DAILY MARKET REPORTS
- U.S. stocks plunged on Friday as grim earnings reports from Amazon and Alphabet rekindled a rush to dump technology and high-growth stocks, but data showing economic growth in the last quarter slowed less than expected provided some relief.
- The Nasdaq dropped nearly 3%, sharply cutting its gains for the year and moving deeper into correction territory, while the blue-chip Dow shed 2% and the benchmark S&P fell 2.5%, putting under threat their slim gains for the year.
- Amazon tumbled 7.1% after it not just missed quarterly sales estimates, but also gave a below-par holiday-season sales forecast.
- Google-parent Alphabet sank 3.3% after its revenue missed estimates, fanning concerns that investments in new businesses, rising regulatory scrutiny and competition are producing slow returns.
- That triggered a sell-off in other members of the so-called FAANG group.
- On the brighter side was data that showed gross domestic product increased at a 3.5% annualized rate in the third quarter as a tariff-related drop in soybean exports was partly offset by the strongest consumer spending in nearly four years and a surge in inventory investment.
- Consumer spending, which accounts for more than two-thirds of economic activity, surged by 4% in the third quarter, the fastest pace since the fourth quarter of 2014.
- Through Thursday’s close, the Dow and S&P 500 were down 5.6% and 7.2% for October, respectively.
- The Nasdaq, meanwhile, had lost 9.1%.
US FINANCIAL MARKET
- Amazon.com forecast holiday season sales that disappointed Wall Street, attributing what would be its lowest growth in years more to accounting issues than to any slowdown in business for the world’s largest online retailer.
- Total revenue increased 29% from last year to $56.6 billion versus expectations of $57.1 billion.
- Revenue from Amazon Web Services (AWS) surged 45.7% to $6.68 billion, narrowly edging past estimates of $6.67 billion.
- Amazon’s “other” category, mostly comprised of its burgeoning advertising business, jumped 123% to $2.5 billion in revenue.
- Net income rose to $2.88 billion, from $256 million a year earlier and well ahead of estimates.
- The company gave fourth-quarter revenue guidance of $66.5 billion to $72.5 billion, below consensus of $73.79 billion.
- Brian Olsavsky, Amazon’s CFO, said no fundamentals had changed, just some holiday timing and accounting differences.
- The company moved the recording of $300 million in subscription revenue from the fourth quarter to earlier periods in the year.
- In addition, Amazon faces a tougher year-over-year comparison because the Whole Foods deal closed in the third quarter of 2017, and the different timing of the holiday Diwali affected sales patterns, he said.
Alphabet’s misses Wall Street revenue estimates, shares fall
- Google parent Alphabet on Thursday reported slower third-quarter revenue growth than analysts had expected, with ad sales barely topping estimates and other revenue missing forecasts, sending shares down more than 4% after hours.
- Revenue rose to $33.74 billion, but that missed analysts’ average estimate of $34.05 billion.
- Third quarter ad revenue was about $29 billion, up 20.3% from a year ago and above the average estimate of $28.762 billion.
- Its cost of revenue was $14.3 billion, up 28% from a year ago, though below the average analyst estimate of $14.5 billion.
- Alphabet reported a net profit of $9.19 billion, compared with $6.73 billion in the year-ago quarter.
Intel bucks chip industry woes; powered by PCs, iPhones
- Intel beat estimates for profit and revenue, driven by its high-margin data center business and strong demand for its PC chips, sending its shares up in extended trading, though those gains later evaporated on concerns about U.S. trade tensions with China.
- Net revenue rose 18.7% to $19.16 billion. Analysts on average were expecting revenue of $18.11 billion.
- Revenue from its data center business rose 25.9% to $6.14 billion in the quarter, while analysts were expecting $5.89 billion.
- Net income rose to $6.40 billion in the third quarter, from $4.52 billion a year earlier.
- Intel forecast current-quarter revenue of $19 billion and adjusted earnings of $1.22 per share, compared to expectations $18.40 billion in revenue and a profit of $1.09 per share
Charter signs up more internet subscribers than expected
- Charter Communications said it added more internet subscribers than Wall Street analysts had projected for the third quarter, making up for a decline in video subscribers that was less severe than expected.
- Total revenue rose 4.1% to $10.89 billion from $10.46 billion a year ago, but below expectations of $10.94 billion.
- The company added 266,000 residential internet customers in the third quarter, above the consensus estimate of 234,000.
- Charter reported a loss of 66,000 residential video customers in the quarter, well below the 104,000 it lost last year. Analysts had forecast a loss of 85,000 video subscribers.
- Net income was $493 million in the quarter, compared with $48 million a year earlier.
Granite Construction Earnings Beat Estimates
- Granite Construction increased revenue 10.3% to $1.06 billion from $957 million in the same period of 2017, but below expectations of $1.14 billion.
- Granite’s gross margin increased 170 basis points to 11.6%, primarily due to price increases.
- The company posted net income of $55.7 million, a 21.1% increase over last year’s $46.0 million, above consensus estimates on an adjusted per share basis.
Gilead 3rd quarter profit falls as hepatitis C drug sales wane
- Third quarter sales of Gilead Science’s flagship hepatitis C drugs fell by more than half as competition increased, sending net profit down 22% from a year earlier.
- Gilead said revenue totaled $5.6 billion, down 14% from the same 2017 quarter.
- Quarterly sales of hepatitis C drugs totaled $902 million, down from $2.2 billion a year earlier.
- Sales of antiviral and HIV drugs rose to $3.7 billion from $3.3 billion.
- Gilead’s third-quarter net income fell to $2.1 billion, from $2.7 billion a year earlier.
Chipotle tops profit estimates as turnaround takes shape
- Chipotle Mexican Grill topped Wall Street profit estimates on Thursday, as newer menu items and a marketing blitz helped the burrito chain recover from a series of food-safety lapses that had kept diners away.
- Revenue rose nearly 9% to $1.23 billion, matching expectations.
- Sales at restaurants open at least 13 months rose 4.4% in the quarter, helped by price hikes, but fell short of expectations of a 5.02% increase
- Net income roughly doubled year-over-year to $38.2 million, while restaurant-level operating margin climbed to 18.7% from 16.1%, as Chipotle kept expenses in check.
Expedia beats profit estimates on HomeAway, travel bookings growth
- Expedia saw major growth in its vacation rental business HomeAway and higher travel bookings in the third quarter, helping it to beat profit estimates.
- Revenue climbed 10.5% to $3.28 billion, missing estimates of $3.30 billion.
- Expedia said customers spent 24% more on HomeAway bookings and that the business, which competes with Airbnb, is headed for strong revenue and profit growth this year.
- The value of bookings on its platforms rose 11% during the third quarter.
- Net income rose to $525 million, from $352 million a year earlier.
Snap expects to lose more users, shares plunge
- Snap lost more users than Wall Street expected in the third quarter as it continued to grapple with an unpopular redesign of its Snapchat photo-messaging app and fierce competition from Facebook’s Instagram.
- Snap’s overall revenue jumped about 43% to $297.7 million, topping Street expectations of $283.2 million.
- Average revenue per user increased to $1.60, from $1.17 a year earlier, helped by growth outside North America.
- The number of daily active users on Snapchat fell to 186 million in the quarter, from 188 million three months earlier.
- Net loss narrowed to $325.1 million, from $443.2 million a year earlier, coming in better than expected.
Mattel reports surprise rise in North America sales, shares jump
- Mattel reported a surprise rise in North American sales, allaying concerns about the effects of retailer Toys ‘R’ Us’ liquidation on the toy industry and driving its shares up 8% on Thursday.
- Overall sales fell 8% to $1.44 billion, below the $1.49 billion expected by analysts.
- Gross sales from North America rose 5.6% in the quarter, marking the first increase in at least six quarters and significantly better than the estimated 13% drop in sales.
- Mattel reported a third-quarter net income of $6.3 million, compared with a loss of $603.3 million a year earlier, when the company had higher tax expenses.
US ECONOMY & POLITIC
U.S. GDP Grows Above-Forecast 3.5% on Consumers, Inventories
- The U.S. economy expanded at a 3.5% pace in the third quarter as consumers opened their wallets, businesses restocked inventories and governments boosted spending, marking the strongest back-to-back quarters of growth since 2014.
- The annualized rate of gains in gross domestic product compared with the 3.3% median estimate in a Bloomberg survey and followed a 4.2% advance in the prior three months, according to Friday’s report from the Commerce Department.
- Consumer spending, which accounts for about 70% of the economy, unexpectedly accelerated to a 4% increase — the best since 2014 – and contributed 2.69 percentage points to growth.
- The 0.8% gain in nonresidential business investment was the weakest in almost two years.
- In two volatile categories, inventories provided the biggest contribution since early 2015, while the drag from trade was the largest in 33 years.
- Government spending rose by 3.3% amid a 4.6% gain in defense spending, both the most since 2016.
Trump adviser warns more sanctions against Russia could be coming
- The United States will do what it deems necessary, including considering more sanctions, to address Russia’s interference in its elections and its annexation of Ukraine’s Crimea, U.S. National Security Advisor John Bolton said on Friday.
- When asked about the possible U.S. plans to impose sanctions on holders of Russian sovereign debt, Bolton said he was not aware of “any kind of sanctioning on the sovereign debt issue.
EUROPE & WORLD
(Esha Vaish and Bhargav Acharya)
- Geely-owned Swedish carmaker Volvo Cars, which postponed plans for a listing this year, said on Friday third-quarter operating income slumped nearly 50% due to product launch costs and higher tariffs.
- The carmaker’s revenue rose 18% to 56.78 billion Swedish crowns, helped by strong sales momentum in all three regions.
- Operating income fell to 1.84 billion crowns ($201.5 million) in the quarter, from 3.67 billion crowns a year earlier.
- However, the company expects continued growth in revenue and retail sales in 2018, supported by its renewed product portfolio and lower capital expenditure.
Energy group Total raises production target as third-quarter profits soar
- French oil and gas major Total raised its production growth target for 2018 after a new record output and high oil prices during the third quarter enabled it to report its highest net income in a quarter since 2012.
- Total’s production rose 8.6% to 2.8 million barrels of oil equivalent per day (Mboe/d), a new record output in a quarter
- Total’s third-quarter adjusted net income increased by 48% from last year to $4 billion, while oil prices increased 44% to $75 per barrel supported by supply tensions and the geopolitical context.
- The net income figure was above an average analyst forecast of $3.75 billion.
Canada’s U.S. envoy says tariffs dispute will be settled soon
- Canada’s ambassador to Washington on Friday struck an optimistic tone over a dispute with the United States over steel and aluminum tariffs, saying he thought both sides would resolve their differences “sooner rather than later.”
- David MacNaughton made his remarks to a business audience in the Ontario town of Niagara-on-the-Lake. Canadian officials said earlier in the month they were downbeat about the chances of a quick solution.
- MacNaughton said it was clear the tariffs had been a tool to exert pressure during talks to update a continental trade deal, which concluded last month.
TODAY in HISTORY
- The First Continental Congress adjourned in Philadelphia. (1774)
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