Week In Review: Nasdaq Hits High, Dow Rallies On France, Amazon, McDonald's, Alphabet, Caterpillar
In a very busy week for news, stocks rallied solidly. Markets worldwide cheered the results of the first round of France's presidential election. Amazon.com (AMZN), Alphabet (GOOGL) and Dow stock McDonald's (MCD) hit record highs on earnings, while Intel (INTC) and Starbucks (SBUX) tumbled, with hundreds of other companies reporting. President Trump's big tax-cut plan, which had lifted markets in anticipation, didn't move the needle when its outline was finally released.
Stocks Soar, Then Hold Gains
The major market averages jumped Monday and Tuesday after Emmanuel Macron led the first round of voting in the French presidential election, with polls suggesting he will easily defeat nationalist Marine Le Pen in the early May runoff. Stocks largely consolidated gains the rest of the week, though individual stocks and sectors were active amid a flurry of earnings. Internet, chips, restaurants and casinos were leaders, while Baidu (BIDU), Intel and Starbucks showed that even leading groups had losers. But the Nasdaq composite climbed more than 2% as of Friday intraday, hitting a record high. The Dow Jones industrial average rose nearly 2%, while the S&P 500 index was up 1.5%, just below all-time bests.
Amazon Is E-Commerce, Cloud King
Amazon stock reached a record high as first-quarter earnings beat Wall Street estimates. The e-commerce giant said adjusted income rose 38% year over year to $1.48 a share, beating the consensus estimate of $1.12. Revenue rose 23% to $35.7 billion, topping views of $35.3 billion. That maintained a steady streak of double-digit revenue gains going back more than four years.
Amazon Web Services, Amazon's cloud computing unit, continued to deliver huge, if gradually slowing, growth.
Amazon shares rose to a record high Friday, clearing a new buy point.
Alphabet Hits New High On Earnings
The earnings of Google-parent Alphabet rose 28% as revenue rose 22%, to $24.75 billion. Analysts expected the company to report earnings of $7.40 a share on sales of $24.22 billion. Revenue at Google's "other" non-advertising business — which includes its cloud computing unit, Pixel smartphones and the Play store — rose 49%, to $3.01 billion. Mobile advertising growth was a bright spot, although Google's rising traffic-acquisition costs are a concern. TAC refers to what Google pays partner websites to carry ads, or what it pays partners like Apple (AAPL) that generate search traffic. Alphabet shares gapped up to a fresh record high Friday.
McDonald's, Domino's Earnings Deliver; Starbucks Iced
McDonald's first-quarter results beat views, and the burger giant talked up its tech efforts, including expanding delivery, trying out mobile order and pay and its new digitized restaurant layout. Shares jumped to record highs. Domino's Pizza (DPZ) also beat and said it was testing GPS-tracking technology. Chipotle Mexican Grill (CMG) beat as well, and analysts debated its progress following a food-borne illness scare. Starbucks matched profit expectations, but missed on sales amid worries about stalling growth. Starbucks shares fell back toward a recent buy point.
Microsoft Earnings Solid; Sales, Guidance Shy
Software leader Microsoft (MSFT) delivered earnings per share above views for its fiscal third quarter, but sales came in a tad short. Its sales guidance for the June quarter also was below analyst estimates. Microsoft earned 73 cents a share excluding items, up 18% year over year, on adjusted revenue of $23.56 billion, up 6%, in the March quarter. Analysts expected 70 cents and $23.62 billion. For the current quarter, Microsoft guided to sales of $24.15 billion, up 7%, but Wall Street had been modeling for $24.51 billion.
Intel Tumbles Amid Mixed Chip Week
Intel earnings topped, but the chip giant's sales fell shy amid weakness in its data center market, sending shares gapping down Friday. Macom Technology Solutions (MTSI), Mellanox Technologies (MLNX), KLA-Tencor (KLAC) and Skyworks Solutions (SWKS) were chip plays that retreated. But Cavium (CAVM) and Monolithic Power Systems (MPWR) rallied after the chipmakers topped Q1 earnings. Gear makers Teradyne (TER) and Ultra Clean (UCTT) boomed on results.
Defense Stocks Are In Buy DMZ Zone
Lockheed Martin (LMT) sees more international demand for its F-35 fighter and missile-defense systems as global tensions heat up and Raytheon (RTN) sees "significant demand signals" for its munitions on increasing military operations in Syria. Lockheed's Q1 sales fell short of expectations and it gave weak guidance. Northrop Grumman (NOC) and General Dynamics (GD) topped on EPS and sales. All four defense stocks were in buy range at some point in the week, but as of Friday afternoon only General Dynamics was in entry areas.
Boeing Sales Miss, Cash Flow Triples
Core Boeing (BA) earnings jumped 16% to $2.01, beating views, but revenue fell 7% as defense revenue fell 18%. Free cash flow soared to $1.63 billion from $527 million. The aerospace giant raised its full year EPS outlook, but the midpoint still fell below analyst views. Industrial conglomerate United Technologies (UTX) topped with slim EPS and sales gains, as Otis elevator revenue, aerospace system sales and Pratt & Whitney jet engine sales rose.
Boeing shares rose toward a flat-base buy point. United Tech is at a 23-month high, at the edge of buying range.
Hard Drives Split
Western Digital (WDC) and Seagate Technology (STX), the two largest providers of disk drives, had differing earnings. Seagate revenue missed estimates, with the stock falling 17% in reaction. Western Digital's earnings beat on the top and bottom lines, and announced very bullish guidance, sending shares up Friday.
Casino Stocks Are Winners
Wynn Resorts (WYNN) pulled ahead of forecasts with 99 cents EPS and $1.475 billion in sales, as Macau gaming activity continues to rebound. Las Vegas Sands (LVS) EPS rose 47% to 66 cents, topping, on 15% revenue growth, meeting views. MGM Resorts (MGM) topped handily on both the top and bottom lines, helped by the takeover of the Borgata Hotel Casino and Spa and the MGM National Harbor opening. Wynn Resorts hit a two-year high, and MGM rose to its best since 2008, with shares in buy range. Sands advanced within a consolidation.
Exxon, Chevron Earnings Top
Exxon Mobil (XOM) reported mixed first-quarter results but said it had no planes to adjust its capital expenditure guidance as the oil major has identified and captured capital efficiencies. Exxon warned that it still needed to be cautious on the rebalancing of the oil market. Chevron (CVX) swung to a profit in Q1 and revenue beat Wall Street estimates as overall production rose. Management said if oil remains around $50 a barrel then future spending would be near the low end of its capex forecast. U.S. oil prices are modestly below $50 a barrel as Baker Hughes announced the U.S. oil rigs in operation rose for a 15th straight week, foreshadowing further production gains.
T-Mobile Keeps Grabbing Customers
T-Mobile US (TMUS) topped Q1 earnings estimates and continued its streak of grabbing the most new subscribers among wireless operators. T-Mobile added 798,000 postpaid phone subscribers vs. 877,000 in the year-earlier period; that topped estimates of 725,000. T-Mobile shares rose to a new high, in buy range. AT&T (T) is expected to ramp up advertising for bundled wireless and pay TV offers after reporting in-line EPS and revenue that fell more than expected. AT&T lost 348,000 wireless postpaid subscribers, more than expected. Subscriber growth at DirecTV Now's streaming service helped AT&T offset surprising weakness at DirecTV's traditional pay TV business. But AT&T shares fell to 2017 low.
Separately, cable giant Comcast (CMCSA) rose to a new high on strength in its movie business and broadband-customer gains.
Autos' Earnings Better Than Expected
Recall costs and slowing U.S. sales hurt Ford (F) earnings, which fell but still beat Q1 views. Ford said higher commodity costs, particularly in steel, could weigh but that the worst hit to profit and costs this year likely happened in Q1. General Motors (GM) beat forecasts on solid U.S. truck and crossover sales, while Fiat Chrysler (FCAU) held its full-year outlook and kept its debt in check. The results come amid concerns about slowing auto sales, rising inventories and falling used-car prices.
Caterpillar Earnings Crush Views
Dow Jones industrial average equipment-maker Caterpillar (CAT) earned $1.28 a share in Q1, more than doubling estimates, and raised its 2017 revenue range by $2 billion to $39-$41 billion, vs. estimates of $38.3 billion. Caterpillar's good news comes despite lack of progress on President Trump's infrastructure program or border wall, two initiatives that have made the maker of heavy equipment a Trump stock. Ahead of earnings, Caterpillar finally broke a 51-month streak of falling retail sales, with a 1% gain that was driven by construction equipment sales in the Asia-Pacific region. Caterpillar shares soared into a buy zone.
Drug, Biotech Earnings Bonanza
Biotechs and drugmakers reported en masse Thursday with AbbVie (ABBV), Alexion Pharmaceuticals (ALXN) and Bristol-Myers Squibb (BMY) delivering across-the-board beats, pumping their stocks up 1.9%, 4.6% and 4.2%, respectively. AstraZeneca (AZN) topped on earnings, but sales slid 12%, though adjusted profits grew 4% and topped by 17 cents. Top two biotechs, Amgen (AMGN) and Celgene (CELG), both reported lagging sales. On Thursday, Acorda Therapeutics (ACOR) stock hit an 11-year low on light sales and an 8-cent per-share loss ex items that also missed.
Insurers Navigate Earnings, TrumpCare
Even as the House made another push to repeal ObamaCare — with a plan that included steep cuts for Medicaid — a raft of insurers moved into buy zones, and flirted with breakouts or pushing to new highs. The catalyst was an especially strong earnings report from Anthem (ANTM), though investors may have judged that TrumpCare remains doomed. Humana (HUM) previewed its earnings and raised guidance. Centene (CNC) topped estimates and CEO Michael Neidorff said he expects the Medicaid-heavy insurer to thrive on any reform that can be passed by Congress, noting that "20 Republican senators come from states that expanded Medicaid."
Homebuilder Stocks Now Lagging
PulteGroup (PHM) topped earnings estimates, but revenue fell short. Meanwhile, President Trump imposed a 20% tariff on Canadian softwood imports, which could raise construction costs by $1,200 per home. New-home sales rose in March to the second-fastest rate of the current business cycle. Pulte tumbled, but did not outright close below a prior buy point. D.R. Horton (DHI) and Lennar (LEN) fell below their 50-day lines as well.