The Dow Jones, S&P 500 index and Nasdaq rebounded after the market correction hit new lows Monday, though the Nasdaq led a Friday sell-off following the Apple (AAPL) earnings report and strong jobs report. Facebook (FB) and Starbucks (SBUX) rebounded on results in a busy earnings week. General Electric (GE) tumbled on weak earnings, a dividend cut and other bad news. Wage growth hit a nine-year high as labor markets tighten.
XStocks Rally, But It's Not Confirmed
After tumbling to new lows on Monday, the Dow Jones, S&P 500 index and Nasdaq rebounded, even with Friday's retreat on Apple, a strong jobs report and mixed reports on China trade talks. A few top stocks broke out into buy zones, including Starbucks. The new stock market rally still needs a follow-through day to confirm the new uptrend. Crude futures continued to slide. Treasury yields spiked Friday as wage growth hit a nine-year high.
Apple Sales Outlook Light
Apple earnings per share rose 41% while sales jumped 20% to $62.9 billion, yet another quarter of accelerating top- and bottom-line growth. But Apple guided to holiday-quarter sales of $91 billion vs. the consensus for $92.91 billion. It also said it will no longer disclose unit sales of iPhones and other products. Apple stock fell 6.6^ Friday. On Tuesday, it unveiled new iPad Pro tablets, a revamped MacBook Air notebook and Mac Mini desktop computer.
Wage Growth Hits 9-Year High
The labor market kept heating up in October, adding 250,000 jobs as wage growth accelerated to a 9-year-high 3.1%, faster than expected. Unemployment held at 3.7%. With no visible weak spots in the jobs report, the Fed is almost certain to hike its key interest rate for the fourth time this year in December. However, the ISM manufacturing index fell 2.1 points to a still-strong 57.7 in October. The bigger-than-expected drop came as companies face uncertainty over Trump tariffs and a possible escalation of the China trade war.
Facebook Rallies On Earnings, Guidance
Facebook earnings were better than expected while revenue missed slightly. But Facebook signaled Q4 revenue would be higher than its prior estimates while costs would not be as high. Users are spending more time on Facebook properties with lower monetization rates, including Instagram. It's growing in popularity but Facebook has yet to settle on the best way to cash in. Facebook rose 3.4%, rebounding from an 18-month low.
Mastercard, Other Payment Stocks Report
Credit card giant Mastercard (MA) topped profit forecasts, but shares were little changed for the week. Meanwhile Global Payments (GPN) earnings and guidance were strong, giving shares a small gain. Finally, fellow payment stock FleetCor Technologies (FLT) gapped up after it bested analyst estimates on both the top and bottom lines.
Alibaba Earnings Top, Revenue Light
China e-commerce leader Alibaba (BABA) beat earnings views but revenue came in light. Baidu (BIDU), China's search engine leader, beat on the top and bottom line. Both internet giants cut fourth-quarter estimates with Alibaba blaming the U.S.-China trade war. Alibaba stock fell Friday on earnings but rose for the week. Baidu rose for the week. Baidu spinoff iQiyi (IQ), called the Netflix of China, tumbled after missing on the top and bottom line.
Business Software Earnings
Paycom Software (PAYC) Q3 earnings leapt 79% and revenue 32%, both edging past forecasts, but its December quarter guidance disappointed. The maker of human-resources and payroll-processing software plans a national advertising campaign touting its mobile app. Ultimate Software (ULTI) reported Q3 EPS up 28% and sales 22%, from a year earlier, topping estimates by a penny. Revenue climbed to $287.8 million, slightly above estimates of $287.2 million. Ultimate specializes in human-capital management software as a service. The company said its PeopleDoc acquisition would pressure 2019 margins. Zendesk (ZEN) reported adjusted profit of 9 cents a share, topping estimates of 4 cents. The maker of customer-support and sales-automation software had a 1-cent loss a year earlier. Revenue jumped 38%, modestly topping. Zendesk said its FutureSimple acquisition could squeeze margins.
General Motors Profit Booms
General Motors (GM) earnings jumped 42% to $1.87 per share as revenue climbed 6% to $35.79 billion. Fiat Chrysler (FCAU) EPS grew 43% to $1 as sales climbed 7% to $33.45 billion. GM, which guided 2018 EPS to the high end of a prior range, rallied strongly. But Fiat Chrysler fell as it sees a potential financial hit from a U.S. diesel probe. Auto stocks rallied broadly at the start of the week on news that China, the world's biggest automobile market, may halve a tax on cars to 5% to revive slumping sales. U.S. auto sales were stronger than expected in October. Fiat Chrysler U.S. sales rose 16% on robust SUV and truck demand. Ford (F) beat views but total sales dipped 4%. Even the prized F-series trucks saw demand stall. Major foreign automakers posted U.S. sales declines.
Sprint, T-Mobile Beat
Sprint (S) earned an adjusted 6 cents as revenue rose 6% to $8.433 billion, defying views for a 1-cent loss and sales of $7.97 billion. The SoftBank-owned company lost 34,000 postpaid customers, the only one of the big four wireless operators to lose customers. Merger partner T-Mobile (TMUS) topped Q3 views and added 774,000 postpaid subscribers, more than double the gains of AT&T (T) and Verizon Communications (VZ) combined. Owned by Deutsche Telekom, T-Mobile stock rose. So did Sprint.
Cybersecurity Earnings
Qualys (QLYS) revenue rose 20% to $71.7 million, just topping views as earnings rose 58%, easily clearing estimates. Qualys, which sells security vulnerability management services, announced an additional $100 million stock buyback. Shares fell on earnings but rose for the week. FireEye (FEYE) earned 6 cents a share in the September quarter vs. a year earlier loss as revenue rose 7% to $212 million, beating views. Analysts expected FireEye earnings to come in at 2 cents a share on sales of $208.4 million. FireEye sells web, email and malware security software to businesses and government agencies. Analysts said Helix, a new analytics platform, seems to be gaining traction. FireEye stock soared. Splunk (SPLK) and ServiceNow (NOW) compete with FireEye's Helix product. Fortinet (FTNT) reported adjusted Q3 profit growth of 75% and revenue that topped estimates with December quarter guidance just above expectations. But Fortinet stock tumbled Friday.
Big Pharma Earnings Reports Mixed
Dow Jones component Pfizer (PFE) topped on earnings, but revenue of $13.298 billion came in light. Generic drug giant Teva Pharmaceuticals (TEVA), likewise, missed on revenue with $4.53 billion, but adjusted profit easily beat. Allergan (AGN) and the U.K.'s GlaxoSmithKline topped on EPS and sales. Sanofi (SNY) edged past sales views and crushed earnings expectations. Animal health specialist Zoetis (ZTS) spiked to a record high after topping estimates. Shire (SHPGY) just missed on EPS, but sales topped.
Crude Oil Keeps Falling; Exxon Leads Energy Earnings
U.S. crude futures fell 6.6% to $63.14 a barrel, the lowest since April as supply fears faded even with Iran sanctions set to start Nov. 5. Exxon Mobil (XOM) and Chevron (CVX) reported strong Q3 results. But Exxon's production fell year-over-year. Shale oil was mixed. Continental Resources (CLR) said it will ramp up activity sharply at year's end and topped Q3 estimates while Diamondback Energy (FANG) unit Viper Energy Partners (VNOM) fell short of forecasts. EOG Resources (EOG) crushed earnings forecasts and boosted its capital spending outlook.
Medtech Earnings Mixed
PerkinElmer (PKI) missed on profit but beat on sales. PRA Health (PRAH) cleared an EPS target but revenue came in light. Masimo (MASI), though, topped expectations with adjusted income of 71 cents per share on $210.6 million in revenue.
Starbucks Breaks Out
Starbucks (SBUX) soared 9.7% Friday to a record high on solid Q4 U.S. same-store sales, growth in the Americas region and a positive top and bottom-line outlook for the next fiscal year. Yum Brands (YUM) Q3 results beat estimates, with demand for things like Taco Bell Nacho Fries likely offsetting the competition that continues to hurt Pizza Hut. Burger chain Shake Shack (SHAK) tumbled on a surprise same-store sales decline. Wingstop (WING) results beat. Texas Roadhouse (TXRH) EPS missed. Yum's stock flirted with a buy zone while Shake Shack, Wingstop and Texas Roadhouse sold off.
GE Dives On Earnings Miss, Dividend Cut, Expanded SEC Probe
General Electric (GE) earnings crumbled 52% to 14 cents a share as revenue fell 12% to $29.57 billion. The industrial giant gutted its once-trusted dividend to a penny a share from 12 cents quarterly, the second cut in about a year. The move will save the cash-challenged GE $3.9 billion a year. GE also said an SEC accounting probe would widen to include a $22 billion goodwill charge tied to its Power business. Weakness in GE Power, which will be split into two units, will cause a significant miss of full-year targets. New CEO Larry Culp will stick to his predecessor's overall turnaround strategy, which entails shrinking operations to just power, aviation and renewable energy in years to come. Shares plunged 18% to a fresh nine-year low.
News In Brief
Streaming music service Spotify Technology (SPOT) met its forecast for paying subscribers and other metrics for the third quarter. But average revenue per user continued to decline because of promotions.
Electronic Arts (EA) topped estimates for its fiscal second quarter, but the video game publisher gave weak sales guidance for the holiday quarter. Take-Two Interactive Software (TTWO) said global sales of "Red Dead Redemption 2" topped $725 million in its first three days of release. EA stock fell while Take-Two jumped.
Abiomed (ABMD) topped expectations with adjusted earnings of 81 cents a share on $181.8 million in sales for the maker of medical implant devices.
Amgen (AMGN) reported adjusted profit of $3.69 per share and $5.9 billion sales, as the biopharma beat estimates.
Under Armour (UAA) profit rose a surprise 14% to 25 cents a share, vs. views for a 46% drop. Sales notched up 2.5% to $1.44 billion vs. estimates for $1.41 billion. Shares popped 28% Tuesday. Still, North America sales dropped 2%.
Sprouts Farmers Market (SFM) recorded an adjusted 17% EPS gains to 27 cents a share, beating estimates by a penny, on a 10% rise in revenue to $1.33 billion, matching views.
EBay (EBAY) rose on stronger-than-expected third-quarter earnings. The e-commerce company's global active buyers rose by 4% across its platforms, to a total of 177 million.
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The post Stocks Try To Rally In Week: Apple, Facebook, Starbucks, GE Stocks Among Big Earnings Movers appeared first on Investor's Business Daily.
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