    August 10, 2022
    • Bart Yee said:
      From WashPo article:
      At Cleveland Express Trucking, the falling price of diesel in July was a welcome change.

      Company president John Lamb said diesel peaked at $5.79 per gallon on June 17, but has since fallen to about $3.90. He’s been able to lower the fuel surcharge passed on to customers. And he hopes that if energy prices keep falling, every rung of the transportation and trucking industry will get a little more breathing room.

      “It takes a while for things to work through the system, but the trend is moving in the right direction,” Lamb said. “Barring any unforeseen geopolitical risks, I think it’s going to stay low and maybe go even lower.”

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      August 10, 2022
  2. John Konopka said:
    Apple closed up over $4 and over $169. I was thinking we might see $170 sometime this fall, could happen this week. Part of the credit goes to Apple’s buy backs and to Warren Buffet’s buy and hold. Since January the share count is down roughly 250 million shares.

    Question, according to this site the share count goes up from time to time. I haven’t seen announcements that Apple is releasing new shares. Is this due to stock options given to employees and execs?

    https://www.macrotrends.net/stocks/charts/AAPL/apple/shares-outstanding

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    August 10, 2022
    • Bart Yee said:
      In regards to shares actually going up, it’s not time to time random but every end of Q4 (Sept.) and end FY. See last 10K FY2021, pages 46-47, Note 8 and 9. This coincides with:

      1) shares being issued but not yet awarded for employee stock plan options, rewards, grants etc. These share generally vest over 4 years and stock is withheld in turn for taxes when vested as compensation. Stock numbers may go up as shares are vested, net of any withheld for taxes. Shares may go down as shares are cancelled, sold, or expire. As of September 25, 2021, approximately 760 million shares were reserved for future issuance under the 2014 Plan.

      2) shares under non-employee director compensation, eg. independent directors, similar situation. As of September 25, 2021, approximately 4 million shares were reserved for future issuance under the Director Plan.

      3) Section 16 officers Cook, Maestri, Williams, O’Brien, and Adams have 105b predetermined and planned trading programs that periodically buy or sell shares including shares under their employee stock program. This avoids any insider trading worries and addresses their personal finances, taxes, and share or money distributions for their own purposes (i.e. charitable giving or personal use).

      “An equity trading plan is a written document that preestablishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of the Company’s stock, including shares acquired under the Company’s employee and director equity plans.”

      4) Employee Stock purchasing program – all employees may voluntarily enroll to purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods. An employee’s payroll deductions under the Purchase Plan are limited to 10% of the employee’s compensation and employees may not purchase more than $25,000 of stock during any calendar year. As of September 25, 2021, approximately 96 million shares were reserved for future issuance under the Purchase Plan.

      I suspect and could verify that most stock vested RSU (restricted stock units) at year end (performance bonuses) are delivered at end of Q4 FY year end net of shares withheld for taxes, which causes the shares outstanding to rise because it may be more than total shares repurchased QoQ, plus if share prices go up, # of shares repurchased declines for same money, but # of shares vesting is already a predetermined algorithmic number.

      I hope this helps.

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      August 10, 2022
      • Michael Goldfeder said:
        @Bart: Thanks for pulling together all of that pertinent data Bart! That answers a lot of questions.

        1
        August 10, 2022
      • John Konopka said:
        @Bart: Awesome, thanks.

        1
        August 10, 2022
  3. Bart Yee said:
    @John and @Michael. You’re very welcome! So much of this information and data is hiding in plain site in the 10Q and 10K reports plus other SEC filings like the 105-b plans.

    This also highlights the fluidity and difficulty of estimating the outstanding share used to determine quarterly EPS because it’s NOT the same as plain shares outstanding.

    June Quarter EPS share counts, page 6, under Note 1:

    In thousands of shares:
    Weighted-average basic shares outstanding 16,162,945
    Effect of dilutive securities 99,258
    Weighted-average diluted shares 16,262,203

    Yet, we also know on page 1 at bottom, this statement on share count reads:

    16,070,752,000 shares of common stock were issued and outstanding as of July 15, 2022.

    That’s a big difference in share numbers from avg. weighted diluted share to 2 weeks into new quarter – about 191M shares or 1.14% over July number.

    So there’s much more to figuring EPS and why Indies may overestimate EPS based on share count denominator.

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    August 10, 2022

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