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April 26th, 2019

Twitter Rallies, Boeing Disappoints

By PRATTE

 

 

 

Blogue 10 fev EN
It was one of the most important weeks of earning season and investors closely monitored the turnover of large US companies. Twitter posted a strong performance in the final quarter, beating expectations, while Facebook and Microsoft boosted the NASDAQ on Thursday after strong quarterly results. Here is what happened in the markets this week.

Market Brief

Difficult return Monday for the markets that closed the day without direction after the long weekend of Easter. The Dow finished down 0.18% to end the day at 26,511.05 points, the NASDAQ index gained 0.22% to close at 8015.27 points and the S&P 500 index dropped 0.1% to close at 2907.97 points. The energy sector performed well, led by shares of Chevron (+ 1.65%) and ExxonMobil (+ 2.19%), who benefited from higher oil prices. Investors were also preparing to face one of the busiest weeks of earnings season.

Tuesday was an exceptional day for the stock markets as the three indexes reached new session highs. The S&P 500 ended the day up 0.88%, with gains of 17% since the beginning of the year and nearly 25% since December 24th. The NASDAQ gained 1.32%, up 22% year-to-date and 31% since December 24th. “We are a little more advanced in the season of results and we were dealing today with big names” as the giant drinks Coca-Cola (+ 1.7%), the industrial conglomerate United Technology (+2.3%) or Lockheed Martin (+5.7%), a specialist in defence aircraft, noted Kate Warne, strategist for the investment company Edward Jones.

On Wednesday, markets opened lower after reaching new highs the day before. The Dow was down 0.14%, the NASDAQ lost 0.14% and the S&P 500 shed 0.13%. Analysts were eagerly awaiting the release of quarterly results from Microsoft and Facebook at the close of markets. On Thursday, the three main indexes started the day disorganized. The Dow slid 250 points, pulled down by declining quarterly results from 3M, while its stock plunged 10%. The S&P 500 also opened lower while the NASDAQ, helped by good quarterly results from Facebook (+ 8%) and Microsoft (+ 4%), gained 0.3% at the open. On Friday, the three major indexes retreated at the open as investors were digesting the latest corporate earnings.

After hitting a record high last week, the TSX index fell 35.53 points on Monday to end the session with 16,577.28 points, despite rising oil prices. However, the energy sector continued its strong performance on Tuesday, allowing the Toronto index to close the day up 92 points, reaching its highest peak. “The profits exceed expectations, so I think it creates a bit of confidence. That’s part of the story,” said Dominique Barker, Portfolio Manager at CIBC Asset Management. The downward revision of the Bank of Canada’s economic forecast on Wednesday pushed the TSX down, closing the day down 82.88 points. The Toronto index continued its downtrend Thursday at the open, prompted by Bombardier’s announcement of a reduction in its financial guidance for 2019. The downtrend continued at the open on Friday, attributable to energy stocks.

Twitter

The company released strong earnings on Tuesday, recording an increase of 11.6% in the number of its daily monetizable users (mDAU) of 134 million, compared with 120 million last year in the same period. Twitter has reported a turnover of $787 million, above analysts’ expectations of $775 million. The company also unveiled profits at $191 million compared to $61 million last year at the same time.

The social network continues to fight against false accounts and abuses. “We have taken a more proactive approach to reducing abuse,” said group CEO Jack Dorsey, who said in a conference call that it was the company’s “priority.” The stock jumped 15.6% Tuesday after the news and is up about 40% since the beginning of the year.

Boeing

Boeing unveiled disappointing results on Wednesday. The company saw a 13.2% decline in profits in the first quarter and a 21% drop in profits. The company also announced a pause in its share buybacks and cancelled its financial forecasts for the year 2019. The company intends instead to focus on the problems related to its 737 Max aircraft, whose software is suspected in two crashes that killed more than 340 people.

“The previous financial forecasts for 2019 do not reflect the impact of the 737 MAX,” says the aircraft manufacturer. “Due to the uncertainty about the timing and conditions surrounding the return of the 737 Max fleet, new forecasts will be given at a later date,” he added. The stock was up 1% early in the session Wednesday to finally close -0.64%.

Facebook

Even though the company has been affected by many controversies, it still published strong earnings, even adding new users. Facebook has earned $2.43 billion in net profit but said it has deposited in its accounts $3 billion in anticipation of a likely fine from the Federal Trade Regulatory Agency.

Facebook has announced a turnover of 15.1 billion, an increase of 26%, above the expectations of analysts. Its number of active monthly users has increased by 8%, numbers that show a downward growth that should continue. Indeed, in the same quarter last year, its turnover had increased by 49% while its number of monthly users was up 13%. Following the unveiling of its results, the stock rallied 7.6% Wednesday around 11 p.m. to finally close up 5.98% Thursday.

Microsoft

The company posted better than expected earnings, helped by sales of its Azure cloud storage service and an increased subscription to its Office software suite. Azure’s revenue jumped 73% and the company on Thursday managed to surpass the $1 trillion mark on Wall Street, becoming the third company to reach this symbolic cap after Amazon and Apple. Microsoft saw its turnover climb by 14% thus boosting its stock by 4% Thursday. Its stock is up 34% since last year.

Pratte Portfolio Management is a firm registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
Intended to provide general information about markets and securities and not to meet your specific needs, this report is the result of the author’s only work. The opinions (including any recommendations, if any) expressed in this report are those of the author only and do not necessarily represent those of Pratte Portfolio Management and do not constitute securities investment advisory activities designed to meet your specific needs.
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