It was a seesaw session where buyers showed up on shallow pullbacks and a sense that major breakouts are beginning to create a greater sense of urgency.  The great news is the broad market rallied without Technology, which was weighed down by semiconductors under pressure from that big miss at Texas Instrument (TXN). I like that last little push for the broad market into the close when investors could have easily given up the ghost and moved to the sidelines to await the next tranche of earnings.  It wasn’t the size of the gain that impressed, but the fact the market’s directional bias has shifted back to the upside; although, it needs a big punch to establish new all-time milestones.

Momentum investors got their fix in Communication Service stocks, which powered higher, even as Mark Zuckerberg was getting grilled and not looking too confident on Capitol Hill.  

S&P 500 Index	+0.28%
Communication Services (XLC)	+0.78%
Consumer Discretionary (XLY)		-0.46%
Consumer Staples (XLP)	+0.46%
Energy (XLE)	+0.83%
Financials (XLF)	+0.42%
Health Care (XLV)	+0.62%
Industrials (XLI)		-0.01%
Materials (XLB)	+0.63%
Real Estate (XLRE)	+0.17%
Technology (XLK)	+0.09%
Utilities (XLU)	+0.40%

BamBam Stocks

A few names that have been targeted by shorts, and short campaigns are set to turn the table today and hit back at those that bet and, in many cases, attempted to manipulate their shares lower.   I’m just going to call them BamBam stocks.

 

Tesla (TSLA)

Elon Musk tried to tell everyone, but nobody would listen.  It was the quarter the man, which some call a modern-day PT Barnum, has been promising.   The company earned $342 million, while the street modeled them losing $257 million.  Ouch.  The company is ahead of schedule on its Model Y and Shanghai Giga factory.  Moreover, Musk says the company will reach 360,000 in sales for 2019, which means they must deliver 105,000 this quarter.

Microsoft (MSFT)

Just keeps churning out impressive numbers, which is why the street initially greeted another great quarter with a collective yawn. 

• Revenue $33.1 billon consensus $32.15 billion
• Earnings $1.38 consensus $1.25

Cloud revenue came in at $10.8 billion, beating consensus of $10.4 billion.

Lam Research (LRCX)

Considered a better proxy for the trade war than Texas Instruments, which laid an egg on Tuesday night.

Global Markets

• China 27%
• Korea 21%
• Taiwan 18%
• Japan 13%
• SE Asia 10%
• US 8%
• Europe 3%

The stock popped in strong guidance of $2.5 billion in revenue and earnings in the $3.60 to $4.00 range.

Edward Life science (EW)

Posted a perfect quarter, as sales climbed 21%. Management didn’t skimp on research and development, which also increased 21%, and was 18% of total revenue.  In addition, management hiked its earnings guidance.

The stock looks to open at an all-time high.

Align (ALGN)

• Posted record revenue $607.3 million +20.2%
• Volume +20.7%
• Teens Volume +31%

PayPal (PYPL)

• Total Payment Volume (TPV) $179 billion from $143 billion,  estimate $177.4 billion
• Venmo $27.0 billion volume
• 9.8 million net new active accounts
• Crossed 1 billion transactions first time

Note: company is first foreign firm to get domestic license for payments in China

We'll see how the call goes, but I think the stock rallies back to $121 this year, and longer term, it could go exponentially higher.

The Almighty American Consumer

I’m sure I was the only person in the financial media to mention Lithia Motors (LAD) yesterday, which is a shame. For one thing,  it was the best proxy for the American consumer to post financial results.

• Its 265 on the Fortune 500 list
• Third largest dealership group
• 82% national coverage
• 186 centers
• 15,000 employees

The company posted the highest revenue quarter in its history.

• Same store sales +7.6%
• Same store new autos +4.0%
• Same store used autos +14.0%
• Same store service & parts +9.5%
• Gross profits $3,631 +3,1%

The results from Lithia underscore the strength of the American consumer but also refutes the notion US auto sales were falling off a cliff, although stories of “peak auto” go back five years.

After the close, Ford (F) posted results that beat on the bottom line, but the company has issues that are mostly company-specific issues. 

Global market share 6.0% from 6.5%

• North America 12.6% -0.7
• South America 7.1% -1.3
• China 2.3% -0.6

Ford shares might struggle a bit, but it’s not the proxy for the consumer, or even autos, in part because of its stumble rolling out its latest Explorer.

Portfolio Approach

Communication Services	Consumer Discretionary	Consumer Staples
1	3	2
Energy	Financials	Healthcare
1	2	2
Industrial	Materials	Real Estate
3	1	1
Technology	Utilities	Cash
3	0	1

Today’s Session

The earnings parade continues this morning. 

Carter's Inc (CRI)

• $943.32 million revenue in-line with Street
• EPS $1.87 versus $1.70 estimate

Citrix Systems, Inc. (CTXS)

• $19.49 billion revenue street $19.29 billion
• EPS $1.52 versus $1.25 estimate

Valero Energy Corp (VLO) 

• $27.25 billion revenue street $25.93 billion
• EPS $1.48 versus $1.35 estimate

Twitter (TWTR)

The earnings call is not going so hot. Although, there are some legitimate issues that could be short-term, but management might be too cool for school - they still are struggling to monetize product ,

• Missed on earnings and revenues

On the economic front, new orders for manufactured durable goods decreased 1.1% in September to $2.8 billion from $248.2 billion(August was revised higher to 0.3% from 0.2%).  This comes after 3 consecutive months of increases.  Excluding transportation, new orders declined 0.3%, and excluding defense decreased 1.2%.  Transportation equipment orders dropped 2.7%, as motor vehicles and parts declined 1.6% and orders for nondefense aircraft and parts decreased by 11.8%.

• Shipments -0.4%% to $252.5 billion

• Unfilled Orders, basically unchanged to $1,163.5 billion
• Inventories +0.5% to $430.3 billion, up 14 of 15 months

Capital goods non-defense new orders dropped 2.8% to $71.6 billion.  Excluding aircraft, new orders decreased 0.5%, on the heels of a decline of 0.6% in August, and indicative of weaker business spending.

• Shipments -0.01% to $74.2 billion
• Unfilled Orders -0.4% to $690.4 billion
• Inventories -0.9% to $194.5 billion

Capital goods defense new orders declined 4.5% to $13.2 billion.

• Shipments +1.4% to $12.8 billion
• Unfilled orders +0.2% to $157.5 billion
• Inventories +1.0% to $24.0 billion

The Dow is down will the S&P500 and Nasdaq are in the green at the start of trading.

Comments

Charlie, keep up the great work !! Many thanks..!! Regards, Perry Foote P A Foote, Jr MD on 10/24/2019 9:53:17 PM

Thank you very much Perry  Charles Payne on 10/25/2019 6:44:49 AM

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