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Thursday February 20, 2020



Alphabet's Shares Fall on Weak Earnings

Alphabet Inc. (GOOGL) released its latest quarterly earnings on Monday, April 29. The tech titan reported revenue that fell short of expectations.

The company reported revenue of $36.34 billion, up from $31.15 billion during the same quarter last year. This missed analysts' expected revenue of $37.33 billion.

"We delivered robust growth led by mobile search, YouTube and Cloud with Alphabet revenues of $36.4 billion, up 17% versus last year, or 19% on a constant currency basis," said Alphabet CFO Ruth Porat. "We remain focused on, and excited by, the significant growth opportunities across our businesses."

Alphabet posted net income of $6.66 billion, or $9.50 per share for the quarter. This was down from $9.40 billion, or $13.53 per share during the same time last year.

The parent company of Google saw shares drop 7% following the earnings release. Advertising revenue from Google came in at $30.72 billion for the quarter. This was up 15% from the prior year's quarter but was lower than analysts expected. The company attributed the slower revenue growth to changes made to its YouTube video platform. YouTube's algorithms were updated in early 2018 in an effort to improve the quality of its content.

Alphabet Inc. (GOOGL) shares ended the week at $1,189.55, down 7.1% for the week.

Apple Releases Earnings Report

Apple, Inc. (AAPL) reported quarterly earnings on Tuesday, April 30. The company's stock rose 5% following the earnings report's release.

Revenue for the quarter came in at $58.02 billion. This was down from $61.14 billion during the same quarter last year.

"Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for Services, and the strong momentum of our Wearables, Home and Accessories category, which set a new March quarter record," said Apple CEO Tim Cook. "We delivered our strongest iPad growth in six years, and we are as excited as ever about our pipeline of innovative hardware, software and services."

Apple's quarterly net income was $11.56 billion. This was down from $13.82 billion in net income at this time last year.

While the company reported a decrease in iPhone sales from $37.56 billion last year to $31.05 billion for the most recent quarter, Apple's Services segment increased sales from $9.85 billion to $11.45 billion. The company's Services segment includes subscription services, such as iCloud and Apple Music as well as the App Store, AppleCare and Apple Music.

Apple, Inc. (AAPL) shares ended the week at $211.75, up 3.6% for the week.

GE's Earnings Beat Expectations

General Electric Company (GE) reported quarterly earnings on Tuesday, April 30. The company's quarterly revenue beat Wall Street's expectations.

GE posted revenue of $27.29 billion for the quarter, down 2% from $27.79 billion during the same quarter last year. Analysts expected quarterly revenue of $27 billion.

"We saw progress in the first quarter as we continued to execute on our priorities to improve our financial position and strengthen our businesses," said GE Chairman and CEO H. Lawrence Culp, Jr. "We announced the sale of BioPharma, closed the Wabtec merger, settled WMC and improved our operating performance. We delivered strong industrial orders in the quarter, up 9% organically, with backlog closing at $374 billion, up 6% year over year."

GE reported net earnings of $3.65 billion for the quarter. This was an improvement over a net loss of $1.11 billion at this time last year.

The company's shares surged 4.5% after the earnings release. GE's Aviation segment led the way with 12% revenue growth to $7.95 billion for the quarter. Oil & Gas followed with a 4% increase. GE's Power segment saw a 22% drop in revenue to $5.66 billion. This was due in part to a 14% decrease in orders.

General Electric Company (GE) shares ended the week at $10.49, up 9.6% for the week.

The Dow started the week at 26,560 and closed at 26,505 on 4/26. The S&P 500 started the week at 2,941 and closed at 2,946. The NASDAQ started the week at 8,148 and closed at 8,164.

Treasury Yields React to Strong Jobs Report

Yields on U.S. Treasurys dipped slightly on Friday following the release of the latest jobs report. Strong job growth paired with the Fed's statement on inflation to keep yields relatively steady.

On Friday, the Department of Labor released the jobs report for April, showing 263,000 jobs added. This beat analysts' expected increase of 185,000 jobs for April. Unemployment dropped to 3.6%. This is the lowest unemployment rate since 1969.

"Even as some gauges of the strength of the economy have disappointed, job market conditions remain a very bright spot," said Jim Baird of Plante Moran Financial. "Job creation remains solid, and should provide continued support for consumer spending sufficient to keep the economy on a solid growth path."

During early trading on Friday, the yield on the benchmark 10-year Treasury note was at 2.519% after closing at 2.543% on Thursday. The yield on the 30-year Treasury bond was at 2.922% during trading, down from Thursday's closing yield of 2.932%.

On Wednesday, the Federal Reserve announced that the federal funds rate would remain at a range of 2.25% to 2.50%, in line with expectations. Fed Chairman Jerome Powell noted that inflation is running below the target range, but indicated that he is confident this is a temporary issue.

"We think our policy stance is appropriate at the moment and we don't see a strong case for moving in either direction," said Powell. "We say in our statement of longer-run goals and monetary policy strategy that the Committee would be concerned if inflation were running persistently above or below 2%."

The 10-year Treasury note yield closed at 2.53%, while the 30-year Treasury bond yield was 2.93%.

Mortgage Rates Fall

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, May 2. Rates dropped this week following several weeks of increases.

This week, the 30-year fixed rate mortgage averaged 4.14%, down from last week's average of 4.20%. At this time last year, the 30-year fixed rate mortgage averaged 4.55%.

The 15-year fixed rate mortgage averaged 3.60% this week, down from 3.64% last week. During the same period last year, the 15-year fixed rate mortgage averaged 4.03%.

"Slightly weaker inflation and labor economic data caused mortgage rates to dip this week," said Sam Khater, Chief Economist at Freddie Mac. "Moving into summer, we expect rates to be about a quarter to half a percentage point lower than where they were last year, which is good news for the housing market. These lower rates combined with solid economic growth, low inflation and rebounding consumer confidence should provide a solid foundation for home sales to continue to improve over the next couple of months."

Based on published national averages, the money market account closed at 1.28% on 5/3. The one-year CD finished at 2.66%.

Published May 3, 2019
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