Are Stocks Preparing to Plunge?


Stocks are oscillating between positive and negative territory today as the second week of earnings gets under way. At roughly halfway through the trading session, the Dow Jones Industrial Average is up by 2 points, or 0.02%.

The biggest news impacting the market today is a report that Apple has cut its orders for iPhone component parts. According to The Wall Street Journal, the tech giant's orders for iPhone 5 screens for the first quarter of this year have dropped to roughly half of what the company had previously planned to order.

While Apple once dominated the smartphone market, controlling an estimated 23% of it in 2011, its share has since fallen to 14.6% on the heels of stiff competition from the likes of Samsung Electronics and other manufacturers that have adopted Google's Android operating system.

Despite these issues, noted technology journalist David Kirkpatrick recently told Yahoo!'s Daily Ticker that the company still has a lot of "tricks up its sleeve" in 2013:

I don't think there's any fundamental problem with Apple. In fact, Apple's P/E is still ridiculously low. It's still by far the world's most popular electronics company. I would be a buyer of the stock.

Beyond Apple, many investors are focused on the financial sector, as all three of the remaining too-big-to-fail banks report fourth-quarter earnings this week. The nation's fourth-largest bank by assets, Wells Fargo kicked things off last week, reporting record fourth-quarter and 2012 fiscal-year earnings. As I discussed at the time, traders nevertheless sent shares in the lender down on concerns about its contracting net interest margin and slightly lower quarterly mortgage origination volume.

Up next for the banking sector is JPMorgan Chase , which reports earnings on Wednesday, and Bank of America and Citigroup, both of which release results on Thursday. While analysts are anticipating somewhat ho-hum earnings, investors already know that the figures will be weighed down by legal settlements entered into by the banks at the beginning of last week.

For B of A's part, the bank said that its fourth-quarter earnings will be "modestly positive" after recording a $2.7 billion charge-off related to a long-simmering dispute with Fannie Mae and a $2.5 billion charge-off associated with a broader foreclosure settlement that also encompassed Wells Fargo, JPMorgan, and Citigroup. To see a full list of B of A's legal woes, click here.

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John Maxfield owns shares of Bank of America and Apple. The Motley Fool recommends Apple and Wells Fargo & Company. The Motley Fool owns shares of Apple, Bank of America, Citigroup Inc , JPMorgan Chase & Co., and Wells Fargo & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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