The S&P 500 Index, Dow Jones Industrial Average, and S&P MidCap 400 Index all moved to record highs, seemingly helped by a series of positive earnings surprises. Further reflecting the strong investor sentiment, the Cboe Volatility Index (VIX) also fell to its lowest level since the beginning of the pandemic. Along with real estate and utilities stocks, health care shares led the gains within the S&P 500, boosted by insurance providers. Communication services shares were strong through much of the week, but social media stocks dropped sharply on Friday following downward guidance from Snapchat parent Snap, which the company blamed on new privacy settings on Apple’s iPhones. Energy shares also underperformed following strong recent gains.
Top Sectors last week:
- Real estate Sector (ETF: XLRE) up 3.23%
- Health Care Sector (ETF: XLV) up 2.89%
- Financial Sector (ETF: XLF) up 2.01%
Interesting News:
- Slowing Ad-revenue: It was a nasty day for shares of online advertising-exposed companies in particular, following Snap's slower-than-expected revenue growth and disappointing guidance last week. The Snapchat-parent blamed the weakness on recent changes by Apple that make it more difficult to track iPhone users’ activity across apps and websites. That was taking a larger bite out of advertising revenue than it had expected. As a result, Snap stock has tumbled 26% on that day, while other online advertisers got hit too. Google-parent Alphabet slid 3%, Facebook dropped 5.1%, Twitter fell 4.8%, and Pinterest slumped 5.4%. There is one company whose ad business is booming, and its name is...you might want to sit down for this...Apple. As it undercut its rivals’ visibility with its privacy update, Apple has become a major player in advertising, more than tripling its market share since it introduced the feature six months ago. Apple’s ad business will earn $5 billion this year and $20 billion per year within three years, according to estimates from Evercore ISI.
- Tesla Record revenue: The EV maker posted record revenue and profit in Q3 as it scaled up despite some problems along the supply chain. Despite the issues the firm still reiterated prior guidance of "achieving 50% average annual growth in vehicle deliveries" over a multi-year horizon. The company racked up $1.6B in GAAP net income ($2.1B in non-GAAP net income), while producing 237,823 vehicles in Q3 (+64% Y/Y) and delivering 241,391 (+73%). On the operations side, Tesla said its buildout for the Berlin-Brandenburg Gigafactory remains on schedule with testing of equipment well underway. It expects to receive final permit approval by the end of this year and continues to target the first Model Y production there and in Austin before 2021 comes to a close. Tesla also notched $806M in revenue from its energy business (solar deployments of 83MW were up 46%).
- TRUTH Social: Some predicted the move since he left office, but former President Donald Trump is finally launching his own media network. The new business, called Trump Media & Technology Group (TMTG), will include a social media platform called "TRUTH Social," as well as a subscription video-on-demand service (TMTG+) that features "non-woke" entertainment programming, news and podcasts. The company will go public via a SPAC merger with Miami-based Digital World Acquisition (DWAC), which is up more than 800% to $94.20/share as of market close on Friday.
Calendar:
Big tech companies Apple (AAPL), Amazon (AMZN), Facebook (FB), Alphabet (GOOG) and Microsoft (MSFT) dominate a huge week of earnings with over 25% of the S&P 500 constituents due to step into the earnings confessional. The headliner economic reports due in are updates on durable good orders, consumer confidence and new home sales.
Earnings:
Monday, October 25: Kimberly-Clark (KMB), Facebook (FB) and Universal Health (UHS).
Tuesday, October 26: UPS (UPS), General Electric (GE), Lockheed Martin (LMT), Alphabet (GOOG), Microsoft (MSFT), Twitter (TWTR), F5 Networks (FFIV), Hasbro (HAS), Visa (V), Robinhood Markets (HOOD) and AMD (AMD).
Wednesday, October 27: Boeing (BA), Coca-Cola (KO), Kraft-Heinz (KHC), McDonald's (MCD), eBay (EBAY), Ford (F) and General Motors (GM).
Thursday, October 28: Anheuser-Busch InBev (BUD), Caterpillar (CAT), Merck (MRK), MasterCard (MA), Apple (AAPL), Atlassian (TEAM), Amazon (AMZN), Altria Group (MO), Hershey (HSY), Comcast (CMCSA), Keurig Dr Pepper (KDP) and Starbucks (SBUX).
Friday, October 29: Exxon Mobil (XOM), AbbVie (ABBV), Church & Dwight (CHD), Chevron (CVX), Colgate-Palmolive (CL) and L3Harris Technologies (LHX).
IPO watch:
A busy week is setting up in the IPO market with Informatica (INFA), Rent the Runway (RENT), Arteris (AIP), GlobalFoundries (GFS) (see full preview below), Fluence Energy (FLNC), Ensemble Health Partners (NASDAQ:ENSB) and Candela Medical (CDLA) all expected to debut.
GlobalFoundries IPO preview:
GlobalFoundries (GFS) goes public next week as the silicon wafer supplier hits the market right in the middle of a global semiconductor shortage. GlobalFoundries expects to raise up to $1.55B in an offering of 55M shares, of which 33M are from the company and 22M shares are from owner Mubadala Investment Co. The IPO is expected to be priced in a range of $42 to $47 per share to value GlobalFoundries as high as $25B. The company was spun off by AMD (AMD) in 2009 and competes with Intel (NASDAQ:INTC) and Taiwan Semiconductor Manufacturing Co. (TSM). Top customers include Qualcomm (QCOM), MediaTek and NXP Semiconductors N.V. (NXPI).
For more watch video in GEO
