After the first World Series win for the Cubs in 71 years last night, attention turns today to earnings from two of the biggest
tech firms: Amazon.com, Inc. (NASDAQ: AMZN)
and Alphabet Inc (NASDAQ: GOOG) (NASDAQ:
GOOGL). Other sluggers stepping up to the plate include
Twitter Inc (NYSE: TWTR) and Ford
Motor Company (NYSE: F) on one of the key earnings days
of the quarter.
Stocks came into Thursday with a bit of momentum, having clawed their way back from early losses the day before. Weak oil had
weighed on the market Wednesday, overwhelming the earnings picture to some extent. But the oil market was a little stronger early
Thursday, holding above $49 a barrel after U.S. inventories posted a surprise decline. Meanwhile, volatility reared its head
Wednesday, rising 6%, but fell a bit early Thursday, as tracked by CBOE VIX futures. It wouldn’t be surprising to see a higher VIX
between now and election day.
In earnings action this morning, TWTR beat earnings per share estimates for the eighth-straight quarter and saying it plans to
slash its workforce 9%. Shares climbed in futures trading before the bell.
In other earnings news, Tesla Motors Inc (NASDAQ: TSLA) shares rallied this morning after the company reported a quarterly profit for
the second time ever and said it expects to deliver 50,000 new vehicles in the second half of 2016. It also expects another profit
in Q4. Though TSLA may grab headlines as the new kid on the automotive block, old timer Ford also reported early Thursday, but the
results arguably weren’t as headline worthy, and could actually be considered quite disappointing. The company beat analysts’
estimates for earnings per share, but earnings fell nearly 55% from a year ago, in part due to a recall. Revenue slid across most
of the world, and North American pre-tax profit fell 57%.
And that’s not all on this huge earnings day, as we also hear from Bristol-Meyers Squibb Co (NYSE: BMY), Colgate-Palmolive Company (NYSE: CL), LinkedIn Corp (NYSE: LNKD), and United Parcel Service, Inc. (NYSE: UPS).
On the Fed watch, chances for a December rate hike seem to be getting baked in. The odds reached 72% early Thursday, according
to CME Group futures.
Is the “EPS Recession” Over? Going into earnings, there was widespread belief that Q3 would mark the
fifth-consecutive quarter of weaker earnings year over year. But now that’s changing. Specifically, Q3 earnings per share results
are projected to increase 0.6% year over year, up from the initial estimate of a 1% drop, S&P Global said in a research report
Wednesday. All sectors except energy, telecommunication services, and industrials are now expected to post improved year-over-year
earnings, S&P Global predicted, led by 13% earnings growth in financials and 7.6% growth in materials. Looking ahead, the
research firm sees Q4 earnings growing 6% year-over-year, led by materials, utilities, and financials.
Amazon and Alphabet After the Close: There’s optimism going into this afternoon’s earnings reports from GOOG
and AMZN, with Wall Street analysts’ consensus estimate for GOOG earnings per share at $8.60, up from $7.35 a year ago; and the
consensus for AMZN at 82 cents a share, up from 17 cents a share a year ago, according to Briefing.com. Investors may want to
carefully watch for guidance from both companies. Metrics worth focusing on at GOOG include revenue growth, as well as progress in
its cloud business. The story at AMZN is a little less focused on retail and more on cloud computing, part of the company’s Amazon
Web Services (AWS) division. Revenue in AWS rose 58% year over year in Q2, so we’ll see if it can keep up that frenetic pace. But
that doesn’t mean not to watch online retail, especially to see what AMZN executives have to say about the coming holiday
market.
The Pattern is There’s No Pattern: It’s getting difficult to find a pattern in this market pointing either up
or down. Since mid- September, there’s been no stretch of more than two consecutive sessions in either direction for the S&P
500 (SPX). The last time the SPX had a three-day stretch in one direction or another was in mid-September, when it fell three days
in a row. The last time the SPX posted a hat trick, rising three sessions in a row, was in early September. Trading can often be
choppy in the weeks prior to a presidential election, so perhaps that’s what we’re seeing. VIX rose 6% to above 14 on Wednesday but
fell below 14 early Thursday.
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