The S&P 500 index, Dow Jones industrial average and Nasdaq tumbled during the week as Alphabet (GOOGL), Caterpillar (CAT) and 3M (MMM) earnings and a 3% Treasury yield spooked investors. The stock market averages pared losses amid strong earnings from Amazon (AMZN), Facebook (FB), Boeing (BA), Visa (V) and others.
Stocks Fall As Treasury Yield Hits 3%
The S&P 500 index, Dow Jones and Nasdaq found support near their 200-day moving averages, rebounding to close the week with fractional losses. The 10-year Treasury hit 3% for the first time in four years, hitting 3.02% during the week before pulling back to 2.96%. Short-term yields continued to rise faster than long-term rates, squeezing the yield spread. Alphabet (GOOGL) expenses and ongoing chip weakness also hit stocks. But Amazon (AMZN), Facebook (FB), Boeing (BA) and Visa (V) rallied on strong results. Intel (INTC) and Microsoft (MSFT) initially hit buy points Friday, but pulled back.
Amazon Growth Booms
Amazon’s first-quarter earnings skyrocketed, more doubling the EPS estimate. Revenue rose 43% to $51 billion, the fifth straight quarter of accelerating sales growth. Revenue from Amazon Web Services rose 49% to $5.4 billion. AWS accounts for most of Amazon’s overall operating profit. Amazon shares shot up to a record high Friday, paring gains for a 3.6% advance. EBay (EBAY) stock dropped after it reported Q1 results that fell short of consensus estimates, ending the quarter with 171 million global active buyers, up 4%.
Facebook Rocks, Twitter Retreats
Facebook (FB) stock surged after posting first-quarter results that blew past expectations, dashing fears of an exodus of users and advertisers from the social media giant. Twitter (TWTR) reported strong earnings and guidance, but shares fell after its CEO made cautious comments about slowing growth.
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Boeing, United Tech Top, Raise Guidance
Boeing (BA) easily beat Q1 forecasts and raised its full year guidance. The aerospace giant said an aircraft completion center in China is nearly finished and it downplayed U.S.-China trade war fears. Fellow Dow Jones stock United Technologies (UTX) reported stronger-than-expected Q1 earnings and sales. The industrial giant also raised its full-year adjusted EPS and sales forecast.
Lockheed Beats, But Holds Cash Target Flat
Lockheed Martin (LMT) topped first-quarter estimates and the defense contractor raised EPS and revenue targets. But the F-35 maker didn’t raise its cash-flow expectation. Northrop Grumman (NOC) also reported Q1 earnings above estimates, but Northrop said it didn’t submit a bid for the Air Force’s GPS III contract, leaving Lockheed as the likely lone bidder. Raytheon (RTN) raised its full-year earnings forecast above consensus as its Q1 earnings and revenue topped estimates. General Dynamics (GD) beat on earnings and met revenue views. Shares of all four defense contractors sold off sharply for the week.
Microsoft Tops Views On Cloud Strength
The software kingpin earned 95 cents a share, up 36% year over year, on sales of $26.8 billion, up 16%, in its fiscal third quarter. Analysts expected 85 cents and $25.71 billion. Microsoft (MSFT) has been shifting its business from desktop PC software to cloud-computing infrastructure and applications, such as Office 365 and Azure. Microsoft’s commercial cloud revenue rose 58% in fiscal Q3. The software giant initially reclaimed a recent buy point on Friday, but pared gains.
Intel Leads Chip Earnings
Intel (INTC) earnings rose 32% as sales grew 9% to $16.1 billion, both well above analyst views. The chip giant guided higher for current quarter sales, indicating a third-straight quarter of top-line growth. Shares initially jumped to a 17-year high Friday but reversed to close slightly lower. Texas Instruments (TXN), Advanced Micro Devices (AMD), STMicroelectronics (STM) and Xilinx (XLNX) got boosts from upbeat earnings reports. But chip-gear maker Teradyne (TER) tumbled after warning of weak demand for equipment to test mobile devices. Western Digital (WDC), which makes disk drives and memory chips, tumbled Friday despite beating fiscal Q3 views. The Philadelphia Semiconductor Index fought for support at its 200-day moving average.
Alphabet Earnings Jump, But So Do Costs
Google-parent Alphabet (GOOGL) reported Q1 earnings and revenue that topped views but a sharp rise in capital spending, margin pressure and higher traffic acquisition costs sparked a sell-off in the internet search giant. Capex jumped to $7.3 billion from $2.5 billion in the year-ago period, including $2.4 billion for a real estate purchase in Manhattan. Traffic costs — or what Google pays partner websites to generate advertising revenue — jumped 36% to $6.288 billion. Google has hiked spending on YouTube and video content, cloud computing, smart home consumer appliances and artificial intelligence projects.
PayPal Beats On Strong Payment Volume
PayPal (PYPL) topped earnings and revenue expectations as total payment volume rose 27% to $132 billion year over year, vs. estimates of $128 billion. The company raised its 2018 revenue and adjusted EPS guidance. Management pointed to momentum from partnerships with Visa (V), international banks and technology platforms, such as AliExpress and Baidu (BIDU).
Oil Earnings Mixed, Crude Futures Steady
Exxon Mobil (XOM) missed earnings views as output slipped despite the recent surge in oil prices while Chevron (CVX) fell short on revenue. ConocoPhillips (COP) crushed estimates while Hess (HES) reported a shallower-than-expected loss. Royal Dutch Shell (RDSA) reported the highest profit since the oil price crash. The Energy Information Administration said U.S. crude inventories rose by 2.2 million barrels vs. the drop analysts expected. Domestic production rose to 10.59 million barrels per day, a 46,000 barrel increase. U.S. crude oil futures briefly topped $69 a barrel, the highest level since late 2014, but traded little changed for the week.
Big Three Automakers Beat, Ford Exits Cars
General Motors (GM), Ford Motor (F) and Fiat Chrysler (FCAU) beat quarterly estimates. Ford will not invest in traditional sedans for North America going forward, and will almost phase out passenger cars by 2020, as consumers migrate to SUVs and light trucks. GM still sees small cars as an opportunity at home and abroad, even as it too shifts focus to larger and more profitable vehicles.
Las Vegas Sands Tops, Wynn, MGM Disappoint
Casino operator Las Vegas Sands (LVS) topped first-quarter results estimates, helped by strong demand in global gaming hub Macau and in Singapore. Macau also helped Q1 results for Wynn Resorts (WYNN), but its overall and Macau sales disappointed some analysts. Wynn Resorts also approved a dividend increase. The earnings report from Wynn was the first since Steve Wynn resigned as CEO and sold his stake following allegations of sexual misconduct. MGM Resorts (MGM) narrowly beat, but the stock tumbled on declining traffic at its U.S. locations. MGM is more U.S.-focused than Sands or Wynn.
Biotech, Drug Earnings
Amgen (AMGN) and Alexion Pharmaceuticals (ALXN) broadly topped Q1 views, though Amgen’s sales and adjusted profit outlook for 2018 were a bit soft at the midpoints. Sales of Alexion’s blockbuster Soliris missed some estimates, but shares popped on a promising study for new drug ALXN1210. Biogen (BIIB) sales lagged on sluggish Spinraza and multiple sclerosis drug revenue. Prothena (PRTA) tanked 69% on Monday after it scrapped a rare disease drug on a failed Phase 2 study. Eli Lilly (LLY) broadly beat the consensus. Two diabetes drugs and a chemotherapy helped offset short sales of psoriasis drug Taltz. GlaxoSmithKline (GSK) sales and adjusted profit lagged. AbbVie (ABBV) and Bristol-Myers Squibb (BMY) both topped profit views and raised full-year guidance, though Bristol’s sales missed some estimates. Shire (SHPG) said it’s considering a raised $64 billion takeover bid by Japan’s Takeda. Vertex Pharmaceuticals (VRTX) topped views, though sales declined vs. last year. Vertex said it’ll move another triple-pill regimen into Phase 3 studies.
Domino’s, Chipotle Soar
Domino’s (DPZ) delivered a 59% EPS gain while revenue leapt 26% to $785 million, blowing out views. Shares rose 7.3% on Thursday. Chipotle Mexican Grill (CMG) stock vaulted 24% to a 10-month high after EPS unexpectedly jumped 33%. Same-store sales also topped. Starbucks (SBUX) was on par on earnings with an 18% EPS rise to 53 cents, though a 14% rise on sales to $6.03 billion outdid analyst predictions.
Chinese School Stocks Top Views
New Oriental Education (EDU) earned 67 cents per share as revenue grew to $618 million. Total student enrollments rose 7.7% year over year to about 861,400. IBD 50 stock TAL Education‘s (TAL) EPS jumped to 14 cents a share as revenue soared 59% to $504 million. Student enrollments ballooned 96% vs. a year earlier to 2.62 million. New Oriental and TAL shares popped on their respective earnings days, but were slightly lower for the week intraday Friday.
Homebuilder Earnings Strong
PulteGroup (PHM) on Tuesday crushed views with a 111% EPS jump to 59 cents, with home sale revenue leaping 21% to $1.9 billion. Homebuilder stocks were generally muted due to rising interest rates. But D.R. Horton (DHI), the biggest U.S. builder, on Thursday bested views with a 52% EPS surge as revenue swelled 17% to $3.795 billion. Homebuilder stocks rallied for solid gains, helped by cooling Treasury yields. New-home sales rose in March to an annualized sales pace of 694,000 units, a four-month high. Meanwhile existing-home prices rose 6.8% in February vs. a year earlier.
Baidu Rallies On Earnings, iQiyi Falls
China search-engine leader Baidu (BIDU) reported a Q1 profit that blew past estimates, lifting shares. Baidu still owns a majority of iQiyi (IQ), which held its IPO in March. Video streaming website iQiyi accounts for roughly 20% of the parent’s revenue. Shares in iQiyi fell after it released earnings in tandem with Baidu.
News In Brief
Visa (V) reported a 29% EPS gain on a 13% revenue rise, both beating fiscal Q2 views. The credit- and debit-card giant raised its full-year revenue outlook. Shares leapt 4.8% on Thursday.
3M (MMM) met EPS views as revenue rose 8% to $8.278 billion, just above consensus. But the Dow Jones giant slashed its full-year EPS target. 3M stock plunged.
Caterpillar (CAT) reported strong Q1 earnings and sales, but shares of the heavy construction and equipment maker reversed sharply lower Tuesday after warning that operating margins hit a “high watermark” for the year.
ServiceNow (NOW) reported Q1 profit and revenue above estimates. Fifty-two customers now spend over $5 million annually, a metric that is up 108% year over year.
Edwards Lifesciences (EW) topped sales and adjusted profit views, but shares tanked as sales of transcatheter heart valve replacements lagged.
Illumina (ILMN) beat the consensus. Adjusted profit rose 127% per share as sales swelled 31% to $782 million.
Align Technology (ALGN) reported adjusted earnings of $1.17 per share and $436.9 million in revenue, handily beating views for 98 cents and $408 million, respectively.
TD Ameritrade (AMTD) delivered impressive Q1 EPS and revenue growth, but fell short of some lofty expectations. Shares fell 4.7% for the week. E-Trade Financial (ETFC) continues to rise after last week’s strong results.
First Solar (FSLR) hit a six-year high after Q1 earnings topped expectations due to the sale of several solar projects, as it expanded U.S. production.
Proofpoint (PFPT), a cybersecurity firm, topped adjusted first-quarter earnings and revenue views, but guided low on Q2 profit. Shares fell 5.2% Friday. In Q1, advanced protection solutions nearly doubled to make up 20% of new and add-on bookings, up from 15% in the prior quarter.
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