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Apple Lags, Amazon Leads; Sprint, T-Mobile Seal Deal

Dow Jones futures rose modestly Sunday night, along with stock futures for the S&P 500 index and Nasdaq 100. Sprint (S) and T-Mobile (TMUS) finally agreed on a merger Sunday, but Apple (AAPL) earnings will take center stage Tuesday. The iPhone giant is still the world’s most valuable company but hasn’t led the broader market for 12 months. Meanwhile, Amazon.com (AMZN) has sprinted over the past year and is closing on Apple’s market cap, after fellow FANG stock Google-parent Alphabet (GOOGL) briefly grabbed that crown two years ago.

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The Dow Jones industrial average, S&P 500 and Nasdaq composite fell last week, though they pared losses after finding support near their 200-day moving averages. But they hit resistance around their 50-day lines Friday, as Amazon, Microsoft (MSFT), Intel (INTC) pulled back from post-earnings highs and Apple retreated.

Dow Jones Futures Today

Dow Jones futures advanced 0.3% vs. fair value. S&P 500 futures rose 0.3% and Nasdaq futures climbed nearly 0.6%. Remember that Dow Jones futures and other off-hours trading often doesn’t translate into how the market or individual stock will open or close in the following session. Nasdaq futures skyrocketed early Friday, but tech gains quickly withered after the open.

Sprint, T-Mobile Merger

After years of on-and-off talks, Sprint and T-Mobile agreed on a $26.5 billion combination. The obvious winners are tech writers and editors, who will no longer have to write headlines like “Sprint, T-Mobile Said To Resume Talks” followed by “Sprint, T-Mobile Merger Talks On Hold.”

As for investors, the T-Mobile merger with Sprint values each Sprint share at 0.10256 of a T-Mobile share. That values Sprint at $6.62 a share based on T-Mobile’s Friday close of $64.52. Sprint closed Friday at 6.50 but tumbled to nearly 6 in after-hours trading on buzz that Sprint would not get a deal premium.

Deutsche Telekom, T-Mobile’s parent, will get a 42% stake while Sprint majority owner Softbank will get 27%. The new company will use the T-Mobile name. T-Mobile Chief Executive John Legere will be CEO while the board will include SoftBank CEO Masayoshi Son.

Antitrust regulators will take a close look at the deal, which would reduce the number of major U.S. wireless operators to three.

Apple Is No Leader

Even as the Dow Jones, S&P 500 and Nasdaq eked out slim gains Friday, Apple fell 1.2%, undercutting the low of its recent consolidation. The stock is beginning to lose sight of its 200-day line.

Apple’s relative strength line, which tracks the stock’s performance vs. the S&P 500 index, also sank to its worst levels since early February. The RS line offers a quick way of showing which stocks are the real leaders and laggards. Apple’s RS line is about where it was exactly 12 months ago,  Since early November, it has been trending lower.

The Dow Jones tech giant’s earnings are expected to rise 28% to $2.69 a share as revenue grows 15.5% to $61.1 billion. That would be faster EPS growth and the 6th straight quarter of accelerating sales gains. But that’s largely a reflection of the new iPhone product cycle. The growing fear, which has weighed on the stock, is that iPhone X demand is rapidly cooling. What will drive Apple’s growth going forward.

Apple’s guidance will be key. The iPhone giant also is expected to hike its dividend and increase share buybacks.

Amazon Eyes Apple Market Cap Crown

Apple has a market cap of nearly $824 billion, still the most valuable public company. But Amazon has raced up to $761 billion, recently surpassing slumping Google-parent Alphabet, which is at $717 billion. Amazon has shot up 71% over the past 12 months vs. 13% for Apple and 12% for the S&P 500 index. Alphabet has risen 16%.

Since the end of last year, Amazon has climbed 34% while Alphabet and Apple are modestly lower.

Amazon broke out Friday follow its blowout, accelerating earnings and revenue growth. But the stock fell back below the 1,617.64 cup-base entry, closing up 3.6% at 1,572.62.  Investors may want to wait for the online sales giant to move above Friday’s intraday high of 1,638.10.

Remember that Amazon is in a very late-stage base, after several big moves in recent years. Late-stage breakouts are less likely to be big winners and more likely to fail outright.

Restaurant Earnings On Menu

Finally, McDonald’s (MCD) and Texas Roadhouse (TXRH) on Monday kick off a big week for restaurant earnings. Restaurant stocks have acted well in recent weeks, with Chipotle Mexican Grill (CMG), Domino’s Pizza (DPZ), BJ’s Restaurants (BJRI) surging last week on strong results.

Yum Brands (YUM), Yum China (YUMC), Wingstop (WING) and Shake Shack (SHAK) all report earnings this week. So does food delivery service Grubhub (GRUB), which recently formed a partnership with Yum Brands’ Taco Bell. Yum Brands is in a buy zone while Shake Shack is extended from a recent breakout. Yum China and Grubhub are in consolidations.

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