Analysis: Apple, AMD Navigate Chip Shortage with Focus on Profitable Products

By Stephen Nellis and Subrat Patnaik

Apple Inc said on Tuesday chip shortages had mostly affected its iPad and Mac products in its last quarter, but would start to bite into its mainstay iPhone business, its best seller and major profit driver, in the current quarter.

“We’ll do everything we can to mitigate whatever set of circumstances we’re dealt,” Chief Executive Officer Tim Cook said in a post earnings conference call.

The comments provide an insight into how Apple, known for its deft supply chain management through long-term supply deals with Broadcom Inc and Qualcomm Inc, is dealing with the shortage ahead of the crucial holiday quarter when it sells millions of its new line of flagship phones.

Some analysts believe Apple could be prioritizing chip supplies for its new phones during the July-September quarter, which is typically the sleepiest for iPhone sales as shoppers hold out for upcoming models.

“I think it largely reflects the timing of new product releases, specifically related to new iPhone launches in September,” Angelo Zino, an analyst with research firm CFRA, said of Apple’s warning.

Even in normal times, he said, “new phone cycles typically start off supply constrained given the high demand needs ahead of the holiday selling season.”

And even within Apple’s current lineup, the company is likely to direct the supply chain pain to its least lucrative products, said Jeff Fieldhack, research director at Counterpoint Research.

Its flagship phones also drive revenue from paid subscription services and accessories like AirPods.

“Assuming Apple prioritizes the iPhone 12 family, it probably affects iPads, Macs and older iPhones more,” Fieldhack said.

The global chip shortage stems from a combination of factors including the fallout from last year’s COVID-19 shutdowns and factories struggling to meet demand for semiconductors, which have become omnipresent in an increasingly digitized world.

The supply squeeze took the auto industry by surprise. Car makers like Ford Motor Co and General Motors Co had to halt production lines for their popular pick-ups at a time when demand was booming as economies started to open up.

The auto industry relies almost exclusively on chips from a few manufacturers, so-called foundries, including Taiwan Semiconductor Manufacturing Co (TSMC) and South Korea’s Samsung Electronics Co Ltd. The shortage has exposed this reliance on overseas suppliers as an Achilles’ heel for many companies.

STRATEGIC FOCUS

Technology companies, the traditional consumers of semiconductors, have been more nimble.

Chip designer Advanced Micro Devices, which makes central processor chips for PCs and data center servers, has also been redirecting supplies.

The company, which has a new family of chips that outperform offerings from larger rival Intel Corp, has steadily made gains in unit sales market share against the chip giant, which retains more than 80% of the overall market.

AMD has responded to limited industry capacity by focusing on selling only its most profitable chips, leaving the lower end of the market to Intel, said Dean McCarron of Mercury Research, which tracks market share among chipmakers.

Intel has also been struggling with its own set of challenges with manufacturing in recent years, causing it to fall behind AMD and Nvidia Corp.

“We’re focusing on the most strategic segments of the PC market,” AMD CEO Lisa Su told investors on a conference call.

“We believe that the data center business will continue to be a strong driver for us into the second half of the year.”

(Reporting by Stephen Nellis in San Francisco, Subrat Patnaik in Bengaluru and Danielle Kaye in New York; Editing by Saumyadeb Chakrabarty)

Today’s Market Wrap Up and a Glimpse Into Wednesday

A winning streak on Wall Street came to a screeching halt today after all three of the major indices finished in the red. The Dow Jones Industrial Average, S&P 500 and Nasdaq all ended the day lower after Monday’s record session.

The Nasdaq fell more than 1% as tech stocks tumbled. Investors appear to be taking some profits after five days of gains.

Technology leaders reported their earnings after the closing bell, including Google parent Alphabet, Microsoft and Apple. All three companies shined in different areas, while revenues were strong all around.

Durable Goods orders for items such as vehicles and appliances increased last month, the latest data show, in yet another sign that the economic recovery is in full swing. Supply-chain constraints continue to be a problem, however.

The results buoyed General Electric shares, which climbed 1% higher. GE also reported Q2 earnings, and its aviation division is poised to benefit from a rebound in the travel industry.

The FOMC began a two-day meeting today. And while inflation will no doubt be at the center of the discussions, economists are not expecting any surprises. Stock index futures are under pressure, with the Dow Jones, S&P 500 and Nasdaq all moving lower. Dow futures are down nearly 100 points on Tuesday evening.

Stocks to Watch

  • Apple’s earnings were better than expected, while iPhone sales increased 50% vs. year-ago levels to USD 39.6 billion. The stock is down more than 1% in extended-hours trading as investors worry if Apple can keep the good times rolling, especially in light of chip supply issues.
  • Microsoft just flipped green in after-hours trading with the stock up 1%. The company outperformed analyst estimates on the top and bottom lines. Fourth-quarter revenues soared more than 20% to USD 46.2 billion. Microsoft has a market cap of USD 2.15 trillion.
  • Google parent Alphabet far exceeded Wall Street estimates and benefited from robust online advertising sales.

Look Ahead

The earnings parade is far from over, with Facebook, PayPal, McDonald’s and more all on tap for Wednesday. In addition, Dow stock Boeing will unveil its Q2 results before the opening bell. The company is widely expected to report a loss as it continues to grapple with 787 jet airliner setbacks.

Monstrous Earnings Week Ahead: Tesla, Google, Microsoft, Apple, Facebook and Amazon in Focus

Earnings Calendar For The Week Of July 26

Monday (July 26)

IN THE SPOTLIGHT: TESLA, LOCKHEED MARTIN

TESLA: The California-based electric vehicle and clean energy company is expected to report its second-quarter earnings of $0.94 per share, which represents year-over-year growth of over 113% from $0.44 per share seen in the same quarter a year ago.

The high-performance electric vehicle manufacturer would post revenue growth of about 90% to around $11.4 billion. The electric vehicle producer has beaten earnings three times in the last four quarters.

“A double-fly-wheel. We believe Tesla can leverage its cost leadership in EVs to aggressively expand its user base, over time generating a higher % of revenue from recurring/high-margin services revenue. Services drives the upside. We forecast Tesla’s network services EBITDA as a % of total TSLA EBITDA to reach 11% by 2025, ~18% by 2030 and ~35% by 2040. Tesla Service revenue includes automated driving, infotainment, upgrades, supercharging, maintenance, telematics, etc,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Valuation supportive vs. tech. Including Network Services, Energy & Insurance to our core auto fcst, at $900 Tesla trades at ~29x EV/EBITDA in 2025 and ~6x 2025 sales. Expensive vs. auto but not vs. software/tech comps.”

LOCKHEED MARTIN: The Bethesda, Maryland-based global security and aerospace company is expected to report its second-quarter earnings of $6.53 per share, which represents year-over-year growth of about 13% from $5.79 per share seen in the same quarter a year ago.

The world’s largest defense contractor would post revenue growth of over 4% to around $16.9 billion. It is worth noting that the aerospace company has beaten earnings in all last eight quarters.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 26

Ticker Company EPS Forecast
PSON Pearson £8.40
LMT Lockheed Martin $6.53
PHG Koninklijke Philips $0.47
CHKP Check Point Software Technologies $1.56
LII Lennox International $4.39
RPM RPM International $1.26
BOH Bank of Hawaii $1.31
DORM Dorman Products $1.04
TSLA Tesla $0.94
KOF Coca Cola Femsa Sab De Cv $14.53
ARE Alexandria Real Estate Equities $0.62
AMP Ameriprise Financial $5.20
SUI Sun Communities $0.57
BRO Brown & Brown $0.40
UHS Universal Health Services $2.69
PKG Packaging Of America $1.77
FFIV F5 Networks $2.46
AGNC American Capital Agency $0.65
ACC American Campus Communities -$0.07
AMKR Amkor Technology $0.45
CR Crane $1.39
ADC Agree Realty $0.47
SSD Simpson Manufacturing $1.61
AXTA Axalta Coating Systems $0.46
TNET TriNet $0.81
HXL Hexcel $0.01
RRC Range Resources $0.25
PCH Potlatch $2.55
JJSF J&J Snack Foods $0.76
IBTX Independent Bank $1.31
CATY Cathay General Bancorp $0.83
AIN Albany International $0.73
CALX Calix $0.27
IBA Industrias Bachoco Sab De Cv $1.22
ARI Apollo Commercial Real Est Finance $0.36
PPERY PT Bank Mandiri Persero TBK $0.18
CDNS Cadence Design Systems $0.76
OTIS Otis Worldwide Corp $0.72
RYAAY Ryanair -$1.46
HAS Hasbro $0.48
WWD Woodward $0.98
ACKAY Arcelik ADR $0.46
GT Goodyear Tire & Rubber $0.16
TTM Tata Motors -$0.31
CBU Community Bank System $0.80
SANM Sanmina $0.91
BDN Brandywine Realty $0.01
FRME First Merchants $0.91

Tuesday (July 27)

IN THE SPOTLIGHT: GOOGLE (ALPHABET), MICROSOFT, APPLE

GOOGLE (ALPHABET): The parent of Google and the world’s largest search engine that dominates internet search activity globally is expected to report its second-quarter earnings of $19.33 per share, which represents year-over-year growth of about 90% from $10.13 per share seen in the same quarter a year ago.

The Mountain View, California-based internet giant would post revenue growth of more than 45% to around $56.16 billion. It is worth noting that the company, on average, has delivered an earnings surprise of over 43% in the last four quarters.

Alphabet’s better-than-expected results, which will be announced on Tuesday, July 27, would help the stock hit new all-time highs. Alphabet shares surged more than 50% so far this year. On Friday, the stock closed at a fresh record high at $2,660.30, up 3.57%.

MICROSOFT: The Redmond, Washington-based global technology giant would report its fiscal fourth-quarter earnings of $1.91 per share, which represents year-over-year growth of over 30% from $1.46 per share seen in the same quarter a year ago. The world’s largest software maker would post revenue growth of over 15% to around $44.1 billion, up from the $38.03 billion a year earlier.

“Channel work and our CIO survey point to building momentum across the Cloud, Hybrid and On-premise portfolio, which should power a solid Q4. While investors seek reassurances margin expansion continues into FY22, our model suggests durable high-teens EPS growth and upside in the shares,” noted Keith Weiss, equity analyst at Morgan Stanley.

Microsoft’s better-than-expected results, which will be announced on Tuesday, July 27, would help the stock hit new all-time highs. Microsoft shares have surged more than 30% so far this year.

APPLE: The consumer electronics giant would post its fiscal third-quarter earnings of $1.01 per share, which represents year-over-year growth of over 55% from $0.65 per share seen in the same quarter a year ago.

The iPhone manufacturer would post revenue growth of over 20% to around $73.3 billion up from $59.69 billion a year earlier. It is worth noting that the company has beaten earnings in all last eight quarters.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 27

Ticker Company EPS Forecast
SIRI Sirius XM $0.07
IEX IDEX $1.62
PCAR PACCAR $1.40
MMM 3M $2.29
MSCI Msci $2.31
ENPH Enphase Energy $0.42
LSXMK Liberty Media SiriusXM C $0.36
LSXMA Liberty Media SiriusXM A $0.48
CVLT Commvault Systems $0.52
LOGI Logitech Internationalusa $0.90
MXIM Maxim Integrated Products $0.85
ST Sensata Technologies $0.88
CNC Centene $1.22
UPS United Parcel Service $2.79
TRU TransUnion $0.91
SHW Sherwin-Williams $2.67
IVZ Invesco $0.70
FELE Franklin Electric $0.80
LW Lamb Weston Holdings Inc $0.42
IQV IQVIA Holdings Inc $2.07
RTX Raytheon Technologies Corp $0.93
ENTG Entegris $0.79
LECO Lincoln Electric $1.48
FISV Fiserv $1.28
DTE DTE Energy $1.36
GE General Electric $0.03
ROK Rockwell Automation $2.09
WM Waste Management $1.19
SWK Stanley Black & Decker $2.88
ADM Archer-Daniels Midland $1.02
HUBB Hubbell $2.16
PNR Pentair Ordinary Share $0.79
BSX Boston Scientific $0.37
ECL Ecolab $1.21
PPBI Pacific Premier Bancorp $0.71
GPK Graphic Packaging $0.28
PHM PulteGroup $1.73
AWI Armstrong World Industries $1.05
RGEN Repligen $0.52
SFNC Simmons First National $0.52
SSTK Shutterstock $0.68
ABG Asbury Automotive $4.60
MPWR Monolithic Power Systems $1.69
CHRW C.H. Robinson Worldwide $1.33
MANH Manhattan Associates $0.43
GOOG Alphabet $19.33
CB Chubb $3.00
AMD Advanced Micro Devices $0.54
PGRE Paramount Group -$0.05
SBUX Starbucks $0.77
CAKE Cheesecake Factory $0.72
EGP EastGroup Properties $0.67
AXS Axis Capital $1.42
WSBC WesBanco $0.75
HIW Highwoods Properties $0.33
STAG STAG Industrial $0.12
VIST Vista Oil Gas $0.15
NAVI Navient $0.85
EHC Encompass Health Corp $0.98
OMAB Grupo Aeroportuario Del Centro Nort $11.31
NOV National Oilwell Varco -$0.13
V Visa $1.34
GOOGL Alphabet $19.24
BXP Boston Properties $0.57
AAT American Assets $0.11
MSFT Microsoft $1.91
JNPR Juniper Networks $0.39
BYD Boyd Gaming $0.90
MASI Masimo $0.90
MTDR Matador Resources $0.75
CSGP CoStar $0.23
FIBK First Interstate BancSystem $0.72
OLN Olin $1.44
EQR Equity Residential $0.19
EXR Extra Space Storage $1.06
EPR EPR Properties $0.06
USNA USANA Health Sciences $1.72
THG Hanover $2.38
UMBF UMB Financial $1.75
CHE Chemed $4.29
SYK Stryker $2.13
MDLZ Mondelez International $0.65
MAT Mattel -$0.06
PFG Principal Financial $1.52
AAPL Apple $1.01
TER Teradyne $1.75
VIV Telefonica Brasil $0.13
ASH Ashland $1.31
GLW Corning $0.51
PII Polaris Industries $2.15
JBLU JetBlue Airways -$0.74
RDY Drreddys Laboratories $0.55
XRX Xerox $0.40
CIT CIT $0.86
SID Companhia Siderurgica Nacional $0.86
RNST Renasant $0.77

Wednesday (July 28)

IN THE SPOTLIGHT: FACEBOOK

The world’s largest online social network is expected to report its second-quarter earnings of $3.04 per share, which represents year-over-year growth of about 70% from $1.80 per share seen in the same quarter a year ago. The Menlo Park, California-based social media conglomerate would post revenue growth of over 49% to around $28.0 billion.

“Monetization Potential: We are positive on FB’s monetization roll-out of Instagram as well as FB’s ability to continue to innovate and improve its monetization (Canvas Ads, Dynamic Ads, video). Combined with the high and growing engagement we see monetization upside going forward,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Investing from Position of Strength to Drive Faster Long-Term Growth: We are modeling ~33% GAAP opex (excl. one-time items) growth in 2021, implying an incremental ~$18bn in opex. Our base case model implies opex per employee moderates in ’21 while FB hiring remains roughly flat on an absolute basis. We believe FB will grow EPS at a ~39% CAGR (2019-2022).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 28

Ticker Company EPS Forecast
PTC PTC $0.63
URI United Rentals $4.90
ENSG Ensign $0.88
ALKS ALKERMES $0.12
TYL Tyler Technologies $1.63
AMG Affiliated Managers $3.85
SF Stifel Financial $1.38
FIX Comfort Systems USA $0.91
MSA MSA Safety $1.04
CBD Companhia Brasileira De Distrib $0.04
ALGT Allegiant Travel $2.55
GD General Dynamics $2.55
HES Hess $0.11
PFE Pfizer $0.97
QCOM Qualcomm $1.68
HP Helmerich & Payne -$0.56
UMC United Microelectronics $0.14
BA Boeing -$0.81
EQIX Equinix $1.87
DB Deutsche Bank $0.33
RJF Raymond James Financial $2.27
SAN Banco Santander $0.13
HNP Huaneng Power International $0.86
LRCX Lam Research $7.59
APH Amphenol $0.55
EVR Evercore Partners $2.71
PPC Pilgrim’s Pride $0.52
R Ryder System $1.38
NSC Norfolk Southern $2.97
FORM FormFactor $0.33
SHOO Steven Madden $0.31
SCI Service International $0.67
ADP ADP $1.14
MNRO Monro Muffler Brake $0.52
SLAB Silicon Laboratories $0.93
BXMT Blackstone Mortgage $0.60
PAG Penske Automotive $2.76
ROL Rollins $0.18
BCS Barclays $0.54
CAJ Canon $0.33
XLNX Xilinx $0.78
HUM Humana $6.82
AVY Avery Dennison $2.05
NYCB New York Community Bancorp $0.30
SCL Stepan $1.84
GSK Glaxosmithkline $0.55
CME CME $1.61
TEVA Teva Pharmaceutical Industries $0.59
MCD McDonalds $2.11
BSBR Banco Santander Brasil $0.20
EXP Eagle Materials $2.07
DT Dynatrace Holdings $0.15
EEFT Euronet Worldwide $0.65
SPOT Spotify -$0.38
OC Owens Corning $2.14
FMX Fomento Economico Mexicano Sab $14.29
BMY Bristol-Myers Squibb $1.89
VRTS Virtus Investment Partners $8.11
GRMN Garmin $1.26
SIX Swiss Exchange -$0.22
CCJ Cameco USA -$0.05
TDY Teledyne Technologies $2.70
IART Integra LifeSciences $0.66
GNRC Generac $2.30
MCO Moody’s $2.77
VRT Veritas Pharma $0.24
EPD Enterprise Products Partners $0.50
GIB CGI Group USA $1.08
TMO Thermo Fisher Scientific $5.47
TEL TE Connectivity $1.58
SLGN Silgan $0.83
PB Prosperity Bancshares $1.39
ODFL Old Dominion Freight Line $2.17
BG Bunge $1.62
LFUS Littelfuse $2.24
CNMD CONMED $0.62
CP Canadian Pacific Railway USA $1.00
AVB AvalonBay Communities $0.74
ALGN Align Technology $2.52
AM Antero Midstream Partners $0.19
CNO CNO Financial Group $0.54
CINF Cincinnati Financial $0.99
SSNC SS&C Technologies $1.14
MTH Meritage Homes $3.28
TTEK Tetra Tech $0.88
MKSI MKS Instruments $2.95
ROIC Retail Opportunity Investments $0.06
SIGI Selective $1.23
VAC Marriottacations Worldwide $0.89
PDM Piedmont Office Realty $0.05
IRBT Irobot $0.32
UDR UDR $0.01
EXAS Exact Sciences -$0.75
MOH Molina Healthcare $3.39
EQT EQT $0.04
MXL MaxLinear $0.50
IR Ingersoll Rand $0.42
AGI Alamos Gold $0.11
MAA Mid-America Apartment Communities $0.55
KGC Kinross Gold USA $0.13
ESRT Empire State Realty -$0.01
BSMX Santander Mexico Fincl Gp Sab Decv $0.17
CRUS Cirrus Logic $0.39
MUSA Murphy USA $3.21
RE Everest Re $8.58
VALE Vale $1.47
DRE Duke Realty $0.19
PYPL PayPal $1.12
NOW ServiceNow $1.21
CCS Century Communities $2.84
NLY Annaly Capital Management $0.27
TROX Tronox $0.52
XPO XPO Logistics $1.66
SAVE Spirit Airlines -$0.86
PAC Grupo Aeroportuario Del Pacifico $1.14
CHX ChampionX Corp $0.10
NUVA NuVasive $0.44
FBHS Fortune Brands Home Security $1.39
NOVA Nova Mentis Life Science Corp -$0.24
FB Facebook $3.04
ACGL Arch Capital $0.84
CONE CyrusOne $0.04
AR Antero Resources $0.20
AEM Agnico Eagle Mines USA $0.59
RBC Regal Beloit Corporation $2.07
PEGA Pegasystems -$0.18
AFL Aflac $1.28
PKI PerkinElmer $2.44
CHDN Churchill Downs $2.51
PEB Pebblebrook Hotel -$0.65
CTSH Cognizant Technology Solutions $0.96
HOLX Hologic $1.12
KRC Kilroy Realty $0.29
ALSN Allison Transmission $0.93
F Ford Motor -$0.04
ASGN On Assignment $1.29
HIG Hartford Financial Services $1.34
ORLY O’Reilly Automotive $7.51
ISBC Investors Bancorp $0.31

Thursday (July 29)

IN THE SPOTLIGHT: AMAZON.COM

The eCommerce leader for physical and digital merchandise is expected to report its second-quarter earnings of $12.24 per share, which represents year-over-year growth of about 19% from $10.3 per share seen in the same quarter a year ago.

The Seattle, Washington-based multinational technology giant would post revenue growth of about 29% to around $115 billion. The company has beaten earnings per share (EPS) estimates at all times in the last four quarters.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 29

Ticker Company EPS Forecast
RLGY Realogy $1.08
VSTO Vista Outdoor $0.90
AGCO AGCO $2.20
PCG PG&E $0.28
MATX Matson $2.96
PRFT Perficient $0.79
NATI National Instruments $0.05
GPI Group 1 Automotive $7.59
CFX Colfax $0.53
CMS CMS Energy Corporation $0.46
LYG Lloyds Banking $0.14
MHK Mohawk Industries $3.59
EBS Emergent BioSolutions $1.41
TXT Textron $0.65
AUOTY AU Optronics $0.56
CMCSA Comcast $0.66
VLO Valero Energy $0.17
CG Carlyle $0.60
ABEV Ambev $0.02
NLSN Nielsen $0.36
MTD Mettler Toledo International $7.62
ADS Alliance Data Systems $3.68
FTNT Fortinet $0.88
FTV Fortive Corp $0.60
ASX Advanced Semiconductor Engineering $0.16
LKQ LKQ $0.75
ERJ Embraer -$0.26
TFX Teleflex $2.87
CARR Carrier Global Corp $0.55
CX Cemex Sab De Cv $0.16
ORAN Orange $0.18
CVE Cenovus Energy USA $0.26
MT Arcelormittal $2.52
MA Mastercard $1.74
KBR KBR $0.50
HOCPY Hoya Corp $0.85
YUM Yum Brands $0.96
EIX Edison International $1.02
EME EMCOR $1.58
AGIO Agios Pharmaceuticals -$1.35
KPELY Keppel Corporation $0.18
BUD Anheuser-Busch $0.87
CS Credit Suisse $0.22
DANOY Danone PK $0.45
SNY Sanofi $0.77
AZN Astrazeneca $0.45
TEF Telefonica $0.14
STM Stmicroelectronics $0.37
GRFS Grifolsbarcelona $0.26
THRM Gentherm $0.65
WWW Wolverine World Wide $0.49
CNX Consol Energy $0.24
CBRE CBRE Group Inc $0.77
TAP Molson Coors Brewing $1.35
VC Visteon $0.05
KEX Kirby $0.14
TREE LendingTree -$0.63
SAH Sonic Automotive $1.38
HSY Hershey $1.42
AMT American Tower $1.27
TW Towers Watson $0.39
OSK Oshkosh $2.25
MAS Masco $1.04
MO Altria $1.18
TROW T. Rowe Price $3.19
CTXS Citrix Systems $1.22
SPGI S&P Global Inc $3.26
BAX Baxter International $0.75
ICE Intercontinental Exchange $1.16
SO Southern Co. $0.79
NTCT Netscout Systems $0.18
GOL Gol Linhas Aereas Inteligentes -$0.91
CFR Cullen/Frost Bankers $1.56
CWT California Water Service $0.41
FSS Federal Signal $0.45
AER AerCap $1.37
COLB Columbia Banking System $0.66
COR CoreSite Realty $0.45
WEX WEX $1.95
TMHC Taylor Morrison Home $0.96
XEL Xcel Energy $0.56
FLEX Flextronics International $0.38
SAIA Saia $2.05
OSTK Overstock $0.67
IDA IdaCorp $1.21
FCN FTI Consulting $1.52
LAWS Lawson Products $0.60
WST West Pharmaceutical Services $1.74
MLM Martin Marietta Materials $3.85
MTSI MACOM Technology Solutions $0.53
LH Laboratory Of America $5.62
EXLS ExlService $1.01
BSAC Banco Santander Chile $0.50
AOS A.O. Smith $0.65
TPX Tempur Sealy International $0.56
HBAN Huntington Bancshares $0.32
WAB Westinghouse Air Brake Technologies $0.96
NOC Northrop Grumman $5.83
MMP Magellan Midstream Partners $1.02
HLT Hilton Worldwide $0.39
KDP Keurig Dr Pepper $0.37
OMCL Omnicell $0.82
BC Brunswick $2.14
MRK Merck & Co $1.40
TRP Transcanada USA $0.77
KIM Kimco Realty $0.12
IP International Paper $1.06
MDC MDC $1.99
PRLB Proto Labs $0.44
SGEN Seattle Genetics -$0.61
CPT Camden Property $0.34
SIMO Silicon Motion Technology $1.25
CUBE CubeSmart $0.21
DLB Dolby Laboratories $0.28
BIO Bio-Rad Laboratories $2.66
CC Chemours Co $0.94
ZEN Zendesk $0.16
FWRD Forward Air $0.97
AJG Arthur J. Gallagher $1.08
SPSC SPS Commerce $0.40
ROG Rogers $1.89
ERIE Erie Indemnity $1.51
CUZ Cousins Properties $0.20
WELL Welltower Inc $0.15
PTCT PTC Therapeutics -$1.81
AUY Yamana Gold USA $0.06
LPLA LPL Financial $1.67
WWE World Wrestling Entertainment $0.25
WRE Washington Real Estate Investment -$0.04
TXRH Texas Roadhouse $0.98
ATR AptarGroup $0.97
GLPI Gaming And Leisure Properties $0.57
OFC Orate Office Properties $0.14
RSG Republic Services $0.95
TEX Terex $0.60
X United States Steel $3.08
LBTYA Liberty Global Class A Ordinary Shares $0.46
KLAC KLA-Tencor $3.99
SWKS Skyworks Solutions $2.14
DXCM Dexcom $0.44
HUBG HUB $0.70
VCYT Veracyte -$0.25
POWI Power Integrations $0.75
LGND Ligand Pharmaceuticals $1.38
FHI Federated Hermes Inc $0.66
FSLR First Solar $0.55
CWST Casella Waste Systems $0.24
DLR Digital Realty $0.24
MTX Minerals Technologies $1.25
VRTX Vertex Pharmaceuticals $2.37
PFPT Proofpoint $0.49
ESS Essex Property $0.88
GILD Gilead Sciences $1.73
WERN Werner $0.87
MMSI Merit Medical Systems $0.45
LBTYK LIBERTY GLOBAL $0.46
AMZN Amazon $12.24
QGEN Qiagen $0.65
EW Edwards Lifesciences $0.55
NRZ New Residential Investment $0.31
MSTR Microstrategy $0.81
SM SM Energy -$0.26
SWN Southwestern Energy $0.21
TMUS T-Mobile Us $0.51
DECK Deckers Outdoor -$0.15
CORT Corcept Therapeutics $0.17
TWOU 2U -$0.16
SBH Sally Beauty $0.62
MPW Medical Properties $0.29
CACC Credit Acceptance $10.36
SJW SJW $0.64
SHEN Shenandoah Telecommunications $0.86
ES Eversource Energy $0.80
KMPR Kemper $1.33
WRI Weingarten Realty Investors $0.10
OPK Opko Health $0.02
SU Suncor Energy USA $0.39
APELY Alps Electric $0.11
ACI AltaGas Canada $0.69
EXPO Exponent $0.42

Friday (July 30)

Ticker Company EPS Forecast
KMTUY Komatsu $0.40
VFC VF $0.11
ABR Arbor Realty $0.42
PEXNY PTT Exploration & Production $0.16
LAZ Lazard $0.89
HRC Hill-Rom $1.35
XOM Exxon Mobil $1.00
COG Cabot Oil Gas $0.29
MFG Mizuho Financial $0.08
GCTAY Siemens Gamesa ADR $0.02
TU Telus USA $0.21
JCI Johnson Controls $0.83
CL Colgate-Palmolive $0.80
BAH Booz Allen Hamilton $0.97
TOTDY Toto $0.25
ASEKY Aisin Seiki Co $1.13
BBVA Banco Bilbaoizcaya Argentaria $0.06
E ENI $0.33
FMS Fresenius Medical Care $0.48
SMFG Sumitomo Mitsui Financial $0.21
SBGSY Schneider Electric SA $0.63
PG Procter & Gamble $1.09
CHD Church Dwight $0.70
ALNPY ANA Holdings ADR -$0.20
CVX Chevron $1.58
BNPQY BNP Paribas ADR $1.07
NMR Nomura $0.17
CHT Chunghwa Telecom $0.34
HUN Huntsman $0.81
LIN Linde PLC $2.55
AON AON $1.85
PNM PNM Resources $0.46
CAT Caterpillar $2.41
CPRI Capri Holdings Ltd $0.79
BLMN Bloomin’ Brands $0.66
CHTR Charter Communications $4.79
DAN Dana $0.50
ITW Illinois Tool Works $2.09
GWW Grainger $4.59
CERN Cerner $0.76
NWL Newell Brands Inc $0.45
POR Portland General Electric $0.37
ENB Enbridge USA $0.45
LYB LyondellBasell Industries $5.30
ABBV AbbVie $3.08
SHLX Shell Midstream Partners $0.35
WPC W. P. Carey $0.56
AVNT Avient Corp $0.81
WY Weyerhaeuser $1.37
IDXX Idexx Laboratories $2.02
BCPC Balchem $0.82
For a look at all of today’s economic events, check out our economic calendar.

Today’s Market Wrap Up and a Glimpse Into Wednesday

Investors couldn’t stay away from stocks long after yesterday’s meltdown. All three major market indices finished the day in the green with gains of more than 1%. The Dow Jones Industrial Average tacked on nearly 550 points, while the S&P 500 and Nasdaq each gained 1.5% on the day. Travel-related stocks as well as the financial sector and industrials all took back lost ground.

Investors had fled stocks on Monday on fears of the Delta variant, but cooler heads prevailed today. Apple was among the stocks that redeemed itself after sharp losses on Monday. The tech giant advanced almost 3% on the day. Apple reportedly postponed employees’ return to the offices until the fall due to the spread of the COVID-19 variant.

 

The oil price similarly found its footing, with Brent crude climbing 1.1% higher on the heels of yesterday’s sell-off of nearly 7%. Investors appeared to have had lumped oil in with their Delta variant-related fears, but it was just a blip on the radar.

Stocks to Watch

Netflix shares were under pressure in extended-hours trading after the streaming giant fell short of subscriber growth expectations. The company added 1.5 million subscribers vs. estimates for 1.75 million, as per Factset. Netflix also missed on the bottom line while beating on the top line.

Netflix blamed the pandemic for its uneven subscriber growth, and management is eyeing 3.5 million new members in Q3, which is weaker than expected. Chief executive Reed Hastings also made it official — Netflix is making a push into gaming.

Restaurant stock Chipotle Mexican Grill had a strong Q2 as customers flocked back to its locations after last year’s lockdowns kept them away. Revenue and earnings beat Wall Street estimates, and Chipotle expects the momentum to continue into Q3, as evidenced by an outlook for same-store sales growth in the double-digit percentage range. Chipotle shares are up 4% in after-hours trading.

AMC Entertainment saw its value balloon by nearly 25% in the session, sending the stock back above USD 40 per share.

Look Ahead

Investors will be looking to see if the stock market can extend today’s rally. On the earnings front, Coca-Cola is set to report its quarterly results ahead of the opening bell, as is Johnson & Johnson. Energy company Kinder Morgan’s earnings come out after the closing bell.

Today’s Market Wrap Up and a Glimpse Into Tuesday

Today was not a pretty day in the markets after investors fled equities on rising fears of the COVID-19 Delta variant and the damage it could do to the economy. The Dow Jones Industrial Average shed 721 points, or more than 2%, for losses it hasn’t experienced since last October despite being off its lows of the session. Boeing was one of the hardest-hit stocks on worries of another lockdown, falling almost 5%.

The S&P 500 tumbled close to 2% while the Nasdaq was down just over 1%. Stocks weren’t the only asset class that suffered. Brent crude was down close to 7% to below the USD 70 threshold. Oil was set up for declines after OPEC and its allies reached an agreement over the weekend to bolster supply in an attempt to ease prices.

There was almost nowhere for investors to hide, except for bonds. Gold and bitcoin were even down on the day. Meanwhile, the yield on the 10-year Treasury fell to multi-year lows at 1.17%.

Stocks to Watch

IBM is in focus after the closing bell. After getting caught up in the selling pressure during the regular session, the stock rebounded in extended-hours trading. IBM is up nearly 4% thanks to a better-than-expected quarterly report in which the company’s top and bottom lines surpassed Wall Street estimates. The company proved that the turnaround from the pandemic was not a fluke as services and software both outperformed.

Investors are also celebrating AMC Entertainment in the after-hours for some fundamental reasons. The company announced the reopening of two theatres in the Los Angeles district. AMC was able to successfully negotiate with real estate firm Caruso to open the doors on the theatres after they were temporarily shut due to the pandemic. AMC shares are up fractionally in the extended-hours session.

Apple shares dropped close to 4%. The stock was recently perched at a fresh all-time high of USD 150 and is now trading closer to USD 140. Incidentally, Montreal-based investment firm Hexavest slashed its positions in tech stocks Apple and Microsoft in favor of healthcare stocks Merck and Pfizer in early 2021.

Look Ahead

On the economic front, Housing Starts for the month of June will be released on Tuesday. Wells Fargo economists are expecting a slight increase vs. May levels amid uninterrupted demand and improved conditions for lumber.

Netflix reports its Q2 results on Tuesday. The stock managed to eke out gains on Monday amid bullish expectations on Wall Street. Halliburton reports its Q2 earnings results on Tuesday.

Nasdaq Ends Lower as Investors Sell Big Tech

Amazon, Apple Tesla and Facebook all fell. Nvidia tumbled around 4%.

The S&P 500 technology sector index ended a four-day winning streak. Earlier this week, investors’ favor for heavyweight growth stocks pushed the S&P 500 and the Nasdaq to record highs.

The S&P 500 energy sector index fell more than 1% and tracked a drop in crude prices on expectations of more supply after a compromise agreement between leading OPEC producers.

Fresh data showed the number of Americans filing new claims for unemployment benefits fell last week to a 16-month low, while worker shortages and bottlenecks in the supply chain have frustrated efforts by businesses to ramp up production to meet strong demand for goods and services.

Federal Reserve Chair Jerome Powell told lawmakers he anticipated the shortages and high inflation would abate. Yet many investors still worry that more sustained inflation could lead to a sooner-than-expected tightening of monetary policy.

“People are very nervous and concerned about inflation, tax rates and the (2022 midterm) election. Those three things are very much on people’s minds,” said 6 Meridian Chief Investment Officer Andrew Mies, describing recent phone calls with his firm’s clients.

Unofficially, the Dow Jones Industrial Average rose 54.52 points, or 0.16%, to 34,987.75, the S&P 500 lost 14.29 points, or 0.33%, to 4,360.01 and the Nasdaq Composite dropped 101.82 points, or 0.7%, to 14,543.13.

Morgan Stanley dipped as much as 1.2% after it beat expectations for quarterly profit, getting a boost from record investment banking activity even as the trading bonanza that supported results in recent quarters slowed down.

Second-quarter reporting season kicked off this week, with the four largest U.S. lenders – Wells Fargo & Co, Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co – posting a combined $33 billion in profits, but also highlighting the industry’s sensitivity to low interest rates.

Blackstone said late on Wednesday it would pay $2.2 billion for 9.9% stake in American International Group’s life and retirement business. AIG and Blackstone both rallied.

Johnson & Johnson dipped after it voluntarily recalled five aerosol sunscreen products in the United States after detecting a cancer-causing chemical in some samples.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Noel Randewich; Additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel)

 

Apple’s Stock Price Up By 2% Today. Analysts Estimate Further Increase in H2

The shares of Apple Inc. are up by 2% earlier today, reaching another record high for the third consecutive week. Analysts believe that the stock will rally even higher in the second half of the year as the company makes some improvements.

Apple’s Shares Rally At Pre-Market Trading Session

The shares of Apple Inc. are up by over 2% at Thursday’s pre-market trading session. Following this rally, APPL is trading close to the $150 mark per share. The rally was a result of the tech giant announced plans to boost iPhone production over the coming months.

According to the report, Apple has asked its suppliers to increase the production of its next-generation iPhones by 20%. The boost in production is expected to come despite Apple describing 2020 as a Super Cycle that was driven by 5G models offering consumers access to the improved, faster wireless networks.

AAPL Could Experience Massive Growth In Second Half Of The Year

AAPL is now up by over 15% since the start of the year. Its market cap of $2.5 trillion makes it the most valuable company in the world. Jim Suva, a senior tech analyst at Citigroup, said Apple’s current valuation is fair and might likely not expand.

However, he expects the company to experience an increase in revenue and sales. As such, the expected increase in Apple’s stock price will come from the increase in revenue and sales over the coming months.

AAPL stock chart. Source: FXEMPIRE

Loup Ventures’ co-founder and managing partner Gene Munster is of the opinion that Apple’s stock will rally higher in the coming months. he stated that “ultimately that I think the best days are still ahead of the company, whether it’s 5G, augmented reality, what they’re going to do in health care and transportation and other additional services.”

The growth recorded by Apple in various aspects of its business could see its stock price reach $200 by the end of 2021, Munster added. He is predicting a 40% increase in the stock price over the coming months.

Munster predicted earlier this year that he thinks Apple will be the top performer amongst the FAANG stocks. However, with Google up by 44% year-to-date, Munster doesn’t see that happening. He still believes Apple will be a top-performing stock by the end of 2021.

Five Little Known Facts About Stock Options

If you are becoming interested in trading Options, you need to learn the basics about Options and how to trade them before jumping in with both feet. Options are very different from stocks and there are more factors that go into the pricing.

Many view trading Options as a get-rich-quick scheme while others think of it as gambling. I am here to say it is neither. What I will say, is that you have to know the rules before you begin trading if you want to be successful.  Keep reading as I cover some little-known basic facts that, if you are new, will surely spark your interest.

There are Options on More Than Just Stock

Most people hear of options and think they only apply to stock.  In reality, you can trade options on futures, Forex, Bonds, and even the index themselves.  Most assets have options available.

Options Symbols

The OCC option symbol can consist of up to 4 parts:

  • Root symbol of the underlying stock or ETF, padded with spaces to 6 characters
  • Strike price, as the price x 1000, front padded with 0s to 8 digits
  • Expiration date, 6 digits in the format YY/MM/DD
  • Option type, either P or C, for put or call

Examples:

  • AAPL:  AAPL210723C145 – This symbol represents a call on Apple, expiring on 23 Jul 2021, with a strike price of $145.
  • AMZN:  AMZN210917P3700- This symbol represents a put on Amazon, expiring on 17 Sept 2021, with a strike price of $3,700.

Buying an Option

If you own an option, you are not obligated to buy the underlying instrument; when you buy a Call Option, you have the right to BUY stocks at your option’s strike price.  You can also sell the option itself before expiration.

Similarly, when you buy a Put Option, you have the right to SELL stocks at your Option’s strike price through exercising it but like Call Options you can sell the put contract as well before expiry.

Selling an Option

First, you can sell an option you don’t own stock in!  However, if you sell a Call Option, you are obligated to deliver the underlying asset at the strike price at which the Call Option was sold if the buyer exercises his or her right to take delivery. If they do not exercise then you keep the premium you sold the option for.  Put Options are the reverse, if you sell a Put Option, you are obligated to buy the underlying asset if exercised.

Selling Means Credit And Buying Means Debit

Options when BOUGHT are purchased at a DEBIT to the buyer and should be considered assets. So when you buy an option the money is debited from your brokerage account. It’s exactly like buying a stock.

As mentioned above you can also sell an Option, without owning the shares. Options when SOLD are sold at a CREDIT to the seller. When you sell an option it should be considered a liability and money is added to the brokerage account at the time of sale. Not many things are guaranteed in the market but this is.  However, you can’t withdraw this money until the trade has been closed, usually, this money is used to offset the margin required for selling the options.

Every day on  Options Trading Signals our resident specialist, Neil Szczepanski, does defined risk trades that protect us from black swan events 24/7.  Many may think that is what stop losses are for.  Well, remember the markets are only open about 1/3 of the hours in a day.  Therefore, a stop loss only protects you for 1/3 of each day.  Stocks can gap up or down.  With options, you are always protected because we do defined risk in a spread.  We cover with multiple legs which are always on once you own.

My team and I have been building and developing fully systematic algorithmic trading strategies for many years and can tell you that unless you have a solid foundation related to knowing when and where opportunities exist in market trends, you are likely churning your money in and out of failed trades. Though I have already completed the first live presentation, I will be hosting one more at the July Wealth365 Summit on July 16th at 12 pm. The Summit is free to attend and offers unparalleled opportunities for learning…plus a potential prize or two!

Have a great day!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Founder & Chief Market Strategist
www.TheTechnicalTraders.com

 

Bitcoin vs. Gold Debate Reignited by Tech Genius

Apple co-founder and engineer Steve “Woz” Wozniak is famous for building the tech giant’s original computer. Therefore, it’s not so surprising that he knows a thing or two about digital money. That is why when Woz has something to say about bitcoin, or any other cryptocurrency for that matter, people listen up.

At a recent Talent Land event in Jalisco, Mexico, Wozniak was the main speaker. According to local reports, he brought bitcoin into the discussion. Woz reportedly touted bitcoin, saying that it is a better asset to own than precious metal gold.

Bitcoin and gold have become rival store-of-value assets, with the flagship cryptocurrency having captured some institutional investor share from the precious metal recently. While gold has more history and an USD 11 trillion market cap compared to bitcoin’s roughly USD 615 billion, the digital nature of the leading cryptocurrency makes it much easier to use in transactions.

Woz Not Stacking Sats

As much as Woz likes bitcoin, he is not stacking sats. El Sol de Mexico cites Woz as saying,

“Gold is limited and you have to look for it. Bitcoin is the most amazing mathematical miracle. I do not invest in Bitcoin, but I believe in it for the future.”

He made the remarks before other entrepreneurs and government officials who gathered to discuss tech innovation.

Gold Bug

One gold bug who would likely beg to differ is Peter Schiff, a staunch bitcoin critic who is at the helm of Euro Pacific Capital. He has used bitcoin’s inherent volatility as his chief argument against the digital asset, which has played out in the BTC price in recent months. Schiff bashes bitcoin as a safe-haven asset that can protect investors against inflation given that the price can plummet 85% “at any moment.”

Source: Twitter

Something that Schiff fails to mention, however, is that while the gold price has had every opportunity to shine in 2021 as inflation has seemingly reared its head, the precious metal is actually down about 6% year-to-date (YTD). Precious metals have lagged other commodities as the USD has strengthened.

The bitcoin price, meanwhile, is up 11% YTD. The flagship cryptocurrency has also shaved about 50% off its value since its all-time high of more than USD 64K.

Today’s Market Wrap Up and a Glimpse Into Thursday

Stocks rebounded as investors breathed a sigh of relief now that the Fed minutes are out, sending all three major indices higher. The S&P 500 reached its latest all-time high to hover above 4,358. The Dow Jones Industrial Average tacked on another 100 points, while the tech-laden Nasdaq closed modestly higher.

Policymakers in their FOMC minutes from the June meeting expressed a need for “patience” before making any changes to the Fed’s asset-buying program. This soothed investors’ fears about any sudden change in monetary policy.

Technology stocks were out front once again, including the likes of Apple and Amazon. For its part, Apple reached a new record high, closing at just above USD 144. In fact, while the S&P 500 has been on a tear, AAPL and AMZN have outperformed the broader index in the short term. Both tech stocks have advanced by double-digit percentages since early June while the S&P has increased just over 3% in the same period. Apple’s market cap is now USD 2.4 trillion.

The oil patch saw more volatility, with the crude oil price falling 1.5%, extending Tuesday’s declines amid stalled production talks involving OPEC+ countries.

Stocks to Watch

Meme stocks continued their downward spiral, with AMC Entertainment feeling the brunt of the selling. The movie chain stock shed almost 10% on the day and is continuing under pressure in after-hours trading. It was not alone, as shares of GameStop extended recent declines and fell by 5%. AMC and GameStop have closed in the red for the past four trading sessions in their worst such stretch since May.

While meme stocks bucked the overall bullish trend, several stocks are continuing the market’s upward momentum in extended-hours trading.

  • WD-40 Company is up by nearly 10% in after-hours trading after its third-quarter earnings results surpassed Wall Street’s estimates. The company also raised its revenue outlook for the full fiscal year amid robust demand for its cleaning products.
  •  GAN Limited is up an eye-popping 17% in extended hours on the heels of its preliminary Q2 results. The gambling company’s revenue was “higher than expected,” as a result of which it bolstered its full-year sales outlook.

Look Ahead

Investors will be looking to see if anything could stop this runaway train that is the markets.

Today’s Market Wrap Up and a Glimpse Into Wednesday

Stocks finished modestly higher, with all three indices closing in the green. The S&P 500 managed to set another record, the broader market index’s fourth in a row, on robust economic data, though it finished off its highs of the session. Today marks the 33rd time that the S&P 500 has reached all-time-high territory year-to-date.

Homebuilders were a bright spot after S&P Case-Shiller revealed that home prices climbed close to 15% higher in April year-over-year on the heels of a 13.3% gain in March. The home price index hasn’t been at this level in more than three decades.

Tech stocks led by Apple powered the Nasdaq to its latest all-time high. Wall Street analysts are eyeing chip stocks as beneficiaries of the introduction of the iPhone 13. Along those lines, Skyworks Solutions advanced 4.5% today. Consumers are exhibiting great confidence, with the Conference Board’s June results coming in stronger than anticipated.

The Dow Jones Industrial Average barely eked out a win, no thanks to Caterpillar, which is down 11% in the month of June alone. Otherwise, inflation worries appear to have been shelved for now. Investors, however, have plenty more data to weigh this week that might help to determine whether the bulls will remain in control.

Active Stocks

  • Virgin Galactic shed 14% on the day. Investors who are eyeing the stock ahead of Richard Branson’s company’s first commercial trip to space might consider it a buying opportunity. Virgin Galactic is proceeding with test flights this summer. Rival space travel company Blue Origin, founded by Jeff Bezos, plans to make its first flight with passengers next month, the excitement for which could spill over into Virgin Galactic.
  • Context Logic, a mobile e-commerce company that is another meme stock play, gave back some recent gains, falling 7%. The stock, which trades under the symbol WISH, is up almost 75% in the month of June in this new market paradigm.

Look Ahead

Second-quarter earnings reports will start to come out in earnest in the coming weeks. On Wednesday, meme stock Bed Bath & Beyond will take the spotlight with its fiscal Q1 earnings report prior to the opening bell. The stock is trading higher by 1% in after-hours.

The ADP employment report comes out at 8:15 a.m. ET ahead of the all-important employment report on Friday. In addition, there are a couple of Fed officials scheduled to speak on Wednesday, including Atlanta Fed President Raphael Bostic and Richmond Fed President Tom Barkin.

German Competition Watchdog Launches Apple Investigation

The Bonn-based watchdog said it will examine whether Apple has “paramount significance across markets” that thwarts competition.

“A key focus of the investigation will be the operation of the App Store, as in many cases it empowers Apple to influence the operations of third parties,” said Andreas Mundt, president of the Federal Cartel Office (FCO).

The watchdog has made use of enhanced powers gained under recent reforms to Germany’s competition laws to open investigations into Alphabet’s Google, Facebook and Amazon over their data practices.

Further proceedings against Apple are also being considered with regard to complaints received about potentially anti-competitive practices, the watchdog said.

These include a complaint that Apple gives itself preferential treatment by pre-installing its own applications, the watchdog said.

An Apple spokesperson said the company’s App Store has given German developers of all sizes the same opportunity.

“We look forward to discussing our approach with the FCO and having an open dialogue about any of their concerns,” the spokesperson added.

(Reporting by Riham Alkousaa and Supantha MukherjeeWriting by Caroline CopleyEditing by Edmund Blair and David Goodman)

Tech-Heavy Nasdaq Ignores Hawkish Fed News to Advance

The performance of the tech-heavy Nasdaq was in stark contrast to the S&P 500 and Dow, which slumped as investors reacted negatively to the Fedeignoral Reserve’s unexpectedly hawkish message on monetary policy on Wednesday.

Chipmaker Nvidia Corp jumped 5.4%, leading the charge among technology behemoths after Jefferies raised its price target on the stock.

Technology shares, which generally perform better when interest rates are low, powered a rally on Wall Street last year as investors flocked to stocks seen as relatively safe during times of economic turmoil.

The group has come under pressure this year on fears that rising inflation would lead the Fed to hike interest rates sooner than expected. The central bank on Wednesday moved its first projected rate increases from 2024 into 2023.

Still, shares of Apple Inc, Microsoft Corp, Amazon.com Inc and Facebook Inc reversed premarket declines to rise between 1.4% and 2% as investors bet that a steady economic rebound would boost demand for their products in the long run.

“Yes there is rising inflation but the market is focusing more on the positives of improving earnings, robust GDP growth and the wider economy getting stronger,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab in Austin, Texas.

“Today’s action is indicative that the Fed hasn’t said anything that the market didn’t already know.”

The Nasdaq briefly advanced to within 16 points of its lifetime peak achieved on April 29, before pulling back a touch.

By 1:55PM ET, the Dow Jones Industrial Average fell 198.57 points, or 0.58%, to 33,835.1, the S&P 500 gained 0.24 points, or 0.01%, to 4,223.94 and the Nasdaq Composite added 127.04 points, or 0.9%, to 14,166.73.

Interest rate-sensitive bank stocks slumped -3.8% as longer dated U.S. Treasury yields dropped.

The strengthening dollar, another by-product of the previous day’s Fed news, pushed U.S. oil prices down from the multi-year high hit earlier in the week. The energy index, in turn, fell more than 3%, the biggest laggard among the 11 main S&P sectors.

Other economically sensitive stocks including materials and industrials fell 2.4% and 1.5% respectively, as data showed jobless claims rising last week for the first time in more than a month. Still, layoffs appeared to be easing amid a reopening economy and a shortage of people willing to work.

“In the balance of June and into the summer we anticipate continued volatility as we get more signals from economic data, Fed policy and as we get into the earnings season,” said Greg Bassuk, chief executive officer at AXS Investments in New York.

In corporate news, U.S.-listed shares of CureVac NV sank 41.5% after the German biotech said its COVID-19 vaccine was 47% effective in a late-stage trial, missing the study’s main goal.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Shashank Nayar and Medha Singh in Bengaluru; Editing by Sriraj Kalluvila, Anil D’Silva, Maju Samuel and Dan Grebler)

 

Market Power of Siri, Alexa, Google a Concern, EU Regulators Say

By Foo Yun Chee

The comments from the European Commission come after a year-long inquiry into voice assistants and other internet-connected devices and responses from more than 200 companies.

Similar inquiries in the past into sectors such as e-commerce, pharmaceuticals, financial services and energy have led to cases against companies and hefty fines.

Alexa, Siri and Google Assistant are the most popular voice- assistant devices in Europe, with the global market expected to double to 8.4 billion devices from 4.2 billion between 2020 and 2024, according to Statista.

“We saw indications that some practices that we know too well may lead to tipping and to the emergence of gatekeepers,” European Competition Commissioner Margrethe Vestager told reporters.

“And from the preliminary results published today, it appears that our concerns are shared by many players,” she said.

Vestager said it was too early to say if the inquiry would lead to cases against companies which will be decided after a 12-week long public consultation ending Sept. 1 and a final report due in the first half of 2022.

The EU antitrust watchdog said respondents cited worries over certain exclusivity and tying practices related to voice assistants such as producers of smart devices being prevented from installing a second voice assistant on a device.

A second concern was about voice assistant providers promoting their own services or those of third parties via default settings on devices, thus restricting rivals.

A third concern focused on the troves of data available to providers of voice assistants and smart devices, while a fourth worry was about the lack of inter-operability between devices.

Amazon said there was intense competition in the smart home market.

“There will not, and should not, be one winner. Today, Alexa is compatible with over 140,000 smart home products, and we make it easy for device makers to integrate Alexa directly into their own products,” a spokesperson said.

Amazon went on to say it has signed up 80 companies to its Voice Interoperability Initiative which gives customers the ability to access multiple voice services on a device.

Google and Apple did not immediately respond to requests for comment.

Vestager has proposed tough new rules known as the Digital Markets Act which targets a number of these practices. The draft needs to be thrashed out with EU lawmakers and EU countries before it can be implemented, likely next year.

(Reporting by Foo Yun CheeEditing by Bernadette Baum and Elaine Hardcastle)

Exclusive-Apple in Talks With CATL, BYD Over Battery Supplies for Its Electric Car: Sources

The discussions are subject to change and it is not clear if agreements with either CATL or BYD will be reached, said the people who declined to be named as the discussions are private.

Apple has made building manufacturing facilities in the United States a condition for potential battery suppliers, said two of the sources.

CATL, which supplies major car makers including Tesla Inc, is reluctant to build a U.S. factory due to political tensions between Washington and Beijing as well as cost concerns, the two people said.

It was not immediately clear if Apple is also talking to other battery makers.

Apple, which has yet to make a public announcement about its car plans, declined to comment. CATL, the world’s biggest automotive battery maker, and BYD, the world’s No. 4, also declined to comment.

The U.S. firm is in favor of using lithium iron phosphate batteries that are cheaper to produce because they use iron instead of nickel and cobalt which are more expensive, the four people said.

Apple has been working on self-driving technology and has targeted 2024 for the production of a passenger vehicle, Reuters reported in December.

People familiar with the matter have previously said Apple’s planned EV could include its own breakthrough battery technology. It was not immediately clear if the discussions with CATL and BYD involved Apple’s own technology or designs.

The discussions come at a time when the U.S. government is looking to attract more EV manufacturing. U.S. President Joe Biden’s proposed $1.7 trillion infrastructure plan includes a $174 billion budget to boost the domestic EV market with tax credits and grants for battery manufacturers, among other incentives.

Many battery makers are ramping up production to meet soaring worldwide demand as car makers accelerate their shift to electric vehicles to comply with tougher emission rules aimed at tackling global warming.

Chinese battery makers are expected to grow at a faster pace than their foreign peers thanks to further expansion of the world’s biggest EV market, SNE Research said in a June report.

Reuters reported last week that CATL is planning a major new automotive battery plant in Shanghai, continuing a blistering pace of expansion that will cement its lead as the world’s No.1 supplier. The factory would near Tesla’s China manufacturing operations.

(Reporting by Zhang Yan in Shanghai and Julie Zhu in Hong Kong; Editing by Miyoung Kim and Edwina Gibbs)

 

Stocks Mixed After G7 Countries Reach Historic Tax Deal

G7 Countries Agree To A Minimum Global Corporate Tax Rate

S&P 500 futures are swinging between gains and losses in premarket trading while traders evaluate their next steps after the historic G7 tax deal.

Over the week, G7 countries agreed to a minimum global corporate tax rate of at least 15%. The details of the deal would have to be negotiated over the upcoming months, and G7 countries will have to convince the rest of the world to join the deal.

The deal is viewed as a way to tax international tech giants, although it will have a significant impact on most industries. Interestingly, stocks like Apple or Facebook are mostly flat in premarket trading, and it looks that traders will wait for the upcoming negotiations before coming up with final conclusions about the ultimate impact of the new tax deal.

U.S. Dollar Remains Flat Despite Yellen’s Comments

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, remains close to the psychologically important 90 level despite comments from Treasury Secretary Janet Yellen that higher rate would be “a good thing”.

Yellen has recently stated that a slightly higher interest rate environment would be beneficial for the society. Yellen has been very dovish in the previous months, and this sudden change of tone could have had an impact on currency dynamics.

However, it looks that traders believe that Fed Chair Jerome Powell will keep rates at the bottom for as long as he can which is bearish for the American currency and bullish for stocks.

WTI Oil Tries To Settle Above The $70 Level

WTI oil has recently managed to settle above the $69 level and continues to move higher as traders focus on rising oil demand and the successful implementation of OPEC+ deal.

WTI oil has already made an attempt to settle above the $70 level but lost momentum and pulled back closer to $69.50. The oil market remains bullish, and it looks that oil may soon get to another test of the $70 level. In this light, energy-related stocks have a good chance to start the week on a strong note.

For a look at all of today’s economic events, check out our economic calendar.

Insider accumulation warns Tesla, Apple and Dollar investors

Tesla stock forecast

The price action looks very interesting. TSLA stock shows signs of depreciation. But as you know I like to trade a mix of fundamental and technical analysis to have a higher chance of winning trade. The Insider Accumulation is just screaming on a weekly chart. It shows what smart money is doing. No matter what they say, the fact is they don’t buy Tesla. The Insider Accumulation is very low.

At the same time, Sentiment Index and Cycle Forecast show potential consolidation. It makes perfect sense – the price has broken below the trendline of the bearish flag. So, if we see a successful retest of that trendline, consider hedging your $TSLA investments (if you have one) with options or futures. The natural magnet in that case is 400 at least.

TSLA forecast 23 may 2021

Apple stock forecast

AAPL is flagging as well. However, unlike Tesla, it didn’t break down. But Insider Accumulation and Cycle Forecast are very bearish. On the other hand, the Seasonal Forecast is bullish, while the Sentiment Index indicates a coming bounce up. With all that in mind, I want to add Apple to my watchlist as a short candidate if the trendline breaks to the downside. If that happens, bears will target $80 at least.

Moreover, we have clear signs of Wyckoff distribution on the weekly chart. However, we need more price action to confirm all events and phases before considering shorts.

AAPL forecast 23 may 2021

DX (dollar index) forecast

Dollar bears are not done yet. Cycle Forecast and Seasonal indicate potential breakdown below weekly support. However, the commitment of the trader report is neutral. It disturbs a bit. So, we better stick to price action. In case of a breakdown below last week’s low bears will target 88.50. If that support fails as well, we have all the chances to see a free fall to 84.5. It is not going to happen very fast.

But in the middle-term, it seems the most realistic scenario based on the indicators mentioned above. As I mentioned last week in one of the posts, the FOMC meeting next month can shake markets and create amazing opportunities for swing traders. So, keep an eye on it.

DX forecast 23 may 2021

U.S. Investors Look to Europe for Next Leg of Stock Gains

By Lewis Krauskopf

European equity funds have notched their longest streak of net inflows in more than three years, according to data from EPFR, while fund managers globally surveyed by BofA Global Research said they are more overweight European stocks than at any time since March 2018. Morgan Stanley’s strategists, meanwhile, have named holding European stocks as one of their top trades.

The focus on Europe comes as the region’s benchmarks have kept pace with their U.S. counterparts after years of underperformance. The STOXX 600 is up 10.7% year-to-date, broadly matching the S&P 500. The S&P 500 was off 1.7% from its record high as of Thursday, while the European index has slipped 0.8% from its peak.

“We have been more exposed to the U.S. over the past years and now we are becoming more interested in foreign equities,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company.

Investors see an opportunity as Europe’s recovery begins to take root while the U.S. economic growth rate is expected to soon peak. European indexes are also more heavily weighted in the types of stocks expected to perform particularly well as the global economy bounces back, such as financials and industrials.

“Vaccinations are ticking up, you are likely to see restrictions come off and that should mean a decent economic recovery which will bleed into the markets in the euro zone,” Schutte said.

After contracting in the first quarter, the euro zone’s gross domestic product is expected to increase in the second quarter and post its fastest growth in the third, rising on an annualized basis by 9.2%, according to Oxford Economics. U.S. GDP, meanwhile, is expected to post its peak growth rate of 13.3% in the second quarter, after it expanded in the first quarter.

Meanwhile, nearly 48% of the U.S. population had received at least one vaccine dose as of Wednesday, compared with almost 28% of the European population, according to Our World in Data https://ourworldindata.org/covid-vaccinations.

“The story for the first few months of this year has been around U.S. exceptionalism,” said Mona Mahajan, senior U.S. investment strategist at Allianz Global Investors. “As we look through to the next three to six months, that may fade a bit especially if Europe continues to play catch-up.”

Many European stocks are also trading at relative discounts to their U.S. counterparts. The S&P 500 trades at nearly 21 times forward earnings compared with 16.7 times for the STOXX index, according to Refinitiv Datastream – a wider gap than on average over the past 10 years, although that difference has recently narrowed.

Part of the gap stems from the fact that U.S. indexes are more heavily skewed towards tech and other growth stocks that tend to carry higher valuations. Those stocks have helped propel the U.S. stock market since the financial crisis a decade ago and helped push S&P 500 performance ahead of European markets, but could fall out of favor as rising bond yields and inflation fears cut into their valuations.

Several factors could complicate the decision to shift into European stocks. With tech and internet giants such as Apple and Amazon continuing to put up strong profits, investors may be reluctant to cut back on a trade that has worked for years.

As inflation worries have hit U.S. stocks in recent weeks, there are also some concerns about euro zone inflation, which is approaching 2%, its fastest rate in years.

Any setbacks to Europe’s COVID-19 response and economic rebound also could undermine the case for equities there, investors said. So could a reversal in the dollar’s recent weakening trend, which would hurt U.S. investors seeking to convert profits in their euro-denominated assets back into their home currency. The dollar is down about 4% against the euro since the start of April.

“The next move we make is probably going to be to decrease the U.S. and increase international just because of the forces that we are seeing in the market,” said John Traynor, chief investment officer of People’s United Wealth Management in Bridgeport, Connecticut. But, Traynor added, “when the dollar is moving up, that hurts you if you’re investing internationally.”

(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Marguerita Choy)

Apple App Store Profits Look ‘Disproportionate,’ U.S. Judge Tells CEO Cook

By Stephen Nellis

Cook testified for more than two hours in Oakland, California, as the closing witness in Apple‘s defense against Epic’s charges that the iPhone maker’s App Store controls and commissions have created a monopoly that Apple illegally abuses.

App makers including music service Spotify Technology, European regulators and U.S. politicians who question whether the company that once urged the world to ‘think different’ has now become too big and too powerful.

At the end of testimony, Judge Yvonne Gonzalez Rogers questioned Cook, pressing him to concede that game developers generate most App Store revenue and help subsidize other apps on the store that pay no commission.

Gonzalez said the profits Apple reaps from game developers “appear to be disproportionate.”

“I understand this notion that somehow Apple is bringing the customer to the dance,” she said. “But after that first time, after that first interaction, the developers are keeping customers with the game. Apple is just profiting from that, it seems me.”

Cook disagreed. “The free apps bring a lot to the table. Only the people who are really profiting in a major way are paying 30” percent commissions, he said.

Epic has tried to show that Apple’s iPhone is a lucrative platform that locks in users, pointing to an internal Apple document that Epic alleges showed the App Store had 78% operating margins. Cook said the document did not reflect the full costs of running the App Store.

The testimony constitutes Cook’s most extensive public remarks on the App Store, which anchors Apple’s $53.8 billion services business.

Gonzalez Rogers also cited a survey that found 39% of software developers were unhappy with Apple’s app distribution services.

“It doesn’t seem to me that you feel pressure or competition to actually change the manner in which you act with developers,” Gonzalez Rogers said.

Cook replied that “we turn the place upside down” to respond to developer complaints, but later conceded that he does not receive regular reports on how developers feel about working with Apple.

At the start of the three-week trial, Gonzalez Rogers also pressed Epic Chief Executive Tim Sweeney with tough questions https://www.reuters.com/technology/judge-presses-epic-ceo-during-second-day-apple-antitrust-trial-2021-05-04 on how forcing Apple to change would ripple through the software world. Sweeney said he had not thought the issue through.

The maker of “Fortnite,” an online game which pits players against in each other in an animated “Battle Royale” fight to the last survivor, has waged a public relations and legal campaign against Apple.

Epic parodied Apple’s iconic “1984” commercial and argued in court that it acts anticompetitively by only allowing approved apps on the world’s 1 billion iPhones and forcing developers to use Apple’s in-app payment system which charges sales commissions of up to 30%.

See FACTBOX:

Apple has sought to persuade Gonzalez Rogers that its rules for developers are aimed at keeping its customers’ information private and safe from malware.

“We have a maniacal focus on the user and doing the right thing by the customer,” Cook said. “Safety and security are the foundation that privacy is built on. Technology has the ability to vacuum up all kinds of data from people, and we like to provide people with tools to circumvent that.”

(Reporting by Stephen Nellis in San Francisco; editing by Peter Henderson, Richard Pullin and Richard Chang)

Apple, Tesla, and Bitcoin Are in a Technical ‘Excess Phase Top”

Yesterday I highlighted the broad market cycles and what technical analysts call the “Excess Phase Top” process, which usually takes place after the markets peak and setup a downward price trend. There are a number of technical setups that take place throughout this process. Today, I will be exploring the charts of Tesla (TSLA), Apple (AAPL), and Bitcoin (BTC) to see where they are in the process.

The suggestion I am making by highlighting these market trends and setups is that a Cash Position is a viable allocation of capital away from risks and losses. Many traders don’t view a cash position as a properly allocated use of capital. We believe taking a cash position at the right times can and does provide very clear benefits, including:

  1. Eliminating risks of further losses/drawdowns.
  2. Setting up a process of protecting cash and waiting for a confirmed re-entry trigger.
  3. Avoiding the failure of buying into a declining market – which is one of the biggest faults of active traders.
  4. Using the Cash position as a hedge against shifting currency/market valuations.

Remember, in many cases, broad market downtrends are often associated with bigger trends in currencies and global market sectors. Chasing these trends can lead to further risks if you are not careful and skilled in your trading decisions. Keeping your capital in a Cash Allocation/Position is often the easiest and safest way for you to ride out volatile downside price trends and allows you to re-deploy your cash into new trades when the time is right.

Understanding Broad Market Cycles & Trends

Before we get started, we are going to share the broader market cycles chart with you to refresh your memory (or if you missed the first part of this research article).

Before looking at the charts, please bear in mind that these patterns often take place over many months. Usually, the initial topping (#1) phase and flagging formation (#2) take place over a 60 to 90+ day span of time. Yes, sometimes these setups can take place over shorter spans of time, but usually, they last over 60+ days.

Additionally, the breakdown of the Flag formation (#2), which leads to the setup of intermediate support (#3), can often take many months to complete as well. My research team and I have seen the Flagging setup last well over 30 days at times and after the immediate support level is reached, markets sometimes attempt to move sideways for many weeks/months before attempting to break below that support level.

APPL Continues To Flag Out – Watch for potential breakdown below $115.

The Weekly AAPL chart below highlights the rally from $35 to over $140 over the past 2.5 years (notice the price split that happened in 2020). This rally reached a peak near January 25, 2021 (#1) and has fallen nearly 20% from the peak levels before starting a sideways Flag formation (#2). This type of setup completes the first two processes of the Excess Phase Top setup and aligns with the broader market cycles to suggest we may have entered the “Complacency” phase of price trending.

The sideways Flagging pattern (#2) on this chart suggests AAPL may continue to move within this price channel before attempting to either recover, by moving to new highs or to break below the $115 level (#3), which would confirm the next phase of the Excess Phase Top pattern.

If we see any continued breakdown in price, traders need to prepare for the markets to attempt to move downward, targeting historical support levels, where we expect price to consolidate for many weeks/months. I have drawn a YELLOW line near a very clear support level for AAPL near $80 as a potential downside price target. If this Excess Phase Top pattern fails, we will likely see AAPL rally back above $145 and attempt to break into a new bullish trending phase.

Tesla Breaks Below Flag Channels – What’s Next?

The following Weekly TSLA chart highlights the rally from $73 to over $900 over the past year (note the price split that happened in 2020). This rally also reached a peak near January 25, 2021 (#1) and has fallen nearly 40% from the peak levels before starting a sideways Flag formation (#2). At this phase of price action, we can see TSLA has recently broken below the lower Flag price channel and may be attempting to start a downward price trend where price will seek out intermediate support.

I have drawn a YELLOW line near a very clear support level for TSLA near $430 as a potential downside price target for this next phase of the Excess Phase Top pattern (#3). From a technical standpoint, if the support level near recent lows, near $540, holds, and price is unable to move below this level, then we may see a technical failure of the Excess Phase Top pattern.

The move to the intermediate support level, which must be lower than the lows of the Flag formation, is critical in confirming the move into “Complacency” and the transition into “Anxiety” on the Broad Market Cycle example. Without this subsequent breakdown in price happening, we would consider the Excess Phase Top pattern potentially invalid (or failed) and start to watch for any new upside price trending – eventually targeting recent highs near $780. At this point, the $540 lows have become the new critical price level for TSLA and we are expecting price to continue to move lower, possibly breaching the $540 level.

Bitcoin Gaps Lower After Peak & Breaks Flag Lows – What’s Next?

This last chart for Daily BTC Futures highlights the rally from $10,200 to over $65,500 over the past 7.5 months. This rally reached a peak near April 14, 2021 (#1) and Gapped lower on April 19, 2021. The recent downside price move from that peak totaled nearly -27% before starting a sideways Flag formation (#2). In order to confirm the next phase of this Excess Phase Top pattern, we would watch for price to break lower, breaking the Flag formation channels, and attempt to break below the recent support level near $47,440. If we see a strong breakdown in price where closing price levels break below $47,440, I would expect price to move quickly below $40,000 and attempt to seek out critical support.

I have drawn a YELLOW line near a very clear support level for BTC near $34,250 as a potential downside price target for this next phase of the Excess Phase Top pattern (#3).

Recently, Bitcoin broke below the Flag formation lower channel and briefly traded below support near $47,440. If we continue to see downward price trending where price closes below this level, I would consider this technical confirmation of the Excess Phase Top pattern, suggesting price will attempt to continue moving lower while trying to seek out intermediate support (near the YELLOW line possibly).

At this point, Bitcoin is showing moderate weakness and has already attempted to break recent support. Any confirmation of further downward trending could push us out of the Complacency phase and into the Anxiety phase of the broad market cycles. Are you ready for what’s next?

The question of “Should You Be In Cash” right now is a very valid concern for many traders/investors. Learning how to identify and understand risks and technical patterns/setups in the markets is critical to understanding how to protect and grow your wealth. Additionally, learning to use the Cash Position, and proper position sizing, as a valid type of trading allocation is essential, in our thinking, to protect your assets throughout volatile market trends. The next 12 to 24 months are almost certain to include much higher price volatility and big price rotations/trends, which will translate into incredible opportunities for traders/investors.

Over the next 6+ months and beyond, there are going to be incredible market moves. Staying ahead of these index and sector trends is going to be key to developing continued success. As some sectors fail, others will begin to trend higher, and this is the type of research and work I share every day at The Technical Traders Ltd.

For a look at all of today’s economic events, check out our economic calendar.

Happy Trading!

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com