DOW – 26 = 18,169
SPX – 6 = 2133
NAS – 34 = 5215
10 Y + .05 = 1.84%
OIL + .44 = 49.62
GOLD + 2.10 = 1240.00
This has been a tough month for global bonds and the selloff continued today. Treasuries tumbled and the dollar rose to a seven-month high amid increasing wagers the Federal Reserve will boost borrowing costs in December. Tomorrow we’ll get the first read on third quarter GDP, and it is expected to show a notable improvement after a sluggish first half. Traders sent bonds toward their worst month since 2014.
A few days ago we told you that Qualcomm was in talks with NXP Semiconductor; today they announced a deal. Qualcomm will acquire NXP for about $38 billion, or $47 billion including debt. Qualcomm will pay $110 a share in cash for each NXP share outstanding, which represents an 11% premium to Wednesday’s closing price.
Qualcomm has been a leader in chips for smartphones, a market which is starting to cool off. NXP, based in the Netherlands, became the world’s biggest maker of automotive electronics after it bought U.S.-based Freescale Semiconductor for about $12 billion last December. NXP provides chips for the Internet of Things, which includes everything from refrigerators to cars. By 2020, some 21 billion IoT devices will be in use worldwide, up from fewer than 5 billion last year.
This is the busy time for earnings reports; 60 S&P 500 companies report today; one-third of S&P companies are reporting this week.
After the closing bell, Alphabet (the parent company of Google) reported revenue rose 20% to $22.4 billion from $18.6 billion a year earlier. Net income rose to $5.06 billion, or $7.25 per Class A and B share and Class C capital stock, from $3.98 billion, or $5.73 per share, a year earlier. Beating estimates on the top and bottom lines.
Google’s Other Revenue, which includes the company’s increasingly important cloud business, jumped 38.8 percent after rising 33 percent in the second quarter. Alphabet’s Other Bets generated revenue of $197 million, but reported an operating loss of $865 million. Other Bets includes broadband business Google Fiber, home automation products Nest, self-driving cars as well as X, the company’s research facility that works on “moon shot” ventures. Alphabet also announced it would repurchase about $7 billion of its Class C stock. Shares moved a little higher in after-hours trade.
For years, Amazon.com would disappoint on earnings or more likely, losses. Then in the first quarter, Amazon posted strong earnings, and that set the bar high. Today Amazon did not clear that bar. The company posted EPS of $0.30, short of expectations for $0.82. Revenue came in at $32.7 billion, in line with estimates for $32.6. Amazon Web Services (“AWS”) continues to be an important driver for the company, with third quarter revenue for the segment coming in at $3.2 billion, up 54%. Amazon issued fourth quarter guidance at the low range of estimates. Amazon is down almost 5% in after-hours trade.
Ford Motor’s net income fell 56% in the third quarter as safety-recall expenses and softer sales in the U.S. market cut profits. Ford reported net income of nearly $1 billion for the quarter, down from $2.2 billion recorded in the same year-ago period. Operating profit equaled 26 cents a share, beating estimates of 20 cents.
Volkswagen made €2.3-billion-euro in net profit in the third quarter after a massive loss a year ago over its emissions cheating scandal. VW also raised its full-year guidance for group revenue despite setting aside an additional €400-million-euro relating to Diesel-gate.
Deutsche Bank reported a third-quarter profit on lower than estimated litigation and restructuring costs, but set aside an additional €501-million-euro as it works to settle a mortgage probe with the Department of Justice. Net income came in at €256-million-euro compared with a €6-billion-euro loss in the year-earlier period.
The Deutsche Bank earnings call was one of the more interesting of this quarter. CEO John Cryan admitted that the bank is struggling, saying: “…we know that when our name is in the headlines for the wrong reasons, the phone doesn’t ring as frequently…. So, expect some revenue attrition.”
Samsung’s mobile division profit and global market share both went up in smoke in the third quarter as the damage from the company’s recalls and cancellation of its flagship Galaxy Note 7 began to take shape. Samsung’s revenue slid 7% on year to $42 billion and operating income tumbled 30% to $4.6 billion. Those were the bright points in Samsung’s report, believe it or not — Samsung’s mobile division reported operating income dropped a staggering 96% from the same quarter last year.
Nokia’s quarterly profit fell less than expected, boosted by resilient broadband demand and a patent licensing payment from Samsung.
Twitter reported slower revenue growth – even as revenue increased 8% and beat estimates. The company earned 13 cents per share, beating the average estimate of 9 cents. Twitter said it will cut 9 percent of its global workforce to keep costs down. After the report, Twitter announced it was shutting down Vine, the 6 second video looping app. We should all be thankful.
Aetna said revenue and profit rose in its latest quarter, topping estimates.
F5 Networks jumped nearly 10 percent and was the biggest gainer on the S&P, after its quarterly revenue beat estimates.
Belgium reached a deal with the country’s southern region of Wallonia to approve a trade agreement between the European Union and Canada, ending a deadlock that delayed the accord’s signature. The approval removes the last major obstacle for the EU and Canada to move ahead with one of the world’s most ambitious and far-reaching trade pacts. Wallonia’s stance had tied the hands of the Belgian federal government, which had been in favor of the agreement but needed the endorsement of regional authorities. The other 27 EU nations support the deal.
The UK economy grew in the three months after the Brexit vote. Britain appears to be shrugging off Brexit worries: its GDP grew 0.5% in the third quarter—analysts expected 0.3%—but it was down from 0.7% in the second quarter.
The number of people who applied for unemployment benefits last week fell by 3,000 to 258,000. Initial claims have been below the key 300,000 threshold for 86 straight weeks. The last time that happened was in 1970.
The National Association of Realtors’ pending home sales index hit 110.0, thanks to surging demand in the West and South. The index is now 2.4% higher than it was a year ago.
Orders for long-lasting goods made in the U.S. fell slightly in September, a weak performance owing largely to lower demand for military hardware and computers. Excluding defense spending, durable-goods orders rose 0.7%. Customers ordered more heavy machinery, new autos and commercial planes. Orders for autos climbed 1.2% and bookings for commercial aircraft accelerated by 12.5%.
Although the level of overall demand was decent enough, orders for core capital goods that are viewed as a key measure of business investment sank by the largest amount since February; down 1.2% last month and down 4.1% over the past year.
United Parcel Service said it ordered 14 Boeing 747-8 cargo jets, a deal worth $5.3 billion at list prices that potentially breathes new life into an aircraft Boeing had warned it might cancel. The UPS order, which includes options for 14 more of the hump-backed planes, suggests the freight company expects an upturn in air cargo after years of anemic growth.
IPO news… A Shanghai-based logistics company tied to China’s online-shopping industry has raised $1.4 billion in the largest U.S. initial public offering so far this year. ZTO Express, which delivers parcels for businesses including Chinese e-commerce giants Alibaba and JD.com, priced its 72 million shares at $19.50 each, giving it a market value of more than $12 billion. The company trades under the ticker symbol “ZTO.” And the first day hit with a thud, down about 15%.
Apple unveiled its updated MacBook Pro today with a fingerprint reader and faster ports; it’s thinner, lighter, faster, brighter, etc. The Mac line accounted for about 11 percent of Apple sales in the just-finished fiscal year. Also, they came out with their big idea for TV and it’s an app. Try to curb your enthusiasm. The app will get you shows and movies from all your TV apps that you’re signed into and will show them on all your devices. And that’s all well and good but nothing seems earth shattering.
Exxon Mobil and accounting firm PwC must turn over documents related to the oil major’s representations of the impact of climate change on its business and assets, according to a New York Supreme Court ruling. New York Attorney General Eric Schneiderman’s office asked the court in August to compel PwC to hand over the filings, but Exxon refused, citing accountant-client privilege.
Not only are Obamacare premiums on the rise for 2017, deductibles will also be getting more expensive, according to an analysis by insurance comparison site HealthPocket. Deductibles for individuals enrolled in the lowest-priced Obamacare health plans will average more than $6,000 next year, the first time that threshold has been cracked in the three years that Affordable Care Act marketplaces have been operating.
The latest National Weather Service forecast predicts wide variation in temperature and precipitation this winter across the U.S., capping off a year of record-breaking heat. Residents of the southern part of the U.S. from Los Angeles to Atlanta should expect above-average temperatures and below-average precipitation, while people in northern states from Washington to the Midwest should expect below-average temperatures and above-average precipitation. For Arizona, expect warm and dry, with no end in sight for the drought.