Overnight Sentiment - All News Is Good News

S&P threatening to downgrade India... UK double dipping... Germany having a failed auction. It is all irrelevant, for the great fruit has spoken and people are buying iGadgets at record levels, which can only mean that once the great credit spree ends, Apple will likely be forced to use its $110 billion cash hoard to start an in house "Acceptance Corporation" vendor financing purchases of its products directly. And while the AAPL earnings beat has become a contrarian bet, now that even Gartman has said he is turning bullish on stocks, here is a summary of what happened and what will happen. In a nutshell, just like Apple was the only thing that mattered yesterday, today it is only the Fed and the subsequent press conference that matter, with the market likely to only take away whatever it wants to take away.

Full summary with BofA:

In focus

Market participants have largely resigned themselves to the Fed maintaining a holding pattern for policy at the April FOMC meeting. However, with Fed officials updating their economic and policy projections, there is a risk that the markets could misread some of the revisions as more hawkish than intended. In the post-meeting press conference, Chairman Ben Bernanke is likely to clarify that the Fed remains committed to its late-2014 forward guidance, while not ruling out other easing options if conditions deteriorate. Of interest will be any discussion of further refinements to the Fed's communication and transparency initiatives, which we expect to occur at some point this year. In our full FOMC preview (see page 2), we outline what information should be revealed as various post-FOMC announcements unfold during the afternoon.

Market action

Overnight, the regional MSCI Asia Pacific Index finished higher, gaining 0.3%, after corporate profits beat estimates. Technology companies in the region posted the biggest advance after Apple reported robust demand for iPhones in China and strong sales of the new iPad.

While the overall regional index advanced, the individual markets we cover actually finished mixed. The best performers enjoyed solid rallies, offsetting the small declines in the market's that finished lower. Japan's Nikkei surged 1.0% and the Shanghai composite managed to finished 0.8% higher. On the flip side, the Hang Seng lost 0.2% and the Korean Kospi finished 0.1% lower.

In Europe, equities are enjoying a solid rally, up 0.9% in the aggregate. If European stocks manage to hold on to their gains, this will mark the second consecutive advance for European markets. The rally is driven by investor optimism after Apple's strong results yesterday and Swedbank AB reporting better-than-expected earnings. At home, futures are pointing to a strong opening, with the S&P 500 set to open up 0.7%.

In bondland, Treasuries are basically flat across the curve, except for the long bond, which is up 1bp, to 3.13%. In Europe, German bunds are also selling off on the risk-on trade, while the UK gilt is rallying along with most of the rest of the region's sovereigns. Spain's 10-year note is 8bp lower, at 5.74%.

The dollar is weakening against a basket of other major currencies. The DXY index is 0.1% lower. Commodities are mixed, with WTI crude oil up 50 cents, to $104.05, and gold down $3.47 an ounce, to $1,638.81.

Overseas data wrap-up

The UK slips back into recession after economic activity contracted 0.2% in the first quarter of the year. That follows a 0.3% decline in the fourth quarter, and today's figure was weaker than consensus estimates for 0.1% rise in output. An economy is, in general, considered in recession after two straight quarters of negative growth, so the UK is technically back in recession. To read more see: UK Macro Watch, 25 April 2012.

Today's events

At 8:30 am, the March Durable Goods Orders report is released. Durable goods orders are expected to drop 1.5% MoM in March after a 2.4% increase in February. The decline stems primarily in nondefense aircraft, as Boeing orders softened over the month. Stripping out this, along with the rest of transportation, we expect durable goods orders to rise 0.7%, a slight slowdown after a 1.8% increase in February. Our forecast assumes core capital goods orders rise 2.5%, consistent with 5% capital spending growth in 1Q. Later in the day, the FOMC will release its rates decision, at 12:30 pm, and then, at 2:15 pm, Ben Bernanke will hold a press conference. For a full preview, see below.