The Stock Market This Week: October 26-30
The Stock Market This Week: October 26-30
By: Stacey Nickens
- Earnings Reports
- Caterpillar beat earnings expectations and reported third-quarter earnings-per-share of $1.34. Their revenue came in at $9.88 billion. However, over the last year, Caterpillar’s earnings were still down by half due to declining end-user demand. The company predicts end-user demand will ramp up in the fourth quarter.
- 3M reported earnings-per-share of $2.43 in the third quarter and beat per share earnings expectations. They reported a revenue of $8.4 billion and showed sales growth due to increased demand for their medical equipment.
- UPS beat third-quarter earnings expectations and reported earnings of $2.28 per share. Their revenue came in at $21.2 billion, higher than the anticipated $20.3 billion.
- General Electric reported a third-quarter profit and surprised analysts. Their CEO’s cash preservation strategy seemed to be helping GE. Analysts expected a $960 million cash outflow; however GE reported $514 million in industrial free cash flow.
- Chevron’s cost-cutting measures helped the company beat earnings expectations for the third quarter. Chevron reported earnings-per-share of 11 cents, compared to the expected earnings-per-share loss of 27 cents. Chevron’s revenue was down 26% over the past year and clocked in at $27 billion. However, Exxon still plans to cut around 15% of its global workforce, including nearly 2,000 U.S.-based jobs.
- Big Tech
- Amazon’s sales increased by an impressive $26 billion in the third quarter. The company also increased their staff by 50% over the past year. With holiday shopping ramping up sales, Amazon expects sales of more than $112 billion in the fourth quarter.
- Apple’s iPhone sales fell 21% in the third quarter. Since Apple unveiled their iPhone 12 in October, the company is under pressure to deliver much better fourth-quarter sales results.
- Facebook’s revenue climbed 21% in the third quarter, and their total users grew in most markets. However, the US market was the one exception, where daily users dropped 1 million to 255 million.
- Alphabet reported strong advertising revenue. YouTube specifically saw advertising revenue increase 32%.
- Economic News
- New home sales unexpectedly declined 3.5% m/m in September. This decline may be due to rising home prices making it more challenging for potential home buyers to find an affordable home.
- The Consumer Confidence Index dropped from 101.3 in September to 100.9 in October. Analysts had expected the index to increase. While consumer sentiment about current conditions did increase, consumer confidence in future conditions declined.
- Home price growth increased in August by 5.71%. This beats July’s increase of 4.78%. Notably, the home price index increased 5.2% over the last year and beat expectations.
- Durable goods orders increased significantly in September and far exceeded expectations. Orders were up 1.9% but were only expected to increase 0.5%. Core, or non-defense, capital goods orders increased 1% in September. This metric is considered a good estimate for business spending plans.
- September’s trade deficit narrowed unexpectedly, coming in at $79.4 billion. Exports climbed $3.2 billion, and imports declined $500 million.
- The MBA Mortgage Applications Index rose 1.7%.
- Q3 GDP climbed a record 33.1% at an annualized rate. GDP climbed 7.4% over the third quarter. This growth can largely be attributed to significant increases in personal spending.
- Initial jobless claims for the week ending on October 24 fell to 751,000. This is the lowest initial claims level since the pandemic began.
- Personal income rose 0.9% in September, beating the 0.4% expected increase. Stronger employment rates coupled with increased jobless payments helped raise income levels after a 2.5% drop in August.
- Personal spending rose 1.4% in September while the personal savings rate declined. However, the personal savings rate sits at 14.3% and is still higher than the pre-pandemic 8.3% savings rate.
On Monday, major indexes fell after daily new coronavirus cases hit a record high on Friday. The S&P 500 fell 1.9%. The Nasdaq declined 1.6%, and the Dow Jones tumbled 2.3%. With rising COVID-19 cases and uncertainty around fiscal relief, the cyclical energy, industrials, materials, and financials sectors were the hardest hit in daily trading. In individual company news, Dunkin shares soured after they reported that Inspire Brands may take them private. In economic news, new home sales unexpectedly declined 3.5% m/m in September. This decline may be due to rising home prices making it more challenging for potential home buyers to find an affordable home.
On Tuesday, rising COVID-19 infection rates continued to weigh on the market. The S&P 500 fell 0.3%, and the Dow Jones lost 0.8%. However, the technology sector performed more strongly and helped the Nasdaq gain 0.6%. Among the technology sector, Xilinx stock climbed after the company announced their acquisition by Advanced Micro Devices. Overall, the market was pessimistic because the United States’s 7-day average of new COVID-19 cases hit a record high on Monday. Additionally, hard-hit European countries have implemented restrictions to curb the spread of the virus. This pessimism was reflected in October’s Consumer Confidence index, which unexpectedly dropped. While consumers expressed confidence about current conditions, they were concerned about future conditions. However, other economic news was more positive. Home price growth increased in August, and durable good orders increased significantly more than expected in September.
On Wednesday, the market tumbled as France and Germany announced new lockdowns in response to rising COVID-19 infection rates. The S&P 500 fell 3.5%. The Nasdaq lost 3.7%, and the Dow Jones was down 3.4%. All sectors fell in daily trading, with information technology falling the most. Many earnings reports beat expectations, including those from GE and UPS; however, the market didn’t respond to the positive news. The trade deficit also reportedly narrowed in September. Again, though, investors remained focused on the possibility of lockdowns. In other corporate news, Pfizer shares fell when the company announced they would delay their release of their vaccine trials. Alphabet, Facebook, and Twitter shares all tumbled as their CEOs testified before the Senate Commerce Committee.
On Thursday, major indexes climbed in anticipation of Apple, Amazon, Facebook, and Alphabet’s earnings reports following market close. The S&P 500 rose 1.2%. The Nasdaq climbed 1.6%, and the Dow Jones added 0.5%. Pinterest’s strong earnings report inspired optimism that Apple, Amazon, Facebook, and Alphabet would also report an increase in advertising spending. Both Facebook and Alphabet helped the communication services sector gain 2.9%. The energy sector performed the most strongly in daily trading, adding 3.2%. The healthcare sector was the only one to fall, in part due to Abiomed reporting underwhelming Q3 revenue. In economic news, Q3 GDP climbed a record 33.1% at an annualized rate. This growth can largely be attributed to significant increases in personal spending. Additionally, initial jobless claims for the week ending on October 24 fell to 751,000, and September’s home sales declined 2.2%.
On Friday, major indexes fell as uncertainty around the election and rising COVID cases continued to depress investor sentiment. The S&P 500 fell 1.2% and is now up just 1% YTD. The Nasdaq declined 2.5% due to weakness about mega-cap stocks, and the Dow Jones fell 0.6%. The index shed 6.4% this week and clocked in its worst weekly performance in months. All indexes declined more than 2% over the course of October. However, economic data was largely positive on Friday. Personal income and spending rates rose in September, but this news was not enough to help the market pare losses. Technology stocks fell after earnings reports from Amazon, Apple, Facebook, Twitter, and Alphabet, despite the fact that earnings were largely neutral to positive. However, investors were unhappy with Twitter’s slow user growth and Apple’s declining iPhone sales.
