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Morning Commentary

Amazonís Mythical Performance

By Charles Payne, CEO & Principal Analyst
4/27/2018 9:31 AM
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Question of the Week

This week's big comment that took the market by storm was from Caterpillar's CFO Bradley Halverson stating that the stellar quarter was the "high watermark" for the year. This sent Caterpillar and the market sharply lower.

Do you believe that this is as good as it gets for the economy?


Post your answer below.

On Thursday, the market posted a strong session as fundamentals continue to prove that the early enthusiasm in the economy and stock market wasn’t misplaced. Yet there are several surveys showing confidence in the stock market plunging.  I’ve been fighting hard to underscore the reasons to believe in this economy and the stock market, but a number of factors from political hijinks in Washington, D.C., growing debt, and anxiety over interest rate policies have taken a toll. 

However, the biggest problem is that lower sentiment simply triggers even deeper declines in sentiment, coupled with wild gyrations and sessions with monumental point declines. As for active investors, I continue to say the biggest problem is indifference. A number of investors are calling themselves neutral.

History has shown over and over again that the number should be the exact opposite with bullishness surging in a down market as opportunities develop.

Privacy?  Who Cares!

The stock of the day was Facebook (FB), which powered away on amazing earnings results and its confident guidance. The company must continue to grapple with the notion of tweaks to the business model and higher taxes and fees. But, as management stays committed to its advertising model, will the public flee out of privacy concerns?

The poll suggests this could be a problem.

Fox News Poll

Care If Facebook Shares Your Information with Others?

Yes      73%

No       25%

 

Considered Deleting Your Facebook Account to Protect Your Privacy?

Yes      43%

No       54%

Favorable        Unfavorable

Facebook                     48%                 41%

Mark Zuckerberg        37%                 45%

 

That last question may provide and explain why Shakespeare answered the questions about user outrage over privacy:  "Methinks thou dost protest too much."

People seem to view Mark Zuckerberg and not the company as the problem. As for current business trends, America has peaked with respect to user growth up just 1.6% in the last quarter, while Asia soared 24% and the rest of the world enjoyed double-digit growth.

Daily Average Users

Total (Million USD)

Yearly Change

Revenue

United States/Canada

185

+1.6%

$5.7 billion

Europe

282

+5.6%

$3.0 billion

Asia

529

+23.9%

$2.1 billion

Rest of World

453

+11.0%

$1.2 billion

 

Earnings After the Close

Amazon (AMZN) crushed it again:

Intel Corp (INTC) beat on revenue and posted earnings of $0.87, which is $0.15 more than estimated, and management raised guidance.

The news could spark a major reversal semiconductor.

Microsoft (MSFT) beat on revenue and earnings but will need another masterful conference call as the shares are under slight pressure.

Expedite shares popping on earnings:

Western Digital (WDC) beat on revenue and earnings - $0.32 better than expected.

Baidu Inc (ADR) absolutely crushed it, sending its shares up 11% in after-hours trading.

Starbucks (SBUX) results were largely in-line, and the stock mostly shrugged as a result.

U.S. Steel (X) got smoked after posting results.

Technical View

So, will these results be enough to reverse the trend of lower highs?

Thursday was a great session, picking up from yesterday where the Dow Jones Industrial Average climbed off the canvas to erase a 200-point decline. 

 

Today’s Session

We woke up this morning to dramatic images of the North Korean dictator strolling across the demilitarized zone (DMZ) to meet the leader of South Korea.  This meeting was unimaginable last November when North Korea launched its most successful rocket test and saber-rattling was strong enough to move a real Doomsday Clock within seconds of midnight.

Critics are still dismissing the entire event, but there is no denying its historic importance as a potential launching pad for peace, not war.

Several promises have been made, including full denuclearization on the Korean peninsula.  There is absolutely no doubt this meeting wouldn’t have occurred without the heavy-handed approach by President Trump. 

Will there eventually be peace? 

I have a good feeling North Korea wants to move into this current century and avoid military confrontation at the same time.

GDP Report

The first quarter GDP report is a homerun at 2.3% versus consensus of 1.8%.  I will have more details in the afternoon note, but this is the kind of economic momentum and persistence that lends to even better growth down the line.

 

 


Comments
This economy has much room to grow, but the obstructionists are doing everything to sour investors confidence, divert attention, and stall any kind of progress. Dems and leftists do not want America to succeed based on conservative principals, they will not say this directly but their words and actions are clear. There is a lot of money still available to be invested, and gov can help by addressing infrastructure needs in a reasoned manner, and continue to loosen regulations everywhere.

michael on 4/27/2018 10:43:22 AM
There's lots of energy building that won't be constrained by the gossip of experts.

Patricia Flynn on 4/27/2018 3:16:11 PM
Charles, I agree with your sentiment about the market, investors should be cheerleading this on because of the fundamentals. But, I think the progressives have figured out that one way to get at Donald Trump is to tank the market thus all the doom and gloom in the financial media. I look at CNBC every day and the headlines are atrocious. Love your show. Keep hammering away with the bullish talk.


Kevin Lynch on 4/27/2018 11:13:01 PM
Libs want it ďas good as it getsĒ. Not me! Only getting started.

Larry Leonard on 4/28/2018 8:32:55 PM
Given that the market tends to look 60 months ahead I think the concerns are a possible recession. Exacerbating this is the systematic decline in the 2-10 treasury yield that is nearing zero. Everytime it passes through zero we have a recession. This is a cloud over the market spooking investors. And the tremendous run the market has had since the election was likely too fast. 30%+ is a lot of growth in 1.5 years. And the SOX index has been stalling. While the Bollinger Bands are narrowing, given the above I think we are headed lower.

John Parmentola on 5/2/2018 8:02:29 PM
Things look good--especially the GDP growth. The new single-year deduction of capital investment has not been realized and when it is we will see an uptick in earnings. There are a few black swans flying around and are being well fed by the hate-Trump legions. It is nice to see bank regulations, particularly those affecting smaller banks so they can better serve smaller businesses.

Dann Hall on 5/19/2018 3:59:42 PM
This market is strong and going higher---even the charts are very strong-----nothing is breaking down yet!

T. Tredwell on 5/21/2018 6:54:13 PM
The market is too complex for a simple summery or view. There are too many things
That influence minute to minute buys and sells. Too many so called experts, too many
Billionaires manipulating things, large companies buying out other companies to create
Industry monopolies and politicians back room deal making and foreign leaders scheming
And shifting currency values. It is a pure gamble investing in the stock market. What
May look good today can change at the drop of a hat and cause huge buys or sell offs.
Nothing stays the same forever.


Zeno Reagan on 5/24/2018 12:59:57 AM
The economy is firing on all cylinders. The thing is that the "car" that President Obama was driving was running out of fuel and pulling to the left when he took the keys. He added gasoline, in the form of QE, but forgot to change the oil, rotate the tire, change the filters, or do any other maintenance. He also put that QE on his children's credit card by doubling the Federal Debt to an unpatriotic and irresponsible level.

Jobs are up. Unemployment is down. Participation is improving even as the drop in unemployment "brings down" the participation level. WE had multiple recessions folded into the Great Recession: A Housing recession, A Jobs Recession, a Retail Recession, A Wage Recession, and a Revenue Recession. The Housing sector was the start of the recession. We are not back to pre-2001 recession levels for new construction. That is a problem. New construction is a economic development multiplier. Some retail sectors are not back to pre-recession levels, in part because they have moved to Non-store Retail. Some sectors are not back to pre-recession Current Employment Statistics levels of workers. IT and Manufacturing will not come back overnight. The participation rate, right now, is lower than it was during April of 1982, 15 months into the Reagan Administration.

Net-Net: Things are improving. The seasonally adjusted data is misleading. Reality is doing well. Former President Obama left President Trump with a mess. President Trump has fueled up the care with "high test" fuel via tax cuts and jobs. He has realigned the tires so that the car is more in balance with a slight pull to the right. He changed the oil and put in some high mileage American Oil. He replaced the tires with American made tires. He even gave the car a detail job. Some parts are showing wear. Some parts will have to be replaced. Improvement is always possible. This economy is humming. Soon it will be rolling on the American Autobahn.

Jack Dunn on 5/26/2018 6:48:17 AM
 

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