April 27, 2018.
If it appeared that Mark Zuckerberg was squirming in his seat at his hearing on Capitol Hill, his company’s stock seems to be right in its sweet spot. Facebook (FB) surged 9% yesterday after its results clobbered forecasts. It was all about the tech stocks yesterday! Technology was the biggest winner on the S&P 500 with gains of 2.3% as major companies saw their earnings soar.
Facebook (FB) was one of the major stocks driving yesterday’s gains. Its Q1 earnings were up more than expected, earning $1.69 per share on revenues of $11.97 billion. Projections had been an EPS of $1.35 on $11.4 billion in revenues. And the cherry on top was that monthly active users had risen 13% year-over-year to 2.2 billion, outstripping estimates of 2.19 billion. Kingsview Asset Management portfolio manager summed it up perfectly: “Investors have been concerned that the events over the past month and a half would impair Facebook’s growth and user adoption, but that’s clearly not the case.”
Amazon (AMZN) was another case in point, trading up 3.96% in regular trading – and then soaring 6.59% in after-hours trading. More than anything, after suffering a Twitter onslaught from President Trump, Jeff Bezos could not be happier. The stock continued its meteoric climb on the heels of a jump in sales in its North American retail, advertising and cloud computing business. The company beat the Street’s earnings forecasts by $2. Earnings came out at $3.27 a share, the market having expected $1.26. There were a number of factors responsible for the better than expected results. First and foremost, Morgan Stanley has long placed its bets on the company’s cloud business, noting that as its reason for going long on the stock. That forecast has been right on the money, AWS sales having grown 40% or more for at least the last 6 quarters. Its pace in this last period was even better, up 49% to $5.4 billion.
Over and above that, Amazon is showing its pricing muscle, announcing that it plans to raise the price of Prime to $119 in May from the current $99 price tag. Recently, Amazon also announced that its Prime membership base had surpassed 100 million, meaning that the company is firing on all engines. Likewise, advertising boosted the company’s bottom line, with sales revenues also coming out better than expected, meaning that the company had to fork out less cash than anticipating on moving merchandise, meaning more pure profit for the company. It would seem that everybody knows that at a P/E multiplier of 300 plus, Amazon cannot be said to be cheap on the face of it, but over and over again, this stock has surprised the market, surpassing even the highest expectations. It was big news when Amazon was nearing $1,000 – and now the company is poised to lift off in the direction of $2,000. It’s impossible to know if the stock will correct but if you play the movement in this stock just right, it could mean a windfall!
Bezos commented in a statement: “AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,” adding, “As a result, the AWS services are by far the most evolved and most functionality-rich … That’s why you’re seeing this remarkable acceleration in AWS growth.”
The Dow, in its own right, was aided by a number of bellwether mainstays, the likes of Home Depot (HD), which rose 4.7%, and Visa (V) which traded up 4.8%. The blue-chip index being price-weighted, the duo added 97 points. Technology Select Sector SPDR ETF, the XLK, surged 1.9%. Likewise, as we’ve noted in recent days, the 10-year T-bond yield was set to be a critical factor and that was surely the case yesterday as it edged back from the 3% level.
The Economic Calendar saw jobless claims fall 24,000 to 209,000, making it the lowest reading since December 1969. Durable goods orders were up 2.6% in March, riding a 44.5% rise in commercial plane orders. On the trade front, the U.S. deficit in goods contracted 10.3% to $68 billion last month. With that said, home loan rates rose to a 5-year high, driven by strong economic data and an uptick in commodity prices, which led to a bond sell-off. According to Freddie Mac’s weekly survey, released yesterday, 30-year fixed rate mortgages were at a mean of 4.58%. Also on yesterday’s calendar, the ECB left interest rates unchanged, reiterating its commitment to buy bonds until the end of September, or beyond – if necessary.
The chipmaker, Advanced Micro Devices (AMD), soared 14% on the company’s higher than expected profits and optimistic revenue outlook. AMD gave the sector a needed boost, the PHLX Semiconductor index (SOX) up 2%.
On the car front, Ford (F) edged up 2.9%, profits and sales beating the consensus. General Motors (GM) was up 0.4%, the automobile maker recording a 60% falloff in net income due to restructuring costs.
Not everything was rosy in the tech sector. eBay (EBAY) took a big hit, off 5.6% after the online marketplace released a downbeat outlook when releasing earnings numbers late Wednesday. PayPal Holdings (PYPL) was up 2.7% after reporting numbers of its own.
Daily Summary: All 3 major indexes rose on the day, the blue-chip Dow up 0.99%, the S&P 500 tacking on 1.04%, with the NASDAQ taking off 1.64%. Out of the 11 S&P 500 sectors, 9 ended higher; telecom, though, tumbled 3.2%, driven lower by the results of AT&T (T), which fell just under 6%.
Today’s Economic Calendar: GDP numbers will be key today. They’ll be released at 8:30. The Employment Cost Index will also be released at 8:30, Consumer Sentiment coming out at 10:00. The Baker-Hughes Rig Count will be coming out at 13:00. The last figure could create waves today, given the war of words of late between Trump and OPEC and rising oil prices. For its part, OPEC has stated that they’d like to see prices rise higher, and see a higher equilibrium. The rig count hones in on how America has responded to rising prices by ramping up production, giving an insight into what to expect for future crude movement.
Friday’s Hot Stocks: INTC, EXPE, SBUX, MSFT, AMZN
Have a great trading day!