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At the open: RIM rally fades, Apple breaks below $500 support

5. Apple. Apple tops the list as the world’s most innovative company. The company -- which became the most valuable in history (by market cap) last year after it launched both the iPhone 5 and the iPad mini, has claimed top spot every year since 2005. Some analysts have criticized Apple, however, saying the pace of innovation has slowed, with more focus on evolution of products than inventing new ones.

Lucas Jackson/Reuters

North American stock markets opened lower, burdened by continued uncertainty over how the U.S. will resolve its debt and spending problems. The Nasdaq was leading the declines, as Apple Inc. shares broke below the key $500 (U.S.) support level and profit-taking hit Research In Motion Ltd. shares, threatening to break its two-day power rally.

In early trading, the S&P/TSX composite index was down 26 points, or 0.2 per cent, at 12,576; the S&P 500 was down 5 points, or 0.3 per cent, at 1,465; the Dow Jones industrial average was down 35 points, or 0.2 per cent, at 13,473; and the Nasdaq was down 20 points, or 0.6 per cent, at 3,098

Similar to Monday, the tech sector is seeing an active day.

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Apple Inc. shares have broken the key $500 (U.S.) support level and were down 2.4 per cent at $489. They have been under pressure since reports emerged late Sunday that some suppliers for the iPhone have been ordered to curtail production due to slower-than-anticipated demand. Some analysts have downplayed the significance of the news, but the report has garnered widespread publicity, including on the hugely watched Today show in the U.S. this morning. To boot, Apple is now below its 40-day moving average and is increasingly looking ugly on the charts.

Research In Motion Ltd. shares are down about 3.7 per cent on the TSX. The stock rose nearly 13 per cent on Friday and 10 per cent on Monday amid optimism about its crucial BlackBerry 10 launch late this month.

Dell Inc. is up 2.3 per cent at $12.58 (U.S.) after rising by more than 5 per cent in the premarket. Bloomberg, quoting unnamed sources, reported Monday that the company may announce a deal as early as this week to go private. Shares had risen 13 per cent during regular trade on Monday. Jefferries raised its price target this morning to $13 from $10, and said if a Dell buyout does materialize, a likely offer price would be in the $15 to $17 range.

Facebook Inc. shares are up 0.7 per cent ahead of its "mystery" press event today at 1 p.m. (ET). It's not known what it'll announce, but there's widespread speculation it may have something to do with new software, video, search or ad initiatives.

For the market as a whole, a key focus remains on the U.S. budgetary mess and the political wrangling that lies ahead over spending and the debt ceiling. Fitch Ratings overnight reiterated its warning that a delay in raising the U.S. government's debt ceiling would lead to a formal review of the country's AAA sovereign credit rating. President Barack Obama Monday provided a taste for the acrimonious talks to come, saying he won't bargain with Republicans over raising the debt ceiling and called for separate discussions on spending cuts to reduce the deficit.

The U.S. Treasury is using extraordinary measures to pay bills, as the government's $16.4-trillion (U.S.) debt ceiling was reached at the end of last month. A deal on the ceiling is needed to be reached sometime over the next six to eight weeks.

Offsetting some of these fiscal concerns is optimism that the fourth-quarter earnings season will be a favourable one. Already, 28 companies on the S&P 500 have reported quarterly earnings - and about 79 per cent beat projections, according to Bloomberg. On average, analysts are expecting earnings growth of 2.5 per cent.

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There was gloomy news out of Europe overnight again, where Germany reported its gross domestic product shrank by 0.5 per cent in the final three months of 2012, the worst quarterly performance since the country fell into a recession during the global financial crisis in 2008/2009 and only the second contraction since it ended. Overall growth for the year was 0.7 per cent, a tad below consensus forecasts for growth of 0.8 per cent.

Markets didn't have much reaction to favourable U.S. retails sales data this morning. The U.S. Commerce Department said retail sales in December rose 0.5 per cent, beating economists' expectations for a rise of 0.2 per cent.

Here's a look at some other stocks moving on news this morning outside of the tech sector:

Lululemon shares are down 7 per cent after the retailer Monday projected fourth-quarter sales guidance a little below analysts' estimates. Canaccord Genuity this morning is recommending investors buy on any dip and affirmed its $91 (U.S.) price target.

Canadian Satellite Radio Holdings, which operates Sirius XM Canada and is the sole provider of satellite radio in the country, said late Monday that it posted its first ever quarterly profit as its first quarter came to an end. Shares opened up 0.2 per cent on the TSX.

Homebuilder Lennar Corp. reported quarterly profit today that handily beat Wall Street expectations and the homebuilder reported a seventh straight jump in new home orders, indicating that a U.S. housing recovery is well on track. But shares are down 2 per cent, as new order growth slowed from the third quarter.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More


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