Things were looking bad – and real bad – for both the S&P 500 and the Dow going into today’s trading. With 4 days of consecutive losses and geopolitical risk factors to boot, things were getting ugly. Boeing (BA), the aircraft manufacturer though, saved the day for the Dow. Trouncing analyst expectations, and raising its 2018 earnings guidance, the company reported net income of $2.48 billion and revenues of $23.38 billion. Boeing likewise lifted its outlook for adjusted EPS to $14.30-14.50, from $13.80-14.00. The cherry on top was Boeing’s announcement that it would be purchasing $15 billion more of stock over the next 2 years – lifting the company’s EPS. Boeing (BA) has flexed its muscles this year, trading up 11.6%; the Dow is now down 3% on the year. Today’s market trading was volatile, early losses on the S&P 500 and the Dow dissipating come afternoon trading.
As we noted in yesterday’s report, the hot-button issue today continued to be bond yields, which rose past 3%. Boston Partners’ global market research director, Michael Mullaney, has focused on the tug of war playing out on the earnings front, the bond yield monkey wrench thrown in for fun: “Earnings have been coming in very strong, but companies aren’t getting rewarded. At the same time, bonds are behaving badly, and with both struggling, investors are feeling nervous about the market in general,” adding, “The question becomes, where do you hide? Investors are increasingly hiding in cash.” We don’t necessarily think that that’s wise, though. With the stock market’s stellar performance to date, for the market to only rise some 3% on a compounded level 10-years hence seems absurd!
Market Summary: With a late surge in Boeing, the major indexes – save NASDAQ – ended up. The Dow tacked on 0.25%, the S&P 500 edging up 0.18%. The NASDAQ ended marginally off by 0.05%. The Dow and the S&P 500 ended a 5-day losing streak, the NASDAQ falling for the 5th trading day in a row.
The 10-year T-note yield ended at 3.026%, after climbing 3 basis points. The yield on the note hit its highest level since Dec ’13. These higher yields can dampen stocks’ attractiveness, raise corporate borrowing rates, and be symptomatic of a rate hike to come.
Some of the top players in focus included: Boeing (BA), Texas Instruments (TXN), General Electric (GE), Exxon Mobil (XOM), Comcast (CMCSA) and Twitter.
TXN took off 4.7% yesterday, the electronics maker reporting earnings late Tuesday that came out above forecasts. Moody’s Investors Service knocked the wind out of GE, updating its outlook on the company’s ratings to negative, meaning that we could see a medium-term downgrade. Already off 20% year-to-date, the company has fallen even more over the last 12 months, having shed over 50% of its market cap.
Exxon (XOM) is another stock in the limelight. The company tacked on 1.5%, giving the energy sector one of its biggest lifts.
Comcast (CMCSA) also grabbed headlines, rising 2.7%. The company outbid 21st Century Fox for U.K. broadcaster, SKY, the latter announcing that it was resultantly withdrawing its recommendation for the Fox bid. The Comcast offer places a 16% premium over Fox’s bid price – the company’s Chief Executive stating: “We have long believed Sky is an outstanding company and a great fit with Comcast. Sky has a strong business, excellent customer loyalty, and a valued brand.” Yesterday, CMCSA reported Q1 earnings of 62 cents per share, 3 cents above estimates.
Twitter (TWTR), despite beating the market’s earnings projections, fell 2.4% on the day.
Last but not least, Facebook, reported its financial results, beating on both the top and bottom lines. The news could not have been better for investors in the company, who feared a backlash from the latest scandalous revelations involving Cambridge Anlaytica, a story which broke in mid-March. As for the company’s transition to mobile, the company has scored a hole in one, with mobile sales making up 91% of total revenue!
Company CEO, Mark Zuckerberg, has warned about increasing costs, given plans to hire 20 thousand workers to address privacy and security concerns. The company also announced changes to post prioritization but the company has assuaged investors that it shouldn’t affect sales: “The impact of the business is much more muted because we’re still seeing that there’s lots of post engagement,” noted CFO, David Wehner, “So when you’re taking away time from things like passive video, it doesn’t mean you’re not seeing as many posts in news feed. . . . I don’t think the impact on the business is really that profound relative to the impact on time.”
Today’s Economic Calendar: MBA Mortgage Applications will be released at 7:00, followed by the EIA Petroleum Status Report at 10:30. Outside of that, the 2-Yr FRN Note Auction will be taking place at 11:30.
On Friday, the Baker-Hughes Rig Count will be released at 13:00. It will be in center-stage given rising gas prices and Trump’s rhetoric aimed at reining in OPEC.