Sale of Growth Shares Demonstrates Transition of Markets to New Cycle Stage

American indices were again under pressure at the end of the day, rewriting the minimums from May on the S&P500 index. According to the results of the day, the losses amounted to 0.7%, although the amplitude of fluctuations remains elevated, reaching 3.8% in just a few hours.

Spreading fixation of profit has put the quartet FANG (Facebook, Amazon, Netflix, Alphabet) in jeopardy, and took away from their total capitalization about $600 billion from the peak values. The main driver of the weakening on Friday and Monday were the Amazon shares, that lost over 14% after a weak earnings report.

At the same time, key indices are supported during recessions, and outside of the current weakening, the trend in the stock markets shifts. The growth shares, an excellent example of which is FANG, risk giving up leadership to income stocks with good earnings and dividends.

Income-oriented equities are the focus of the market as the economic cycle ages. The next phase may be the demand for countercyclical papers, which are presented by the companies of the military-industrial complex, manufacturers of medicines and foodstuffs. But it is not so easy to predict the exact time of this switch.

It should be noted that the purchase of indices on recessions in combination with strong macroeconomic data from the USA does not allow to speak about a large-scale sale, but only about the change of priorities among the investors.

The dynamics of Asian playgrounds implicitly confirms our idea in the morning on Tuesday. Index Nikkei has added 2.2% this morning. The futures on S&P500 have grown by 0.6% this morning, and the Japanese yen (a great barometer of the demand for risks) has lost 0.8%, pointing to the persistence of global investors’ thrust for the purchases of securities.


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The dollar index is slowly gaining strength, settling in 96.50 – one step from the highs since the middle of 2017. The main reason behind this move was weakening of the euro amid fears around the political situation in Germany, where Merkel promised to resign from the post of the head of the CDU party and leave the post of Chancellor after 2021.

This article was written by FxPro

Asia Slumps, ECB Stands Pat, US Equities Rebound On Strong Earnings

Asia Falls Hard, Led By Tech

Asian indices fell hard in Thursday trading following a massive rout in the US. The Japanese Nikkei led with a loss of 3.72% and outpaced most other major indices in the region. The Nikkei created a large price gap at the open and fell from there, creating a large red candle and setting a new 9-month low. The is bearish and gaining momentum although price action is now approaching a key support level near 21,000.

The Australian ASX posted the second largest decline during the Asian session with a loss near 2.80%. The ASX was led by tech, but bloodshed was not limited to one sector. The energy, financial, and mining sectors all saw substantial losses with shares of Rio Tinto and BHP falling roughly 3.0%. Chinese indices were not immune to the selloff but fared much better than either the Nikkei or ASX. The Hong Kong Heng Seng led Chinese markets with a loss of -1.0%, the mainland Shang Hai index posted a gain of 0.02%.

The ECB Holds Rates Unchanged

In Europe attention was focused on earnings and the ECB. The ECB held their October policy meeting over the past two days and released their statement this morning. The bank decided to hold rates unchanged which was expected; the bank also maintained its outlook for tightening. The ECB says they are on track, barring unexpected data, to end their bond purchase program in December and to begin policy tightening mid to late 2019.

EU markets were mostly flat and mixed at midday. The UK FTSE was the only index to hug the flatline, trading in a tight range over and under 0.00%, while the DAX and CAC were both able to post gains. The CAC led advancing markets with a gain near 1.0% followed by a distant 0.35% for the DAX. Markets in the region were buoyed by earnings more than anything else. Automakers were strong performers as their results reveal dominance over US car makers like Ford (F) who reported sales decline for the region.

US Futures Point To Rebound, Earnings In Focus

In the US futures trading indicated a strong open. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite were all indicated to post a gain of near 1% led by tech. The NASDAQ was indicated to open with a gain near 1.5% as strong earnings from Microsoft (MSFT), VISA (V), and Tesla (TSLA) all blew past expectations for revenue and earnings growth.

Regarding earnings and earnings season; today is the single busiest day of the season with 66 S&P 500 companies reporting. Reports from Amazon, Google, Intel, Pricesmart, Mattel, and Chipotle Mexican Grill are all due after the bell. Based on reports so far there is a high likelihood this batch will produce better than expected results with a few outlying misses. What will matter to traders is the impact of tariffs and trade war on earnings and how they will affect the outlook for earnings growth over the next five quarters.

How to Trade the Trade War?

The developing trade war between the US and China has created turmoil in emerging markets, most noticeably in the form of a sell-off of the Chinese stock market and currency.

Trading the trade war is not very straightforward. Firstly, we really don’t know how it will end. It will probably be resolved eventually, but the timing will make a big difference.

The longer it lasts the more damage will be done, and that will have longer-term implications. A longer trade war may also trigger a domino effect through other parts of the global economy. If the trade war was to be resolved fairly soon, prices would normalize quite quickly.

One thing to remember is that it appears Trump is happy to keep the pressure on as long as the US stock indices continue making new highs. If volatility in the US stock market picks up, as it is now, he may be forced to soften his stance.

Several markets related to the trade war are currently very oversold, and should the impasse be resolved, sharp reversals are possible in some of these markets.

Traders should be careful of using the same approach across all emerging markets. Some markets have been caught up in the trade war, while others have deep-seated underlying problems of their own.

China

Tensions over trade began to grow between the US and China between January and May this year. In May the US began to effectively impose tariffs on certain imports from China by terminating tariff exemptions. More products were added in June and more gain in September.

The Chinese Renminbi has fallen 10% since March as the trade war has escalated. The Shanghai composite has meanwhile lost as much as 25% since the beginning of 2018.

USD/CNH Weekly Chart
USD/CNH Weekly Chart

The slide in the renminbi has to a certain extent offset the added tariffs – the weaker currency means US importers are paying slightly less before tariffs are added.

It’s worth noting that the slide in the value of the Renminbi has slowed significantly since July despite the additional tariffs with a double top potentially forming. It is possible that the Chinese Central Bank is supporting the currency to prevent capital flight, as they experienced in 2015/2016.

Not many forex brokers offer to trade in the Renminbi, but a few do. If you are looking to trade the Chinese currency you will be trading the Offshore Renminbi or CNH. The CNY is the Onshore Renminbi which us restricted and managed by the Central Bank.

Turkey

Turkey has several problems. Firstly, a series of populist policy decisions by the president eroded investor confidence, triggering a selloff of the already structurally weak Lira. This turned into a vicious cycle as much of the country’s government and corporate debt is USD denominated, and effectively rises as the Lira weakens. On top of this precarious situation, the US then imposed new import tariffs on Turkish goods.

USD/TRY Weekly Chart
USD/TRY Weekly Chart

The Turkish Lira had lost almost 46% of its value by the middle of August and is now consolidating in what could turn out to be either a continuation or reversal pattern. The benchmark equity index, the BIST100, fell as much as 30%, though it has recovered some of those losses.

The Turkish economy is one of the most vulnerable in the world, and further emerging market volatility could very easily lead to further losses for both the currency and stock market. Investors will probably want to see policy changes before a sustained recovery begins.

Argentina

Argentina had to turn to the IMF to help prop up its balance sheet in May, and this loan was recently increased to $57 billion. The Peso reached an all-time high of 41.47 against the USD, having traded at 18 in January. Last week, the Central Bank raised interest rates to 65%, indicating how serious the crisis is.

The benchmark stock index recently tested the all-time high recorded in January – though this has more to do with the inflationary effect of a weak currency than with earnings.

Argentina is one of the weakest markets and will be vulnerable to further fallout from the trade war. Traders watching the stock index should focus on the technical picture rather than trying to weigh up valuations and a fluctuating currency.

South Africa

South Africa’s economy has been under pressure for several years as a result of a scandal-ridden government. In the second quarter, the country officially dipped into a recession.

USD/ZAR Weekly Chart
USD/ZAR Weekly Chart

South Africa’s currency, the Rand, is structurally weak and was also rated by Bloomberg as one of the most vulnerable in the world. The Top40 stock index has made little ground since 2014 as political uncertainty led to an investor exodus.

A certain degree of political stability has been restored and South Africa is beginning to look more like a potential turn around play. South Africa is also a major commodity exporter and highly correlated with China’s economy. If the trade relationship between China and the US is resolved, SA may be a market to watch on the upside.

Commodities

Commodities, especially base metals like copper and iron ore are another potential play based on how things develop. If the standoff is prolonged its likely to have an ongoing impact on China’s domestic economy, which includes massive infrastructure projects. Besides metals prices, traders can also look to Australia’s large commodity exporters.

Global Tech Stocks

The original FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google) have a few problems of their own. Not only are they priced for strong growth going forward, but the likes of Facebook and Google are facing growing scrutiny over issues related to users’ personal data.

The trade war has now brought a new dynamic to the sector. Chinese tech giants Alibaba and TenCent are both under pressure due to the trade war. China is also very important in Apple’s life, both as a supplier and as a customer. Ongoing pressure on China’s economy will eventually begin to impact Apple.

Summary

As you can see there are quite a few instruments that traders can use to play the trade war, either in the case of an escalation, or continuation or in the case that it is resolved. When choosing a forex broker it’s a good idea to look at the range of instruments offered so that you have the option of expressing trades through several instruments.

As was mentioned at the beginning, it’s impossible to predict how all of this will play out. Traders should, therefore, trade opportunistically and keep an open mind.

A Correction or Recession?

It has been a rough couple of days for equity investors as stock markets plummeted sharply in the recent days. As for the main catalyst for this rout, we can safely assume it was the rocketing US yields, along with the fears of a global economic slowdown.

According to the International Monetary Fund, global growth estimate has been lowered to 3.7% in 2018 and 2019, down from the 3.9% anticipated by the IMF in July. The group downgraded the outlook for almost all the major economies, citing the ongoing USA-China trade war as the main reason.

Moreover, luxury stocks were among the worst losers as the luxury company LVMH, owner of Louis Vuitton, Christian Dior and Dom Perignon warned of slowing demand for luxury goods in China. The price of LVMH crashed nearly 10% in Paris on Wednesday and dragged lower other stocks in this sector.

The same thing happened in the US on Wednesday as the company Trinseo became the second chemical manufacturer this earning season to downgrade the earnings outlook, when it warned of disappointing results because of pricier raw materials and slow sales in China. The stock dropped most on record and lost 18% after dropping 6% on Tuesday.

Additionally, the newly created communications sector, which contains some of the well-known FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) hasn’t been met with much of an interest and FAANGs are dropping like a stone. On Wednesday, these stocks experienced the biggest decline since July and are down to their lowest since May. FAANGs are down 10% in the last 9 days.

To conclude, equity indices have been poised for a correction for some time. It would appear that sharply rising US yield curve, still hawkish Fed and higher oil prices are causing some repricing of future economic growth, which has become a very negative thing for stocks worldwide.


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However, to sound a bit more optimistic, all the major US indices remain above their respective 200-day moving averages, meaning the long-term bullish trend is still intact for US benchmarks. These averages could be soon tested and that will be the crucial moment for equity investors as breaking below could cause a larger correction worldwide.

The upcoming week will be a significant one to the markets. The FOMC meeting minutes on Wednesday can shed light on the Fed’s rate hike projection and China’s Growth Domestic Product on Thursday can be a game changer.

Analysis and opinions provided herein are intended solely for informational and educational purposes and don’t represent a recommendation or an investment advice by TeleTrade. Indiscriminate reliance on illustrative or informational materials may lead to losses.

This article was written by Peter Bukov, one of TeleTrade’s leading analysts. 

How to Trade FANG Stock with CFD’s

The FANG stocks are some of the biggest consumer and tech stocks listed on the US market. They are favorites amongst active traders because their high growth rates have led to massive returns and strong trends.

CNBC host Jim Cramer originally coined the term ‘FANG Stocks’ in 2013, and it referred to Facebook, Amazon, Netflix, and Google. Most traders now include Apple and use the acronym FAANG.

Some have even included Alibaba and Nvidia, extending the acronym to FAAANNG. However, for this discussion, we will stick to the five, FAANG stocks: Facebook, Apple, Amazon, Netflix, and Google.

The easiest way to profit whenever a FAANG price goes up or down is to trade Contract for Difference (CFD) on these stocks. 

An overview of the FAANG Stocks

Facebook is worth $450 billion, making it the fourth largest company in the world by market cap. Since listing in 2012, the company has grown EPS from $0.16 to $6.80 in 2017. It’s done this by building a user base of over 2 billion monthly users and growing the profitability of its advertising business. Facebook’s stock price has risen more than 500 percent since 2012.

Amazon is the most successful web retailer in the world and the second most valuable company in the world. Since 2010, it has grown annual earnings from $2.28 a share to $6.35, which is the reason the company is now worth $863 billion. Traders and investors both love Amazon and believe in the vision of its founder Jeff Bezos. $1,000 invested in Amazon in 1997 would be worth over $1 million today.

We all know how innovative Apple, the company that brought us the iPod, the iPhone and the iPad, is. Steve Job’s vision and the company’s long history of bringing out new products has made it the most valuable and profitable company in the world. Between 2005 and 2015, Apple grew net income from $1.13 billion to $53 billion, a 5000% increase. Its earnings per share have grown from $1.68 in 2010 to $10.36 in 2017.

Netflix is one of the fastest growing companies in history. If you had invested $1,000 in Netflix in 2002 when it listed, your investment would be worth over $400,000. However, along the way, Netflix has had some large pullbacks, allowing traders to short the stock, and then buy it back at a lower price.

Anyone who uses the internet knows how prolific Google is. It’s all over the web and makes over a hundred billion USD a year from its advertising business. Although it is no maturing as a company it still managed to grow earnings per share from $10 in 2010 to $34.2 in 2017. Google’s share price has doubled since 2015, giving the company a value of $800 billion.

Using CFDs to Trade FAANG Stocks

FAANG stocks are favorites amongst traders because they have strong underlying growth, lots of liquidity and they are in the news a lot. There are opportunities to trade over every time period from minutes to months, and opportunities to go long and short.

CFDs (contracts for difference) are one of the best instruments to use to trade these types of stocks. They offer the opportunity to use leverage and to take short positions not only on currencies and commodities such as EUR/USD, GBP/USD, gold and crude oil but also on stocks. When you trade CFDs you do not actually own the underlying asset, but you have exposure to the price move, whether its up or down.

Recommended trading strategies

There are several very different trading strategies that investors can use to trade FAANG stocks. Because these stocks are in the news a lot, traders often trade around announcements and other news flow.

Stocks offer the best trading opportunities when volatility increases, and this happens when more traders are watching them. For Apple, this happens when a new product is launched and when earnings are announced. For Amazon, Prime Day and the Christmas shopping season are important. For Facebook and Netflix, any announcement about subscriber and user numbers are important.

Traders need to work out what the market is expecting and whether the company is living up to those expectations. Traders will often buy a stock as the hype increases, and then sell when the news is released – unless it’s much better than expected. If they believe the amount of hype is unrealistic, they may even go short just before the announcement, in anticipation of disappointing news.

If you trade on short-term charts, you can take long and short positions, in the direction of the medium-term trend on a 4-hour, 60-minute or 15-minute chart. Moving average cross-over strategies work well for FAANG stocks on these charts, especially when the hype rate is increasing.

Conclusion

The FAANG stocks are favorites amongst active traders because they are well-known companies that people understand, and because a lot of people follow them, there is lots of volatility and liquidity. The fact that they also have high growth rates means they also have big price moves. These factors all contribute to their popularity amongst traders.

SP500 Index Changing Drastically

The beginning of October brings with it the biggest changes to the SP500 index since 1999. Some sectors and industries will most likely emerge, and some may disappear, with their respective weight in the index changing as well. Additionally, some stocks may move to other sectors. These changes may mostly affect the IT, telecommunications and consumer goods sectors.

Consequently, the weight of the information technology sector may fall from the current 25 percent to 20 percent. A new sector is likely to be created, specifically the communication services sector, which may have a weight of 10 percent in the SP500 index. This new sector will be created by moving all titles from the telecommunications industry, which previously had a weight of 2 percent in the SP500 index. After this, the telecommunication sector will probably cease to exist. In addition, several IT and consumer goods companies will most likely be transferred to this new communications services sector.

Among the stock titles that should complete the emerging communications services industry by moving from the IT sector are Alphabet (Google), the dominant social networking player Facebook, as well as EA, Activision and Take-Two Interactive games. Verizon and AT&T will most likely move from the telecommunications sector. From the consumer discretionary sector, Netflix, Disney, 21st Century Fox, and a number of more companies may join the new communications sector in the near future.

What might be the impacts of changes on investors? There are many of them, and in the long run, many of them are crucial. They relate, for example, to the nature of the sectors, including impacts on growth outlooks, dividend yield, exposure to the cloud or AI trends, automatic or forced the rebalancing of portfolios of hundreds of ETF funds and other aspects.

These changes may have a major impact on the IT sector, which has grown to a quarter of its weight in the SP500 index and, has begun to dominate the index. The two major companies which might be affected by this are Facebook and Alphabet, the two main growth drivers with a very high market capitalization. The ‘new’ technology sector may, therefore, have lower expected future revenue growth, earnings per share and a lower margin than the current or future new communications services sector. The largest companies in the technology sector after this change will probably be Apple (19 percent) and Microsoft (16 percent), followed by Intel (5 percent). These are companies with lower valuations, measured for example by the P/E or P/S multiples, and which also have a lower regulatory risk. On the other hand, these companies have a significantly lower growth outlook and weaker exposure to growing cloud services and artificial intelligence. The nature of the IT sector is changing significantly, so investors focusing on growth titles may be able to assess current changes by rebalancing out their portfolios.

On the contrary, new money can be moved to the newly emerging communications sector. This will probably provide an appealing vision of future growth, as Alphabet, Facebook and Netflix will most likely move here. However, this growth dynamics should be moderated by the AT&T and Verizon telecoms companies, which are growing in the same way as the whole economy (for example, they are defensive stocks). In return, they may provide higher revenue stability and higher dividend yields.

Analysis and opinions provided herein are intended solely for informational and educational purposes and don’t represent a recommendation or an investment advice by TeleTrade. Indiscriminate reliance on illustrative or informational materials may lead to losses.

This article was written by Peter Bukov, one of TeleTrade’s leading analysts. 

The Driverless CopyPortfolio Investment Strategy is Your Chance to Invest in the Future of the Automobile Industry

The “smart” revolution is all around us, as a growing number of common items are becoming highly technological. It happened with the telephone, it happened with TV, it happened in numerous fields of industry – and now it’s happening in the automotive industry. Self-driving cars are very much a reality, and we will be seeing them in rising numbers on the road within the next few years. This evolution of the personal car, which over the years incorporated more and more technology into it, has resulted in a vehicle that no longer needs a human driver – and the financial potential is incredible.

The driverless car will be one of the most tech-heavy products available to consumers, and as such, will combine numerous components from both automakers and high-tech companies. To learn more about the different aspects of the autonomous car industry, projected to become a $7 trillion market(1) eventually, read this blog post.

Being such an innovative field on the one hand, yet being developed by some of the world’s largest, and most recognizable, companies on the other, the driverless car industry presents an interesting thematic investment opportunity. However, since it involves companies from different industries, operating in various markets around the world, building a thematic investment portfolio to track the industry can be challenging. That is why, here at eToro, we are launching the Driverless investment strategy, through which the members of the eToro community can invest in this sector.

The Driverless CopyPortfolio: Composition

This managed portfolio strategy contains an array of global companies, ranging from automakers, through hardware manufacturers, to software companies developing computer vision, navigation systems and other solutions relevant to the sector. The companies span several industries and have an overall impressive global presence – and are all part of the trend that will make driverless cars a common part of our daily lives in the coming years:

Car Manufacturers

  • Tesla (TSLA) – Elon Musk’s electric car company has established itself as one of the most intriguing players in both the tech and automotive industries in the US. The company is developing driverless cars and trucks and is one of the pioneers in automotive innovation.
  • Fiat Chrysler (FCA.MI) – One of the largest automotive corporation in the world, Fiat Chrysler has a strong presence in both the North American and European automobile markets, and is working on its own self-driving car.
  • Toyota (TM) – The world’s largest automakers, Japanese Toyota is known to be a highly reliable carmaker, have a strong international presence, and pioneering innovative technologies, such as one of the world’s first mass-produced hybrid personal cars.
  • Honda (HMC) – Another Japanese carmaker, Honda’s name has also become synonymous with quality, for both family cars and high-end sports cars and luxury sedans. Honda is also working on a driverless car, declaring 2025 as the target year for a nearly fully-autonomous vehicle.
  • Ford (F) – The world’s first automotive company is still one of the most influential carmakers out there. The company has announced plans for robot cars for ride-hailing and delivery purposes and will be testing them in Miami in the near future.
  • Renault (RNO.PA) – The French car giant has taken great strides in the autonomous car department: Its Symbioz concept model has generated positive reviews, both for its extremely advanced artificial-intelligence-assisted driving and its innovative approach of including the smart car as an integral part of the smart home of the future, positioning it as a notable player in the industry.
  • BMW (BMW.DE) – The German luxury car maker is a prominent player in driver-assistance technology, such as self-parking systems, which exist in some of its high-end brands. Therefore, it is no wonder that the company has been very public about its plans for creating a completely autonomous vehicle in the future.
  • Volkswagen (VOW3.DE) – Pledging to add electric motors to all of its models by 2030(2), this German giant is also researching completely autonomous cars. The VW I.D. Vizzion concept model unveiled by the company is a fully self-driving car, that doesn’t even have a steering wheel or pedals – it is designed to do all of the driving for the passenger.
  • General Motors (GM) – The largest car manufacturer in the US, GM is no stranger to innovation. In the early 1990s, GM completed the development of the world’s first serial electric car, the EV1. Despite later being pulled from production, GM has proved that it is ready for big changes in serial manufacturing – a quality that will serve it well when the market tilts towards the driverless.
  • Tata Motors (TTM) – India’s largest car manufacturer, which is part of a $151 billion conglomerate, is actively testing autonomous micro-cars. According to Tata, it might be one of the first companies to roll out mass-produced self-driving cars.
  • Caterpillar (CAT) – One of the largest heavy industry vehicle manufacturers in the world, Caterpillar is developing driverless trucks that could revolutionize many industries. In fact, the company is no stranger to automation, as several of its products already include self-driving trucks and other heavy vehicles, used by mining and construction companies around the world.
  • Delphi (DLPH) – This auto parts company is one of the world leaders when it comes to electrical systems and software for vehicles. Its products could play an instrumental part in the linking of cars to advanced computer system required for autonomous driving.
  • Ferrari (RACE) – The Italian supercar’s name is synonymous with luxury and speed. While it has distanced itself from the autonomous car space, it did declare that it is working on a fully electric supercar, which will rival the likes of Tesla.
  • Volvo (VOLV-A.ST) – Swedish carmaker Volvo already has high-tech driver-assistance solutions in some of its models, which is a significant step in the direction of a fully autonomous vehicle.

Software Companies

  • Alphabet (GOOG) – Google’s parent company is also the owner of Waymo, a company who already has self-driving cars roaming the streets of Silicon Valley. Unlike some other tech companies, who’ve kept their progress under wraps, Waymo has been very public with its driverless car prototypes and their performance.
  • Alibaba (BABA) – The Chinese retail giant is known for its massive interest in technological innovation. Therefore, it is no wonder that the company has confirmed that it is also in the race for developing a self-driving car, alongside other tech companies.
  • Baidu (BIDU) – Perhaps one of the strongest competitors in the race of launching the first road-ready autonomous car, Baidu has enjoyed the support of the Chinese government and is manufacturing and testing autonomous cars and buses. According to the company’s Apollo project timeline, Baidu will have a fully autonomous car ready for mass production by 2021.
  • Microsoft (MSFT) – One of the largest tech corporations in the world, Microsoft is also heavily involved in implementing its technology in driverless cars. Some of the cars that use Microsoft’s technology are already being tested in several locations around the world.
  • Blackberry (BBRY) – The former smartphone giant has pivoted into other areas in recent years, including software development. Blackberry is developing software that will be used in the autonomous car industry and has a partnership in place with Chinese giant Baidu.
  • Intel (INTC) – According to the company, Intel has a chip in virtually every self-driving car that is being tested today. Moreover, the company strengthened its grip on the market by acquiring Mobileye, a startup which develops computer vision driver-assisting technology, for a whopping $15 billion.

Hardware Manufacturers

  • Apple (AAPL) – The world’s largest company has a strong presence in numerous fields of technology – and autonomous driving is no exception. Apple has been quite secretive about its driverless plans, but reports suggest the company is developing a brand new self-driving car of its own.
  • Nvidia (NVDA) – Since an autonomous car requires great computing power, it is in need of strong processors. Nvidia is one of the world’s leading manufacturers of processors for some of the most performance-based computer functions, such as the real-time rendering of graphics-heavy computer games. Therefore, it is only natural that the company will also be taking part in making processors for self-driving cars.
  • STMicroElectronics (STM.MI) – Europe’s largest semiconductor manufacturer, ST is also one of the companies taking part in creating the computerised “brains” that will steer the cars of the future.
  • Infineon (IFX.DE) – This German chipmaker is developing semiconductors used in both driver-assistance systems and driverless cars. Teaming up with leading car makers, such as German luxury brand Audi, Infineon could serve a major role in the future of the automotive industry.
  • Texas Instruments (TXN) – Developing semiconductors and various sensors for more than 80 years, Texas Instruments is making its way into the autonomous driving realm. In 2017, the company unveiled a new array of sensors that can be used for autonomous cars, drones and more(3).
  • Advanced Micro Devices Inc (AMD) – A power player in the microchip industry, AMD is known for offering computing solutions that are more affordable than its main competitors, without compromising on performance. The company started hiring personnel for its AMD automotive department, which strongly suggests it is venturing into the field.
  • Dialog Semiconductor (DLG.DE) – This German semiconductor manufacturer has reportedly been involved in the early stages of Apple’s self-driving cars. While currently it seems that Apple chose to go another way, Dialog does have the capability to become a leading developer of hardware for autonomous vehicles.
  • MaxLinear (MXL) – Developing hardware such as semiconductors and radio transmitters, this American company is directing some of its efforts into developing components to serve the self-driving car industry.
  • NXP Semiconductors (NXPI) – This Dutch semiconductor manufacturer already has a strong foothold in the autonomous car industry, as it is one of the companies chosen by Chinese Baidu to help construct its driverless cars.
  • Skyworks (SWKS) – Based in the US, Skyworks Solutions has manufactured some wireless transmitters that are being used for autonomous features in current cars. The company’s experience in the field could serve as a strong foundation for its future business in the driverless car space.
  • HELLA (HLE.DE) – A well-known supplier of parts and subsystems for the automotive industry, HELLA has announced that it is strategically entering the driverless space in 2018(4).
  • EnerSys (ENS) – This battery producer has its products powering numerous cars and aerospace vehicles. As the automobile market shifts towards being driverless and electric, EnerSys could be a dominant player, producing the batteries powering these vehicles.
  • Visteon (VC) – This car electronics and computing company spun off from Ford in the year 2000. Visteon has developed a unique platform for driverless cars, which enables the car’s computer to decipher its surroundings and drive itself.

Each stock within the investment strategy’s composition is given equal allocation, and it is rebalanced by the eToro Investment Committee periodically. The minimum investment using the Driverless investment strategy is $5,000.

Investing in the self-driving car industry

It is obvious that there are numerous players and various companies operating in the driverless car space. In coming years, it is likely that more companies, both existing and new, will join the industry, while the autonomous car becomes a mass-produced, global phenomenon. As the industry takes form, eToro enables you to become part of the first wave of investors to take part in this exciting new automotive/technology sector. Using the Driverless CopyPortfolio, you can access a fully allocated, managed investment portfolio and gain exposure to the autonomous car industry.

New Channel For Brands Promotion That Will Blast Advertising Market

Imagine a perfect world where the advertisement of your brand is shown only to target audience any time they use their phones. The targeting is based on location, gender, education and other characteristics which give advertisers and brands only real views for real possible clients. The advertising market launches more and more application that is developed in accordance with brands’ requirements and provide a possibility to set detailed configurations and make the promotion process simpler. One of the companies has recently launched a mobile application which is claimed to become the next revolution in the advertising market and we are about to tell you why it worths your attention.

According to Statista, there will be 2,5 billion people using smartphones by 2019. Mobile users unlock their phones from 80 to 110 times per day. At the same time, 69% of consumers from 18 to 39 years old use mobile phones for a research of products before purchasing them. Mobile devices automatically become a new channel for brands promotion as people simply cannot imagine their lives without their phones. Applications for smartphones will definitely change the advertising market.

What is the new technology?

Emarketer research states that $101 billion was spent on mobile ads globally last year which is 5 times more than in 2012. Spendings in this sector will only increase.

EasyVisual is an advertising network that before the launch of the app has already had a 3,5 million audience in 190 countries including South Korea, China, Vietnam, Poland, Slovakia, Germany, Ukraine, Turkey, Czech Republic, Israel. The company has made a right choice and decided to use as much potential of smartphones as possible in order to make brands promotion successful and cost-effective.

Banners App and its benefits

Advertising of cryptocurrencies hasn’t become simpler with the development of the blockchain technology and its fast increasing popularity. Facebook was the first social network to forbid crypto ads at the time of the Bitcoin, Ethereum and Ripple bubble. Web giants like Google, Bing, and Twitter have followed by as well. It’s getting more complicated to promote crypto projects and coins, so the advertising market comes up with new ideas and approaches in order to give cryptocurrencies a chance to get audience awareness on the same level as other products and services.

One of the ways to solve the existing problem for crypto advertisement is to launch a mobile application. For example, Banners App is based on Android operating system and doesn’t have any ad restrictions for crypto. The app can be downloaded from Google Play and is activated any time a user unlocks a phone. Users indicated their personal information in the app: location, gender, marital status, education, languages, interests, professional achievements, and wellness. The targeting is based on the following characteristics. Besides, users can set the number of times they want to see the ad.

By using Banners App brands and advertisers get:

  • A mobile application based on the leading and more profitable operating system in the market;
  • Statistical data on advertising campaign: number of real views and a conversion rate of the advertisement;
  • Payment for real views of the ad that is shown only to the target audience.

Thanks to EasyVisual there will be no more useless advertisement and money spent on the promotion will prove its worth.

Battle Between Optimism and Fear Could Fuel Stock Market Volatility

The major U.S. equity markets lost ground last week with the broad-based S&P 500 Index dropping more than 1% for the first time in two months. The Dow Jones Industrial Average outperformed the other major indexes, but still lost 0.2% last week. The biggest loser was the technology-heavy NASDAQ Index, which logged its worst week in nearly six months.

For the week, the benchmark S&P 500 Index closed at 2871.68, down 1.0%. It’s up 7.4% for the year. The blue chip Dow Jones Industrial Average finished at 25916.54, down 0.2%. In 2018, it’s up 4.8%. The tech-driven NASDAQ Composite settled at 7904.20, down 2.6%. However, it is still up double-digits for the year at 14.5%.

Although the government reported robust jobs data with the economy adding more than 200,000 jobs and wages rising 0.4% in August or 2.9% annually, the good news failed to generate enough upside momentum to overcome the downward pressure created by escalating trade concerns.

The failure by investors to drive stocks higher on Friday strongly suggests that uncertain trade negotiations are the headline risk at this time. The employment data shows that wages are rising at the fastest clip in nearly a decade. This should put more money in consumers’ pockets, which should help the economy grow at a faster clip.

However, it also means that with unemployment reaching nearly a 50-year low at 3.9%, fewer available workers are available to add. Furthermore, rising wages, combined with the 18-year high in consumer confidence, suggests inflation will continue to firm.

This should prompt the Fed to continue to tighten at perhaps a faster pace. Since lower rates provided the energy to drive stocks higher over the past 10-years, tighter Fed policy could slow down stock market gains.


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Essentially, last week’s price action suggests a looming battle between optimism and fear. These are the ingredients for heightened volatility. Rising rates, domestic political uncertainty, lingering geopolitical risks and upcoming midterm elections may cause investors to step back a little and reassess the current financial market environment. Although it’s too early to predict a top in the market, we can say that there are signs that we could be in the later stages of the bull market cycle.

Technology stocks have led the major indexes higher this year, and they could fuel any substantial near-term correction. Some analysts are saying that last week’s sharp sell-off in the chipmaker sector was the “canary in the coalmine”. However, further weakness in social media stocks and the “Trillion-Dollar Twins” – Apple and Amazon, could be the major catalysts driving the price action this week.

Global Funds in FAANGs Today, BANNGs Tomorrow?

BANNG = Barrick Gold, Agnico Eagle, Newmont Mining, Newcrest Mining, and Goldcorp. They are the collection of gold stocks that would appear in all the major gold stocks ETFs, major indices in their respective countries. They have the liquidity, market cap, dividends, along with being the group of some of the largest gold miners in the world. Barrick and Newmont are the largest gold miners in the world. Both FAANG and BANNG stocks are in a global equity fund managers MSCI ACWI Index (All Country World Index). But how in love are these global fund managers with FAANGs, and how despised are they with BANNGs?

This is the first-time investors can see how underweight Global Equity Funds are in gold’s BANNG’s stocks.

How Many Global Equity Funds Hold FAANGs & BANNGs?

When looking at the 270 Global Equity Funds, with ~480 billion in AUM, we have seen the number of funds owning FAANG’s risen from 1 in 2 (51.4%) to 7 in 10, but the number of funds holding FAANG’s has been drifting down since April 2017, when it was 72.38%, but not by much to 69% at the end of July 2018. They have been clearly selling into the rally as retail investors continue to hold on.

Global equity funds have been selling into a strength this year, building a larger underweight in FAANG and tech-related stocks. Some of that selling has been reallocated into Materials stocks but the gulf in ownership is still huge, this has further to go.Steve Holden, Founder at Copley Fund Research

This is in contrast to BANNGs today, where only 1 in 13 (7.7%) global equity fund managers have any exposure to the BANNG group. 1 in 3 funds held the BANNG’s during gold’s peak in 2011 and even held them well after gold peaked, 31.1% of global equity fund managers peaked in January 2012. The number of global fund managers didn’t start to reduce exposure until the second quarter of 2012, and more meaningful in the second half of 2012. This is almost one year after the gold price peaked.

FAANG vs BANNG

How Much Exposure Do Global Equity Funds Have to FAAANGs & BAANGs?

When we look at the funds with a global mandate, the average weight to the basket of FAANG’s has more than doubled from 2.0% to 4.6% since April 2011. But fund managers have held the line in keeping their FAANG exposure to no more than 4.5%. This is in contrast to BANNG’s that saw their exposure in global mandate funds fall by more than 90%, from a high of 0.061% to 0.068% at the low in 2013, and currently at 0.13%.

Let’s repeat that, Global equity fund managers only have an average weight of 0.13% allocation across ALL BANNGs. This presents a huge untapped opportunity for investors. Global Funds missed the runup in the gold price in the first half of 2018, as fund exposure continues to fall.

FANNG vs BANNG 2

How Many Funds Are Overweight FAANG’s & BANNG’s?

With all that exposure by global equity managers, only 29.2% of global equity funds were overweight FAANGs, down from a high in 2011, when more than 44.4% of global equity fund managers were overweight FAANGs, relative to the MSCI All-Country World Index. Interestingly, 7% of the global fund managers were overweight the BANNG STOCKS, down from a peak of 24.9% in February 2012.

FAANG vs BANNG 3

The Newmont Edge

If capital continues to flow into the US, Newmont Mining has an edge over the other BANNGs, because it is the only company that is in the S&P 500. No other BANNG will be able to do this unless they change to being domiciled to the U.S.

Over at Barrick, Executive Chairman John Thornton is taking a non-traditional approach to the gold sector, focusing on profits over production ounces. He is taking his non-mining background and focusing on creating a consistently profitable business, with the aim that many of the diversified miners have done. Mr. Thornton doesn’t have to follow the standard norms or practices as to what has been in the past, potentially setting up the company to outperform its peers as its taking an unconventional approach.

We think its welcomed. “(Thornton) doesn’t have the DNA of a mining manager, or a mining family industry executive” (National Post). We would counter, that the one thing counts for shareholders, and that is delivering shareholder performance over anything else. If he is able to deliver on earnings, the share price will follow.

Summary

The contrarian view over the next 2-3 years puts the odds in favor of BANNG’s outperforming FAANGs, as FAANGss come under political pressure, typically highlighting the end of a sector run. Global Equity Fund Managers are light on BANNG’s, so those positioned with a view over a 2-3 year time horizon will be able to capitalize on fund flows back into the sector.

Tech vs Gold

While governments are opening up to miners to expand in their countries to create jobs as we have seen in Canada, Brazil, and the United States, the Risk-Reward for fund managers presents an opportunity shift from FAANG’s to BANNG’s with better asymmetric opportunities. We think this is the beginning of BANNGs versus FAANGs as we see a sector rotation into materials and FAANGs comes under political pressure, a common occurrence at the end of a sector cycle.

This article was written by Paul Farrugia, BCom. Paul is the President & CEO of First Macro Capital. He helps his readers identify mining stocks to hold for the long-term. He provides a checklist to find winning gold and silver miner stocks and any commodity producer.

IoT Platform Wars Have Begun, Blockchain Might Foster a Win-Win for All Stakeholders

Internet of Things (IoT) is here to stay because big data is the future of business and IoT provides a seamless way to gather this data. IoT simply refers to billions of devices connected to the Internet, assigned IP addresses to actively collect and share data. IoT can effectively transform otherwise “dumb” devices into smart devices that could take part in both machine-to-machine communications and machine-to-human communications for a seamless merger of digital and physical words.

Analysts at Gartner expect that the IoT industry will continue to grow and the number of IoT devices in use will reach 20.4 billion by 2020. The analysts also noted that total spending on IoT endpoints and services will reach $2.9 trillion by 2020. Interestingly, getting consumers to ditch their current devices in favor IoT enabled devices still appears to be an uphill task. This piece provides insight into how blockchain could facilitate the faster adoption of IoT in the mass market.

The platform wars in IoT

In mobile technology, the war of platforms is predominantly between Apple’s (NASDAQ:AAPL) iOS and Google (NASDAQ:GOOGL)’s Android OS. In the desktop, the platform battle is predominantly between Microsoft Corporations (NASDAQ:MSFT) Windows and Apple’s MacOS. In gaming, there’s an ongoing platform war between Microsoft’s Xbox and Sony’s PlayStation.

Interestingly, in the IoT segment, there are many different platforms – the likes of IBM, Microsoft, GE, Bosch, Siemens and hundreds of emergent start-ups are trying to build the market-leading IoT platform.

Unfortunately, the fragmented nature of the IoT platform market also makes it hard for OEMs (original equipment manufacturer) to know which platform would make the best business sense for IoT integration with their devices. The current conundrum of the IoT platform wars is that OEMs don’t want to build devices for a platform that doesn’t have any existing users. The fact that OEMs are cautious about pitching their tent on a platform that doesn’t have users also means that IoT devices aren’t being produced as fast as one would have imagined.

Blockchain could incentivize a faster adoption of IoT in the mass-market

Blockchain technology in practical terms is a decentralized network on which users can transfer unique pieces of digital property to other users with the guarantee that the transfer is secure, visible to everybody on the network, and such that the legitimacy of the transfer cannot be challenged. Blockchain technology could encourage data-sharing that would facilitate the mainstream adoption of IoT systems.

A blockchain-based platform could be open sourced, making it easy for all OEMs to build devices that can be integrated to function in an IoT marketplace without being forced to adopt a protocol from any single platform. For instance, blockchain-based IOTW is a platform trying to transform all IoT devices into micro-mining rigs for the cryptocurrency. Many of the existing devices are being retroactively outfitted with IoT capabilities. However, these devices often end up running outdated software that requires consistent manual patches and upgrades.

With IOTW, users don’t need to buy new hardware or commit to repetitive software upgrades on their existing devices. All that is required for existing devices to connect to the IOTW ecosystem is a firmware upgrade from an open SDK solution. Interestingly, once the device is turned on, it will serve the dual purpose of participating in an IoT marketplace and mining cryptocurrencies without any significant increase in power consumption.

More interesting is the fact that IoT device owners will be rewarded with IOTW coins for participating in its data marketplace. The coins can then be used to buy media content, services, or goods in open markets. Device owners can also leverage the coins to pay for services or spare parts on their devices. The IOTW is based on the Ethereum platform and can be exchanged with Ether coins.

2 stocks facilitating growth in the IoT Space

While most IoT companies come out with promises of how they intend to take over the world with their futuristic projects; investors can look at opportunities to make short, medium, and long-term plays. Below are 2 IoT stocks to add to your watchlist as we head into Q4 2018.

Intel Corporation (NASDAQ:INTL)

Intel Corporation (NASDAQ:INTL), is the second largest and highest valued semiconductor and chipmaker in the world. Intel has a strong footprint in the global IoT market, having unveiled its IoT platform for coordinating and managing the security and connectivity of connected devices in 2014. Over the last three years, Intel has worked with some of the largest tech firms to integrate Intel IoT platform with open standards for increased interoperability.

Intel Chart
Intel Chart

In the last three year since launching its IoT division, the shares of Intel have climbed by 74.31% and its quarterly revenue has surged 17.26% as seen in the chart above. In Q2 2018, Intel reported earnings of $1.04 per share on revenue of $16.96B. The reported top and bottom line did outperform the consensus analysts’ estimate of earnings of $0.96 per share on earnings of $16.77B. For what it’s worth, Intel has consistently delivered a positive surprise on price and EPS estimates in the last three quarters.

Texas Instrument Incorporated

Texas Instrument Incorporated (NASDAQ:TXN) is another major stakeholder in the global IoT market. In 2014, Texas Instruments cemented its presence in the IoT space when it introduced its Internet of Things (IoT) ecosystem for third-party cloud providers to enable devices manufacturers to use it’s TI technology to connect to the IoT more easily and rapidly. By leveraging Texas Instruments’ processors, a microcontroller (MCU), and wireless connectivity solutions; companies such as LogMeIn, IBM, Spark, Thingsquare, ARM, 2lemetry, and ARM have been able to launch a wide cross-section of IoT solutions across multiple sectors.

Texas Instruments
Texas Instruments

In the last 4 years of launching its IoT ecosystem, the shares price of Texas Instruments has surged by 147% and its quarterly revenue has increased by 14.74% in the same period as seen in the chart above. In Q2 2018, Texas Instruments reported earnings per share of $1.40 on revenue of $4.02 billion to beat the consensus analyst estimate of earnings of $1.30 per share on revenue of $3.96 billion. It is also important to note that Texas Instruments has consistently delivered a positive surprise on price and EPS estimates in the last three quarters.

Volatility Today Could Start with Personal Spending and End with Apple iPhone Sales

From start to finish, today’s stock market trading session has the potential to be one of the most volatile of the year, but that’s just on paper because volatility is usually triggered by surprises in the reports or in the news. I don’t know of any traders who come into a session saying, “I’m going to cause some volatility today.” Usually, they are just focused on buying and selling. However, they do hope for volatility when they are holding a position in the right direction.

Shortly before the cash market opening, investors will get the opportunity to react to the latest data on Core PCE prices, which is often called the Fed’s preferred inflation gauge. It’s supposed to come in at 2.0% on an annual basis if the monthly number comes in at 0.1%.

The Employment Cost Index is expected to come in at 0.7%. Both Personal Spending and Personal income are forecast at 0.4%.

Later in the session, the Conference Board will release its report on Consumer Confidence. It is expected to come in at 126.5, slightly below last month’s 126.4 reading.

In June, the 126.4 reading showed a drop from a revised 128.8 in May. It also came in below a 128.1 forecast.

The low number reflected American sentiment that was generally mixed about current economic conditions; however, positive feelings for future business conditions and income prospects showed a decrease.

“Consumers’ assessment of present-day conditions was relatively unchanged, suggesting that the level of economic growth remains strong,” said Lynn Franco, Director of Economic Indicators at the Conference Board. “While expectations remain high by historical standards, the modest curtailment in optimism suggests that consumers do not foresee the economy gaining much momentum in the months ahead.”

Looking at current market conditions, I think the game-changing reports today will be Personal Spending and Consumer Confidence. These two reports could raise red flags about the future strength of the economy if they come in lower-than-expected.

Friday’s second-quarter GDP report was relatively strong, but what do you expect when you cut taxes then threaten tariffs that encourage producers to sell all they can before prices increase. Looking into the future, third and fourth-quarter GDP are likely to fall short of expectations if consumers decide to tighten their purse strings.

If consumers are truly worried about the impact of a potential trade war on their jobs and their spending habits then these concerns are likely to be reflected in today’s Personal Spending and Consumer Confidence reports. If there are going to be surprised in today’s reports then watch these two today.


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Apple Earnings

If surprises in the personal spending and consumer confidence reports don’t move the markets then today’s earnings report from Apple should. Today’s report will be released after the bell so its impact will be felt in the after-market, the futures market and tomorrow morning.

Traders are pricing in earnings per share of $2.18, revenue at $52.34 billion and iPhone unit sales of 41.79 million.

Apple stands apart from the other FANG stocks. Amazon and Netflix are online sellers and Google and Facebook are media-based. What separates it from the other companies is iPhone sales. This is the number that should be watched today.

So if you’re looking to time volatility today then watch the markets at 1230 GMT with the release of the Personal Spending number, at 1400 GMT when the Consumer Confidence Number comes out and about 20:00 GMT when Apple releases its reports.

Social-Media Giant Facebook No Concern for True Technology Investors

Last Thursday’s “gap and go” sell-off in Facebook was ugly for long investors but it should only serve as a reminder of what could happen to any stock at any time, not just this social media giant. Furthermore, it should not be used as an indicator “of things to come” for the FANG stocks or the entire technology sector.

Sure, it could happen in other technology stocks because investors are loaded up on the long side in these stocks because for years, they have been the best game in town. So far this year, the tech-based NASDAQ Composite is up 12.1%, while the benchmark S&P 500 is up 5.4% and the blue-chip Dow Jones Industrial Average has posted a 3.0% gain.

Every time a revenue and earnings report is posted, investors run the risk that a company will miss on both sides, triggering a mass exit from the stock on profit-taking. Yes, profit-taking, not fresh short selling. That’s why savvy investors diversify their holdings.

Investors in a bull market are constantly looking for value. Some see higher prices in the future and decide to buy now in anticipation of higher prices. Some play for value and prefer to buy dips. With Facebook, investors perceived the stock as overvalued based on future growth projections so they took a little off the top.

The size of the sell-off was obviously a headlines grabber, but you have to look at who was behind the selling. It wasn’t mom and pop investors, nor was it all mutual fund sellers. They may have booked profits when the bad news came out, but the majority of the selling took place during the over hours market and it was primarily dominated by the over-weighted hedge funds.

According to a recent survey by Goldman Sachs, more than 10 percent of hedge funds counted Facebook as a top 10 holding.

The hedge funds were in massive long positions based on first-quarter regulatory filings. This was in contrast to the mutual funds, which have reportedly been trimming their positions in so-called FANG stocks since late 2016, the Goldman report said on Thursday.

In other words, the mutual funds were hit less-hard from the Facebook debacle than the highly speculative hedge funds.


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Contagion Effect?

Firstly, let’s look at the weightings of the FAANG stocks – Facebook, Amazon, Apple, Netflix and Google (Alphabet) – in the NASDAQ Composite Index. Facebook is weighted 4.983 percent, Amazon 10.475 percent, Apple is 11.151 percent, Netflix is 1.834 percent and Google (Alphabet) is 5.134 percent.

It may be top-weighted in Amazon and Apple, but the others seem to be fine. A sell-off equal to Facebook’s move will, therefore, have a greater effect on the index then Thursday’s move in the social media giant. So the 1.06% loss in the index last week was relatively small when compared to, for example, the steep break in February.

Secondly, analysts are now saying that Amazon is beginning to decouple from the FAANGs. Remember that Amazon released earnings the day after Facebook. Although they were mixed, the stock still rose so there goes the contagion argument.

It looks like the contagion argument may be valid for Facebook and Twitter since both sold off sharply last week and they are both social media companies. However, given the history of the social media sub-sector (see AOL and Myspace), this can be a volatile group of stocks. It is truly an “only the strong survive” industry.

In conclusion, I have to say that based on the second-quarter earnings results, the technology sector is fine and should before well the rest of the year even with the “blip” on the chart from Facebook. As of Friday, earnings from more than half of the companies in the S&P 500 Index have reported, and so far 88% beat on earnings while 74% had better-than-expected revenue. Furthermore, technology stocks continue to look good, with 35 of 36 companies beating on the bottom line.

So when it comes to assessing the value of an entire sector, try not to get caught up in the headlines about how money was lost, and the historical size of the crash, keep an eye on the entire sector. Furthermore, if money leaves Facebook, a social media company, it may flow into other stocks in the sector including Microsoft, Apple, Netflix or Amazon.

What To Expect Ahead of A Busy Earnings Week?

Major U.S Benchmark indices finished the week on the red as investors reacted to mixed earnings reports. Alphabet Inc. (NASDAQ: GOOGL) and Amazon.com, Inc. (NASDAQ: AMZN) led the foray in beating earnings estimates as Facebook, Inc. (NASDAQ: FB) Imploded on missing estimates and providing guidance that fell short of expectations.

It yet again promises to be a busy week as a string of high profile companies is expected to post their quarterly earnings results.

Earnings Report expectations

Apple Inc. (NASDAQ: AAPL)

In the wake of Google and Amazon beating estimates, focus this week shifts towards Apple Inc. (NASDAQ: AAPL) given the amount of market cap it commands. The iPhone maker is to post its second earnings report after market close on July 31, 2018.  Analysts expect the company to post revenue of $61.14 billion representing a 15% year-over-year increase. Earnings per share, on the other hand, are projected at $2.16 a share.

Wall Street will also pay close attention to the number of iPhones the company sold in the second quarter, after a disappointing first quarter whereby unit sales rose by only 1.5 million. In the March quarter, service revenue rose 31% to $9.19 billion thereby helping the company beat sales and EPS expectations.

For the June quarter, Wall Street expects service revenue to come in at $9.21 billion representing a 21% increase. Investors will also pay close attention to other products sales made up of headphones, Apple TV Set-tops, as well as Apple Watch. Expectations are that the company will report a 34% increase in revenues in this segment at $3.68 billion.

Tesla Inc. (NASDAQ: TSLA)

Tesla Inc. (NASDAQ: TSLA) needs to post stellar second-quarter earnings report to avert a further implosion of the stock. After initially rising to highs of $373 a share, the stock has come down tumbling to below the $300 share mark.

Tesla reports on August 1, 2018, having achieved a significant milestone in the production of 5,000 Model 3s, a week. However, the company is expected to report a net loss of $3.49 a share. Investors will focus their attention on the number of Model 3 units the company delivered in the quarter.

The expectation is high that the company did deliver 10,000 more units in Q2 compared to Q1. Revenue, on the other hand, is expected at $4 billion on the sale of the additional cars. Attention will also be on the company’s expenditure, a headwind that has clobbered the company for years preventing it from turning in a profit.

Q3 Guidance will also have to come overboard to prevent further slide of the stock. Given that the company has hit 5,000 a week production milestone investors expect the company to provide a pathway to profitability in Q3.

Caterpillar Inc. (NYSE: CAT)

Caterpillar Inc. (NYSE: CAT) will report its earnings report on July 30, 2018, before the earnings bell. After delivering a 120% year-over-year improvement in earnings in Q1, expectations are high that the trajectory continued in Q2.  Investors expect the company to report a 22% increase in total sales, projected at $13.8 billion.

Earnings per share, on the other hand, should tickle in at $2.66 a share, representing a 79% year-over-year increase. The earnings beat is what Caterpillar needs if the stock is to bounce back after underperforming the market in the first half of the year.

Loews Corporation (NYSE: L)

Just like Caterpillar, Loews Corporation (NYSE: L) is scheduled to report on July 30, 2018, before the market opens. In Q1, the company reported a 14% surprise earnings beat. Expectations are high that the company beat estimates in Q2 on the strong performance of its CAN financials and Loews Hotels units Consensus estimates indicate the company could post earnings of 0.73 cents a share representing 3.9% year-over-year decrease.

AK Steel Holding Corporation (NYSE: AKS)

AK Steel Holding Corporation (NYSE: AKS) will report earnings on July 30, 2018, with expectations high that the company will beat estimates. The stock has already broken out of a critical resistance level in the wake of other steel companies reporting stellar quarterly financial results.

The consensus forecast for the quarter is that the company will report earnings of 23 cents a share, an increase from 19 cents a share reported a year earlier. Steel stocks are expected to continue powering high, the sector has emerged as a bright spot in the economy.

Procter & Gamble Co (NYSE: PG)

The owner of blockbuster brands like Gillett Razors and Pampers Diapers, Procter & Gamble Co (NYSE: PG) is to report its fourth-quarter and full year financial results on July 31, 2018. At the start of the year, the company forecasted organic sales gains of 2.5% up from an initial estimate of 2%.

For the current quarter, Wall Street expects the company to report revenues of $16.55 billion. Full-year sales, on the other hand, are expected at $66.87 billion. Investors will also want to hear what the company is doing as part of its cost-cutting drive. Cost cuts are expected to allow the company to venture into other growth areas.

Pfizer Inc. (NYSE: PFE)

Pharmaceutical giant Pfizer Inc. (NYSE: PFE) is to report its second-quarter earnings report before market open on July 31, 2018. The focus will be on whether the company maintained the positive earning streak in the quarter, after a positive earnings surprise of 4.05% in Q1.

Consensus estimates indicate the company could report EPS of $0.74 a share on revenues of $13.31 billion.

DowDuPont Inc. (NYSE: DWDP)

DowDuPont Inc. (NYSE: DWDP) is to report its recent quarterly earnings on August 2, 2018, before market open. Last year same quarter, the company reported earnings per share of $1.12, beating analyst’s expectations of $1.1 share. For the current quarter, investors expect the company to post EPS of $1.3 a share. Revenues, on the other hand, should come in at $23.6 billion.

Baidu Inc. (ADR) (NASDAQ: BIDU)

Investor’s sentiments are high on Chinese internet giant Baidu Inc. (ADR) (NASDAQ: BIDU) posting impressive quarterly results after the market close on July 31, 2018. Consensus estimates indicate the company could post a 30.2% year over year increase in sales that could come in at $4.01 billion. For the full year, the search giant is expected to post sales of $16.09 billion. Analysts expect the company to issue a sales guidance of $19.46 billion for next year.

Sprint Corp (NYSE: S)

Sprint Corp (NYSE: S) is to report its Q1 financial results on July 30, 2018. Wall Street expects the company to report earnings per share of $0.01 a share compared to $0.05 reported last year. Total revenue is poised to decline 0.7% year over year to $8.1 billion.

Teva Pharmaceutical Industries Ltd (ADR) ADR (NYSE: TEVA)

Teva Pharmaceutical Industries Ltd (ADR) ADR (NYSE: TEVA) is to report on its recent quarterly earnings report before the market opens on August 2nd, 2018. The expectation is high that the company will post sales of $4.75 billion down from $5.69 billion reported last year. Earnings per share, on the other hand, should come in at $0.67 a share.

Shake Shack Inc. (NYSE: SHAK)

Shake Shack Inc. (NYSE: SHAK) is expected to post sales of $110.20 million for the recent quarter after market close on August 2, 2018. Earnings per share are expected at $0.17 a share. The company is also expected to maintain full-year sales estimates of $451.32 million.

Kraft Heinz Co (NASDAQ: KHC)

Kraft Heinz Co (NASDAQ: KHC) will report earnings before markets open on August 3, 2018. Investors expect the company to post EPS of $0.92 a share up from $0.89 a share reported in the previous quarter. Revenue, on the other hand, is expected at $6.59 billion.

What’s Next for Tech Stocks?

In the last week, Facebook Inc. grabbed the headlines once more and once again for all the wrong reasons, with Facebook’s market cap tumbling by over $100bn to sit just above $500bn, as Facebook shares slumped 19%, the market cap collapse being the largest in U.S market history, outdoing Intel’s $90bn tumble in the bubble bursting end of the dotcom era.

Tech Stocks Contagion

FAANG has taken the headlines by storm ever since the U.S equity market rally began, largely in response to the U.S Presidential Election result back in late 2016 and members of the FAANG group have certainly been a major influence in the direction of the broader tech sector and the major U.S and global indexes.

Facebook, Amazon, Apple, Netflix, and Google make up the grouping and the 5-stocks, alongside a more seasoned Microsoft, have continued to ultimately direct the tech sector, not just in the U.S, but also in Asia, where listed companies have significant reliance as a result of partnerships or sales revenues from one of the FANG Members.

Tech stocks have felt the contagion effect that has also weighed on the broader sector and indexes heavily weighted towards the tech sector. The supplier to Apple for instance also has a supplier and in there lies the contagion.

Facebook has faced a tumultuous time of late and, while there was some heavy fallout following the Facebook – Cambridge data scandal that certainly raises many questions over the future of social media platforms as we know it today, it was Facebook’s bread and butter ad revenue and user forecasts attributed to the data scandal that did the damage.

Facebook’s slide and influence across the broader market should perhaps be of greater concern to the U.S government, regulators and governments worldwide than the cryptomarket and future of blockchain technology.

With regulators and government groups tasked with assessing the broader cryptomarket reporting it poses little to no threat to the global financial markets, FAANG members are quite the opposite, with a vast majority of household portfolios holding one, if not all 5 stocks.

No doubt there have been some solid gains enjoyed by many, but at some point, what goes up must come down and as the tides of time shift, sentiment towards a certain platform can also shift and Cambridge Analytics contributed, though whether it’s the end of Facebook remains to be soon.

At the end of the day, while Facebook saw the biggest market cap slide in market history, long-term investors wouldn’t be at fault for missing the 20% share price slide when simply viewing the stock’s 52-week range, with Facebook Inc. still up 17.4% from its 52-week low $149.02.

Whether that brings complacency near-term, investors possibly viewing the stock as being simply 20% cheaper remains to be seen, but it wasn’t long ago that Google faced the wrath of EU regulators, with a fine more akin to the size of fines that European banks coughed up to U.S regulators off the back of breaches to SEC rules and regulations.

While U.S regulators have earned their crust fining European banks by hefty sums since the Global Financial Crisis, European regulators have found a way to hit back and that’s never going to be a good thing for an already fragile sector.

Trade War – Can It Hurt Tech Stocks?

If there was a time when the markets would have preferred the U.S president to let things be, the added attention from Trump and the administration on the tech sector and China’s reported interest and access to U.S tech companies has been another issue faced by investors favouring a sector that has certainly seen a solid run over almost 2-years.

Trump’s trade war with China has left the tech sector heavily exposed and the decision by the U.S to refute China Mobile’s request for entry into the U.S, which comes in the wake of U.S hitting China’s ZTE with sanctions that almost buried one of China’s largest tech companies, has only added to the pressure faced by tech companies.

Tariffs on Chinese goods and expectations of a technology decoupling between U.S and China tech companies is a factor that will add to the pressure. Trump has cited national security as the main reason behind the shift in attitude towards China’s tech companies and to be fair, foreign ownership in anything tech related, particularly the telecoms, should be an issue for any nation and national security and even more so when considering the fact that the cost of cybercrime is estimated to hit $6bn by 2021, quite a jump from $3bn in 2016.

The U.S has plenty to be concerned when considering the fact that both China and Russia share 3rd position behind the U.S and Israel, on best offensive cyber capabilities, the irony being that it was at Russia’s hand that Trump managed to squeeze past Clinton on his way into the Oval Office. Ironically, tech stocks might be a crucial part for a solid national cyber warfare.

Will Twitter and Facebook recover?

With so much uncertainty and sky-high valuations amongst the FAANG stocks, Apple Inc. is in focus this week, with its earnings results due out after the market close on Tuesday 31st July, with Apple Inc. enjoying a consensus buy recommendation ahead of the earnings, based on revenue EPS forecasts.

Not too dissimilar to Facebook and even Twitter, which plunged 20.54% on Friday, in response to a reported slide in monthly users, with warnings of more declines to come in the coming months weighing on investor sentiment, Twitter user numbers have been key to valuing the company and not the platform itself.

Looking away from Social media and stocks that have a heavy reliance on FAANG earnings and growth potential certainly looks to be the way forward for now and, with the trade war showing few signs of coming to an end, tech stocks with a heavy reliance on China, either as a sales market or as a supplier may also need to be carefully considered with the bias towards the negative until there is some resolution to the ongoing trade war.

Social media platforms are beginning to lose popularity at the pace at which they rose in the early years and, while there may be some support from the sheer volume of users, the market’s choice of Facebook and other FAANG members as the tech sector’s barometer may well need to change sooner rather than later.

Facebook Plunge Dragging NASDAQ Lower, Easing of Trade Tensions With Europe Boosting Dow Industrials

The major U.S. stock indexes are trading mixed on Friday, reflecting their exposure to the technology sector and the easing of trade tensions between the United States and the European Union.

The main driver of the price action in the technology sector on Thursday is Facebook. The social media giant represents about 6.026 percent of the NASDAQ Composite Index. Shortly after the cash market opening, it is on pace for its worst one day performance in its history, down over 20 percent on a Q2 revenue miss and disappointing daily active user count.

After the initial news broke on Thursday, shares of Facebook lost about $120 billion in market value while dragging the rest of the technology sector lower. The so-called FAANG stocks – Facebook, Apple, Amazon, Netflix and Google (Alphabet) are also under pressure today on profit-taking. Amazon is set to release its earnings and revenue figures after the close today.

While the NASDAQ Composite is being weighed down by its exposure to technology stocks, Dow stocks are celebrating the easing of tensions over the U.S. trade dispute with the European Union. Shortly after the U.S. cash market opening, the Dow Jones Industrial Average is up over 100 points.

On Wednesday, President Trump announced that the U.S. and the European Union had initiated a “new phase” within their relationship, explaining how both regions would start collaborating in order to lower tariffs and avoid a potential trade war.

Dow components that were beat down during the height of the trade dispute crisis with Europe are roaring back on Thursday. Shares of Caterpillar are up about 0.8 percent. 3M, another company with large overseas revenue exposure, also rose about 1.4 percent.

Amazon Earnings

After the closing bell on Thursday, Amazon is expected to report a jump in profits when it reports second-quarter earnings on Thursday evening. Fueling the surge is expected to be continued growth of its higher-margin businesses, like cloud, advertising and third-party marketplace.

Analysts estimate Amazon will post second-quarter profits of $2.50 per share, or roughly $1.2 billion, according to a Thomson Reuters consensus estimate, up from the 40 cents per share reported a year earlier.

U.S. Economic Data

According to a U.S. government report, new orders for key U.S.-made capital goods increased more than expected in June and shipments surged, pointing to solid growth in business spending on equipment in the second quarter.

The Commerce Department said on Thursday that orders for non-defense capital goods excluding aircraft, rose 0.6 percent last month. Economists had forecast core capital goods orders rising 0.4 percent last month. The report also showed core capital goods orders increased 6.8 percent on a year-on-year basis.

Data for May was revised higher to show the so-called core capital goods orders increasing 0.7 percent instead of the previously reported 0.3 percent gain.

Energy Complex

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday, rising in reaction to the news that Saudi Arabia suspended its oil shipments through a key Red Sea strait in response to an attack on two of its tankers.

Natural gas futures surged early Thursday after government storage data came in lower than expected. According to the U.S. Energy Information Administration, weekly natural gas in the U.S. rose by 24 billion cubic feet (bcf) in the week-ended July 20, below the estimate of 39 billion cubic feet.

Tech Stocks Under Pressure After Facebook Earnings Miss Fuels $125 Billion Loss in Market Value

The major U.S. equity markets are trading lower early Thursday following a strong performance on Wall Street the previous session. The selling pressure is being led by weakness in the technology sector.

At 0235 GMT, the tech-driven September E-mini NASDAQ-100 Index futures contract is down 60.25, or -0.80% at 7408.25. The benchmark September E-mini S&P 500 Index futures contract is at 2835.25, down 6.00 or -0.21% and the blue-chip Dow Jones Industrial Average futures contract is trading 25416, down 34 or -0.13%.

After the bell, disappointing quarterly earnings results from Facebook led to a major decline in after-hour trade. Given the early move, the company is on track to lose more than $125 billion in market value. This represents about a fifth of its value.

Other big technology stocks are also getting hit by a wave of selling pressure. Apple lost about 1 percent. Amazon, which reports after the bell Thursday, lost 2.3 percent. Netflix, which disappointed investors last week, was down about 3 percent in after-hours. Finally, Google parent Alphabet fell 2.4 percent.

Facebook competitors, Twitter and Snap also felt the wrath of sellers. Both lost 4 percent after hours Wednesday.

Triggering the steep drop in Facebook was weaker-than-expected daily active users for last quarter and guidance that said revenue growth would decline sequentially in the second half of this year. Chief Financial Officer David Wehner said shareholders can expect “revenue growth rates to decline by high-single-digit percentages from prior quarters” for the third and fourth quarter.

The Facebook news came as a huge supplies to investors, many of whom stayed long into the report after the NASDAQ Composite Index hit a record during trading Wednesday as investors crowded back into the FANG names once again.

Trump, EU Meeting

The key meeting between U.S. President Donald Trump and European Commission President Jean-Claude Juncker went well on Wednesday with the announcement that they had launched a “new phase” in their relationship.

President Trump said that the two major economies would start negotiations immediately on a number of areas that include working toward “zero tariffs” on industrial goods, and further cooperation on energy issues.

“We agreed today, first of all, to work together towards zero tariffs, zero non-tariff barriers and zero subsidies for the non-auto industrial goods,” Trump said.

Juncker went on to say that the two leaders also agreed that as long as negotiations were ongoing, “we’ll hold off further tariffs and reassess existing tariffs on steel and aluminum” put in place by the Trump administration. “This was a good, constructive meeting,” he added.

U.S. Housing Market Developments

Two key stories stood out on Wednesday. Firstly, according to CoreLogic, southern California home sales hit the brakes in June, falling to the lowest reading for the month in four years. Sales of both new and existing houses and condominiums dropped 11.8 percent year over year, as prices shot up to a record high.

Sales fell 1.1 percent compared with May, but the average change from May to June, going back to 1988, is a 6 percent gain. The report also said that the weakness was especially apparent in sales of newly built homes, which were 47 percent below the June average. Part of that is that builders are putting up fewer homes, so there is simply less to sell.

Secondly, sales of new U.S. single-family homes fell to an eight-month low in June and data for the prior month was revised sharply down, the latest indications that the housing market was slowing down.

According to the U.S. Commerce Department, new home sales dropped 5.3 percent to a seasonally adjusted annual rate of 631,000 units last month, the lowest level since October 2017. May’s sales pace was revised down to 666,000 units from the previously reported 689,000 units.

Traders and economists were looking for new home sales to fall about 2.8 percent to a pace of 670,000 units in June.

Stocks are Growing while Bonds Under Pressure

The situation in the world markets looks controversial. Shares are growing after strong reporting of companies. The shares of Alphabet (#Google) jumped by 3.6% after the market closed on Monday, bringing capitalization of the company to $870 billion on strong quarterly reporting, despite a big fine imposed by the EU. By capitalizing the search engine giant is at a striking distance of Amazon, the 2nd most valuable company after Apple.

In Asia, positive stocks dynamics is supported by news that Beijing will soften the fiscal policy, intending to spur the growth of the economy. The factor of positive dynamics of China looks strong in the short term, probably supporting the demand for risks at the start of trading on Tuesday.

In the calculation for a longer perspective, it is worth paying attention to the yields growth on debt markets and strengthening of safe-haven currencies. In the global market, the dollar grew on Monday, adding 0.3% against the backdrop of fears that the central Bank of Japan and the Eurozone would give up incentives at the time when world growth became less synchronous and robust. These fears fuel the sale of bonds, causing the yields increase.

This is a precondition for a dangerous situation. Bilateral trade tariffs additionally stimulate inflation, which is already close to the target levels or slightly exceeds them in some countries. The lowest unemployment rate in the decade will only accelerate this process.


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At the same time, fears around trade wars harm economic growth, which already shows a slowdown. As a result, global growth is becoming more fragile and less able to survive the tightening of monetary policy. In addition, high inflation will limit the ability of the CBs to stimulate growth.

This article was written by FxPro

Potential BOJ Adjustment to Monetary Policy Fueling Volatility in Debt, Forex Markets

The major Asian stock indexes are moving higher early Tuesday, but traders are expressing concerns over rising bond yields and the falling Chinese Yuan.

At 0342, the Japanese Nikkei is trading 22534.03, up 137.04 or +0.61%. The South Korean Kospi Index is at 2277.54, up 8.23 or +0.36%. In Australia, the S&P/ASX 200 Index is moving up 40.50, or +0.65% at 6267.00 and China’s Shanghai Index is trading higher by 44.39, up 1.55% at 2903.93.

Most of the indexes reversed losses from Monday on the back of a mixed performance on Wall Street. The highlight of the session was the jump in Google parent Alphabet after the company reported expectations-topping second-quarter earnings and revenue on Monday.

Ahead of Tuesday’s session, more than 17 percent of S&P 500 companies have reported earnings for the previous quarter, with 82 percent of those topping expectations, according to FactSet.

U.S. Treasury Markets

U.S. Treasury yields rose on Monday in reaction to a major swing in Japanese interest rates. The yield on the Japanese 10-year note jumped more than 4 basis points Monday to its highest level since February following reports that the Bank of Japan could adjust its monetary policy to make the program more sustainable.

The yield on the U.S. benchmark 10-year Treasury note tracked the move in Japanese yields, rising 7 basis points to 2.96 percent, while the yield on the 30-year Treasury bond moved up to 3.094 percent.

The price action in both the Japanese and U.S. debt markets was fueled by sources who told Reuters that the BOJ is holding preliminary talks on making changes to its interest-rate targeting and stock-buying techniques.

Although BOJ officials made it clear that this wasn’t a tightening move, the debt markets did not respond that way.

Forex

The U.S. Dollar is trading flat to lower against a basket of currencies early Tuesday, following a solid technical reversal bottom the previous session.

The Greenback traded sharply lower against the Japanese Yen early in the session on Monday as Japanese exporters aggressively bought the currency. However, a surge in U.S. Treasury yields to a five-week high made the U.S. Dollar a more attractive investment, leading to the potentially bullish reversal bottom in the USD/JPY.

Some of the early rally by the Yen was driven by Japanese exporters who converted their foreign earnings into the local currency. This was a typical end of the month move. However, the bulk of the rally was ignited by a report that the Bank of Japan was debating moves to scale back its massive monetary stimulus.

Don’t Look Now, but Stocks Could Finish Lower This Week

U.S. equity markets are trading lower on Thursday. Although the newswires haven’t centered on the reason for today’s weakness, I suspect they’ll have some reason by the end of the day.

From the headlines throughout the week, at a glance, one would think the stock markets have been booming this week. However, looking at today’s early price action, you’ll see the NASDAQ Composite trading lower for the week after striking a new all-time high just a few days ago. The benchmark S&P 500 Index and the blue-chip Dow Jones Industrial Average are both in a position to turn lower for the week.

It’s only Thursday, but a lower close for the week in all three major indexes will speak volumes and may even be an indication that we’ve hit our summer highs. A top this early in the second quarter earnings season will definitely come as a surprise since investors have high expectations for this earnings season. According to analysts polled by FactSet, the crowd is expecting to see 20 percent year-over-year profit growth for the second quarter.

However, you have to remember that earnings and revenue reports represent the past and stock prices are supposed to be discounting future events. So while it’s nice to see stocks rallying, across the board weakness in the major indexes should be viewed as a red flag. And with recent data showing money flowing into Index ETFs, investors should be concerned about this week’s price action.

One has to question how much diversification is out there, and one has to worry about how much overlap exists in all these ETFs. Some say that if it wasn’t for the FANG stocks – Facebook, Amazon, Netflix and Google-parent Alphabet, the NASDAQ wouldn’t be performing near as well as it has this year.

We saw earlier this week how fragile the indexes are when Netflix earnings report showed a drop in subscriptions on the same day that Amazon had a glitch in its computer systems in one of its busiest days of the week. Although the sell-off in response to these two events was quick and decisive, it did open the door to the thought of what could happen if all four FANG stocks decided to turn lower at the same time.

We should learn more about how strong or how fragile the stock market is when Amazon releases its earnings and revenue results next week. In the meantime, investors should pay attention to Friday’s close because a lower close may tell us that it may be time to start getting defensive about the stock market.


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While it’s always nice to think about the upside potential of the stock market, it’s equally important to think about the downside risk. Is it possible that investors have been so mesmerized by the quest for $1 trillion in market valuation by Amazon, Apple or Microsoft that investors have forgotten about downside exposure? We could soon find out.

Getting back to the reason for today’s weakness, it could be a combination of events including disappointing earnings, worries over prolonged trade disputes or even Fed Chair Powell’s hawkish talk about rising interest rates. Whatever the reason, keep an eye on Friday’s close because how the market finishes this week may send out an important signal about the status of the market at current price levels.