S&P 500 Hits Highs As Apple, Facebook, Tesla, Trump's Fed Pick, GOP Tax Plan, Jobs Headline Busy Week


The S&P 500 index and other major averages hit record highs during the week, generally moving sideways as good and bad news canceled each other out. Apple (AAPL) reported strong earnings and guidance as the iPhone X launched. Facebook (FB) crushed views but warned of soaring operating costs. Tesla (TSLA) missed badly and tempered its Model 3 goals as production "hell" continued. Alibaba (BABA) delivered huge growth. Symantec (SYMC) and several security stocks tumbled, while Oclaro (OCLR) spurred a big fiber-optic retreat. President Trump nominated a new Federal Reserve chairman while the House GOP finally unveiled a big tax-cut plan. Job growth did not rebound as much as expected last month.

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Stocks Trading At Record Highs

The S&P 500 index, Dow industrials and Nasdaq composite didn't move much as of Friday morning, but did hit record highs amid a new wave of earnings, President Trump's Fed pick and the GOP's tax plan. Megacap Apple gave a nice Friday lift following its strong results. Facebook crushed views, but warned that it'll hike security spending after Russia-tied political content reached nearly half of Americans. Tesla reported a big loss, burned $1.4 billion in cash, pushed back its Model 3 production path and will cut Model S and Model X output. Alibaba had stellar results. Fiber-optic and several cybersecurity stocks were hammered. Home Depot (HD) and homebuilders sold off Thursday as House Republicans included a measure to slash the mortgage interest deduction in their tax plan.


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Apple Tops Views; CEO 'Bullish' On Future

Apple sold more iPhones, iPads and Mac computers than expected in its fiscal fourth quarter. Apple earned $2.07 a share, up 24%, on sales of $52.6 billion, up 12%. Analysts expected $1.87 and $50.79 billion. China sales rose for the first time in seven quarters. For the December quarter, the typically conservative Apple guided revenue to slightly above the consensus. CEO Tim Cook said he is "bullish" on Apple's prospects and expects "the best holiday season yet" thanks to the iPhone 8 and iPhone X handsets, with the iPhone X going on sale Friday.

Shares jumped to a record high Friday, with Apple's market cap topping $900 billion.


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Facebook reported blowout earnings and snapped a four-quarter string of decelerating revenue growth. But the social media giant said it sees faster growth in expenses. Facebook committed to step up spending to improve security on its platform, following two days of congressional hearings about the role Facebook, Google (GOOGL) and Twitter (TWTR) played in Russia's misinformation campaign during the U.S. presidential campaign. Facebook shares fell 2% on Thursday and dipped again Friday morning, but remain in a buy zone.



China e-commerce leader Alibaba reported better-than-expected fiscal second-quarter results. Annual active consumers on Alibaba's retail marketplaces reached 488 million, up 22% from a year ago. It ended the quarter with 549 million mobile monthly active users, up 20 million from the previous quarter. But shares, which had run for several days to record highs heading into earnings, dipped following the report.

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Tesla Dives On Big Loss, Model 3 Delays

The third-quarter adjusted loss and cash burn were much worse than expected and Tesla revealed continued Model 3 rollout woes. Tesla now expects to hit a production rate of 5,000 Model 3 vehicles per week by late in the first quarter of 2018, pushing back plans by about four months. Tesla shares fell 6.8% on Thursday, hitting a six-month low.


Tesla Third-Quarter Results Show A Big Miss As Model 3 Woes Persist

Job Growth Strong, Less Than Expected

The U.S. economy added 261,000 jobs in October, less than expected, but there were notable upward revisions to their prior two months affected by hurricanes. The unemployment rate dipped to a new cycle-low of 4.1%. Average hourly wages were flat vs. September. Meanwhile, the ISM manufacturing index pulled back from a longtime high but still showed factory activity is expanding rapidly.


Jobless Rate Sinks To 4.1% But Wages Slip In October; Payrolls Up 261,000

Trump Names Powell To Run Fed

President Trump tapped Federal Reserve Gov. Jerome "Jay" Powell to succeed Janet Yellen as chair of the U.S. central bank when her term expires in February. Wall Street breathed a bit easier when it became clear that Powell would get the nod, because he is expected to follow Yellen's low-interest-rate path. Powell, a Republican and former investment banker who served in the George H.W. Bush Treasury Department, may be somewhat more amenable than Yellen to easing post-crisis bank regulations, a Trump priority. The Yellen-led Fed kept rates steady on Wednesday, but all signs point to a December hike.


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Drug News Stimulates, Depresses

Neurocrine Biosciences (NBIX), Exelixis (EXEL) and Juno Therapeutics (JUNO) rose after demolishing views, but Clovis Oncology (CLVS) dove as it widely missed. Incyte (INCY) reported better-than-expected metrics and an expanded cancer deal with AstraZeneca (AZN). But the Dow's Pfizer (PFE) and Allergan (AGN) were both soft on revenue and narrowed their full-year sales outlooks. Teva Pharmaceutical (TEVA) earnings missed and the drugmaker cut full-year forecasts citing challenges facing Copaxone and generic drugs, adding to industry concerns about pricing. On Tuesday, a sweeping antitrust lawsuit vs. generic drugmakers was expanded to include a total of 18 companies and the president of Mylan (MYL). Meanwhile, Bluebird Bio (BLUE) and Juno popped on preliminary data in, respectively, sickle cell disease and aggressive lymphoma.


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Shale Operators: Wildcatters Tamed?

Shale operators generally showed spending discipline in the third quarter as investors shift their focus from production growth to cash growth and spending within cash flow. But Pioneer Natural Resources (PXD) boosted its capital spending outlook. Concho Resources (CXO), Devon Energy (DVN) beat on the bottom line while Anadarko Petroleum (APC) missed. EOG Resources (EOG) beat quarterly estimates and announced two new oil plays that together could hold 750 million barrels of oil equivalent. U.S. crude futures traded at two-year highs.


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Activision, Nintendo Applauded, EA Booed

Activision Blizzard (ATVI) posted better-than-expected third-quarter sales and profit and raised its full-year guidance, thanks to games like "Destiny 2" and "Call of Duty: WWII." Nintendo (NTDOY) nearly doubled its profit outlook for the current fiscal year thanks to its Switch console and exclusive games like "Super Mario Odyssey." Nintendo now expects to ship 14 million Switch consoles in its financial year ending in March, up from its previous prediction of 10 million. EA (EA) stock fell after the publisher forecast lower-than-expected sales for the holiday quarter. Prospects for its "Star Wars Battlefront 2" game remain a big question mark for the December quarter.


Nintendo Nearly Doubles Profit Outlook As Switch Hits Home Run

Chip Stock Earnings A Mixed Bag

Broadcom (AVGO) delivered a positive surprise Thursday, announcing that revenue in its fiscal fourth quarter ended Oct. 29 would be at the higher end of its guidance range. Meanwhile, other chip companies got mixed reactions to their third-quarter results. Qualcomm (QCOM) earnings and sales fell but beat views. Qorvo (QRVO) dropped on disappointing December-quarter sales and earnings guidance. Cavium (CAVM) beat Wall Street's forecasts for sales and earnings in the September quarter, but its shares still fell. Cirrus Logic (CRUS) also reported better-than-expected results in the quarter, but its stock rose.

Telecom Deals On Hold?

The Department of Justice could sue to block AT&T (T) from buying Time Warner (TWX), said reports, but analysts said the leaks could reflect the DOJ trying to increase its leverage in negotiating conditions set on the deal. Conditions may involve access to Time Warner content based on an analysis of emerging internet video services and the pay TV market.

Sprint (S)-owner SoftBank reportedly walked away from merger talks involving T-Mobile US (TMUS) and its parent, Deutsche Telekom. Sprint's valuation and management control seemed to be the stumbling blocks. But by late in the week the talks were said to be back on.

Auto Sales

Ford Motor (F) grew new car sales 6% in October as consumer demand for utility vehicles and trucks continued to intensify. Its F-series trucks were especially brisk sellers. General Motors (GM) saw sales slide 2%, but did better than expected. Fiat Chrysler (FCAU) sales dropped 13%, worse than estimates, as it slashes low-margin fleet sales The annualized pace of U.S. auto sales last month was 18.09 million, according to Autodata. That was down from 18.6 million in September, which saw strong post-hurricane demand for replacement vehicles. Ferrari (RACE) topped earnings views and raised full-year guidance, but shares dropped below a buy point.


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Optical Stocks Crash

Oclaro (OCLR) plunged on its December-quarter guidance, sending down shares in other optical device suppliers including Finisar (FNSR), Lumentum Holding (LITE) and NeoPhotonics (NPTN). Weak demand from China's telecom gear makers has pressured fiber-optic stocks throughout 2017 but a new worry involves the data center market. Internet companies are shifting purchases to new types of optical devices as inventory builds for slower parts. Lumentum fell despite expectations that Apple (AAPL) will order more 3D sensors for the iPhone X. Acacia (ACIA) also gave December quarter guidance well below estimates.

Cybersecurity Stocks

Earnings from computer security software makers were mixed. Shares in Qualys (QLYS) and CyberArk Software (CYBR) jumped after they reported September quarter results while investors hammered Check Point Software Technologies (CHKP), Symantec (SYMC) and FireEye (FEYE). Analysts say the shift to cloud computing services is roiling the security market while startups may be taking share from incumbents.

Casino operators Las Vegas Sands (LVS), Melco Resorts and Entertainment (MLCO), Wynn Resorts (WYNN) and MGM Resorts International (MGM) got a lift on another month of gross gaming revenue increases in Macau, as well as positive data in Nevada and news of a gambling expansion in Pennsylvania. But shares of Melco plunged Thursday despite topping Q3 earnings and sales forecasts.

Health Insurers

Aetna (AET), the object of acquisition talks by CVS Health (CVS), grabbed center-stage and easily beat earnings expectations amid soft top-line results, but WellCare Health Plans (WCG) stole the show, leaping into a buy zone and earning the No. 1 rank among IBD's Medical-Managed Care industry group, based on earnings, revenue, margins and stock performance trends.

WellCare earnings surged 150% to $4.08, helped by strength in Medicaid and a Medicare-focused acquisition. Aetna, which highlighted Medicare as its primary growth driver, reported an 18% increase in EPS to $2.45, as revenue fell 5% to $14.99 billion. Molina Health (MOH), a Medicaid and ObamaCare exchange insurer, reported better-than-expected earnings, sending its shares soaring Friday. Aetna continued to pull back following the prior week's spike on CVS buzz. WellCare rocketed to record highs.

Aetna Tops Earnings Views, Mum On CVS; WellCare Health Soars

News In Brief

Shopify (SHOP) reported its first-ever adjusted profit beating views but shares in the e-commerce software maker fell in high-volume trading after one analyst called Shopify "a battleground stock," because of criticism from short-seller Citron Research.

Paycom Software (PAYC) reported earnings that topped expectations, but light revenue guidance sent down shares in maker of human resources and payroll-processing software.

Constellation Brands (STZ), a beer, wine and spirit producer, said it would take a 9.9% stake in Canadian medical cannabis provider Canopy Growth, a move intended to keep apace of "early stage consumer trends" amid concerns about legalization's impact on booze sales. Molson Coors (TAP) said it's keeping an eye on the marijuana market.

CME Group (CME), the massive derivatives marketplace, said it planned to launch bitcoin futures in Q4, marking a big step in the financial world's acceptance of the still-volatile cryptocurrency. Bitcoin soared to new highs.

Mastercard (MA) beat third-quarter earnings and revenue expectations, but raised this year's operating expense forecast largely due to spending related to investments in its Masterpass digital wallet.

Under Armour (UAA) cut full-year targets to 18-20 cents EPS, well below views for 37 cents, after turning in mixed results for the quarter. Shares crumbled 24% on Tuesday to multiyear lows.

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