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Thursday October 18, 2018



Amazon's Shares Soar on Strong Earnings

Amazon.com, Inc. (AMZN) announced quarterly earnings on Thursday, October 26. The online retail giant reported a 34% spike in revenue, causing shares to jump 7% after earnings were released.

Amazon reported quarterly revenue of $43.74 billion. This was an increase from last year's third quarter revenue of $32.71 billion and more than the $42.14 billion in revenue that Wall Street expected.

"In the last month alone, we've launched five new Alexa-enabled devices, introduced Alexa in India, announced integration with BMW, surpassed 25,000 skills, integrated Alexa with Sonos speakers, taught Alexa to distinguish between two voices, and more," said Amazon founder and CEO Jeff Bezos. "With thousands of developers and hardware makers building new Alexa skills and devices, the Alexa experience will continue to get even better."

The company announced quarterly earnings of $256 million, up from $252 million one year ago. On an earnings per share basis, Amazon reported profit of $0.52 per share, which exceeded the $0.03 per share expected by analysts.

Amazon's revenue boost was partly due to its $13.7 billion acquisition of Whole Foods Market at the end of August. After taking on Whole Foods' 87,000 employees, Amazon announced on Thursday that it surpassed the half-million mark at the end of September when its employee count totaled 541,900 people. That headcount is going to continue to rise in the upcoming months, as the company announced plans on Thursday to add 120,000 temporary jobs during the holiday season. Additionally, with the opening of an additional headquarter location ("Amazon HQ2"), Amazon expects to create 50,000 more jobs. The company has received more than 238 proposals from locations across North America to serve as home of Amazon HQ2, but has not yet announced a decision.

Amazon.com, Inc. (AMZN) shares ended the week at $1,100.95, up 11.6% for the week.

Alphabet Reports Surging Sales

Alphabet Inc. (GOOGL) released its latest quarterly earnings report on Thursday, October 26. The parent company of Google reported a 24% increase in revenue thanks to its search advertising and YouTube business.

Revenue for the third quarter reached $27.77 billion. This is up from $22.45 billion reported during the same quarter last year and is above the $27.20 billion that analysts predicted.

"We had a terrific quarter, with revenues up 24% year on year, reflecting strength across Google and Other Bets," said Alphabet CFO Ruth Porat. "Our momentum is a result of investments over many years in fantastic people, products and partnerships."

The company reported net income for the quarter was $6.73 billion, or $9.57 per share. This was up from $5.06 billion, or $7.25 per share, during the prior year's quarter.

Alphabet saw a 21% increase in Google's mobile advertising revenue for the quarter. The company said that it expects to earn $72.42 billion in net digital ad revenue internationally this year. The third quarter marked the 15th consecutive quarter of double-digit sales growth, a trend that the company expects to continue. As a result of the positive earnings and growth, Alphabet's stock jumped to $1,001.50 after the closing bell on Thursday.

Alphabet Inc. (GOOGL) shares ended the week at $1,019.27, up 3% for the week.

General Motors Beats Earnings Expectations

General Motors Company (GM) reported quarterly earnings on Tuesday, October 24. The largest U.S. automaker reported better-than-expected revenue and profit in the third quarter.

General Motors announced revenue for the quarter was $33.6 billion, which beat analysts' projected revenue of $32.7 billion. Last year at this time, the company reported revenue of $38.9 billion.

"We delivered solid results even with planned, lower third-quarter production in North America," said General Motors CEO Mary Barra. "We are managing the business with discipline to drive strong performance today, while investing in higher-return opportunities, including those that will shape the future of transportation."

General Motors reported a net loss of $2.98 billion, or $2.03 per share. Last year in the third quarter, the company's net income was $2.77 billion, or $1.76 per share.

The company attributed the earnings loss to the sale of its European operations. Despite the reported loss, General Motors' performance in the quarter exceeded analysts' expectations, causing shares to rise 2.3% to their highest level since the company's public offering in 2010. One factor that contributed to the company's sales uptick was the increased demand that many auto manufacturers encountered in September after hurricanes Harvey and Irma left a number of individuals looking to replace their damaged vehicles. In September alone, GM's sales jumped 12% as a result of this heightened demand.

General Motors Company (GM) shares ended the week at $44.64, down 1.9% for the week.

The Dow started the week of 10/23 at 23,349 and closed at 23,434 on 10/27. The S&P 500 started the week at 2,578 and closed at 2,581. The NASDAQ started the week at 6,642 and closed at 6,701.

Yields Peak Midweek Ahead of Fed Pick

Treasury yields reached seven-month highs this week after President Trump announced that he is very close to selecting a new Fed Chair. The announcement, coupled with better-than-expected economic data, caused yields to peak mid-week before slightly retreating Thursday and Friday.

On Wednesday, yields soared on speculation that President Trump's pick for the Fed Chair or Vice-Chair seat could be Stanford University economist John Taylor, who is widely considered one of the most hawkish potential candidates. However, Federal Reserve Governor Jerome Powell still remains in the running as a top pick. Analysts explain that Taylor's rule-based policy approach would differ starkly from current Fed Chairwoman Janet Yellen's stance. Amid the speculation, the yield on the 10-year Treasury note reached 2.474%—its highest mark since March 21.

Stronger-than-expected economic data released on Wednesday also contributed to the mid-week boost in yields. Durable goods orders increased 2.2% in September, which exceeded the 1% increase that analysts expected. In addition, new home sales shot up 18.9% last month. Economists were expecting home sales to fall 0.9% in September.

"The rise in yields was put underway even prior to this morning's strong durable goods report," said Bill Northey, chief investment officer at US Bank Wealth Management in Montana on Wednesday. "If you look across what has happened the last seven to 10 days, there has been additional traction on tax reform, which has clearly put some upward pressure on rates."

On Thursday, yields retreated slightly after the European Central Bank (ECB) announced that it plans to continue its stimulus program at a slower pace until at least September 2018. Starting in January, it will reduce its monthly bond purchase from 60 billion euros to 30 billion euros. Following the ECB's announcement, U.S. Treasury yields backed away from Wednesday's highs.

"US yields are following global yields lower, fairly sharply as well," said Gennadiy Goldberg, interest rates strategist at TD Securities. "The risk of the ECB being a little more hawkish has led to the rise in yields for the last week or so. So this is a little bit of a spillover effect."

On Friday, yields retreated further after reports emerged that President Trump is leaning towards selecting Federal Reserve Governor Jerome Powell to take over for Yellen. While no decision has been made, analysts predict that President Trump could name his pick as early as next week. The selection of a new Fed Chair, coupled with the unveiling of tax reform legislation, could lead to market volatility and push yields higher next week.

"We've got the Fed chair and we've got a tax bill coming," said Dan Clifton, head of policy strategy at Strategas Research. "Both of them are bullish for rates."

The 10-year Treasury note yield finished the week of 10/23 at 2.42%, while the 30-year Treasury note yield was 2.93%.

Mortgage Rates Rise

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, October 27. The report revealed that the 15 and 30-year fixed mortgage rates increased, hitting their highest marks since July.

The 30-year fixed rate mortgage averaged 3.94% this week. This represents an increase from last week when it averaged 3.88%. Last year at this time, the 30-year fixed rate mortgage averaged 3.47%.

This week, the 15-year fixed rate mortgage averaged 3.25%. This was higher than last week's average of 3.19%. The 15-year fixed rate mortgage averaged 2.78% one year ago.

"The 10-year Treasury yield surged this week, jumping 12 basis points," said Sean Becketti, Chief Economist at Freddie Mac. "The 30-year mortgage rate followed suit, increasing 6 basis points to 3.94 %. Today's survey rate is the highest rate in three months."

Based on published national averages, the money market account finished the week of 10/23 at 0.73%. The 1-year CD finished at 1.54%.

Published October 27, 2017
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