Yesterday’s market displayed the resolve that characterized its monster rally in 2019. There were excuses to sell and there was a lot of fearmongering, but major indices held up with all but the Dow Jones Industrial Average rallying higher. The market is amid a classic consolidation of those monster gains, which means more downgrades, and more pullbacks of stocks from companies that simply meet or beat the Street by a penny or two.

Although the market clawed its way back from initial weakness, the market breadth was weaker, as the tally of new lows swelled over recent single digits and the down volume remained persistently high.  This kind of wheel-spinning is great for seducing weaker hands to fold, but even with the latest scare, most investors aren’t panicking.

Semiconductors

I remember back in the day when Wall Street experts used to diss the chip sector, saying it was only a commodity business and not worthy of long-term investing. No one is saying that these days because chips are more than commodities; they are the engine of society, and one of the biggest names in the industry making a big noise, especially last night. 

Intel Inside

Intel (INTC) was shoved out of the limelight by its old rival Advanced Micro (AMD) last year, even as it enjoyed its own rally. Now, it looks as though the company didn’t lose any market shares, or perhaps the pie is so big that both companies are benefiting:

Key Metrics

Total Revenue $20.2 billion - estimate $19.2 billion

• Data Center: $7.2 billion estimate $6.4 billion
• Client Computing: $10.0 billion estimate $9.74 billion
• Internet of Things (IoT): $920 million estimate $1.03 billion
• Non-Volatile Memory Solutions: $1.2 billion estimate $1.28 billion
• Programmable Solutions: $505 million estimate $539.7 million
• Mobileye: $249 million

Gross Margin 60.1 - estimate 58.4

• Operating Margin: 35.7 estimate (guidance) 33.5
• Guidance: First quarter (1Q): $19.0 billion estimate $17.2 billion
• Guidance: Fiscal year (FY): $73.5 billion estimate $72.0 billion

Shares of Intel soared in after-hours trading, although there was some confusion about the strong quarterly guidance against the much more guarded full-year guidance.

Portfolio Approach

Today’s Session

Big companies are coming up big (including two Dow Components), and that’s powering equity futures higher this morning.

American Express (AXP)

• Revenue $11.36 billion in line with consensus
• Earnings $2.03 beating the street by $0.02
• Card Fees $1.08 billion
• 11.5 million New proprietary cards
• FY 2020 guidance $8.85 to $9.25 street $8.98