Roar Back, with FAANG shares in the lead

[ad_1]
<div _ngcontent-c14 = "" innerhtml = "

The last two days have been crazy, and the FAANGs are at the heart of the situation.

The previous time the shares had launched a major daily rally a little over a week ago, FAANG shares have contributed to the rising market. Thursday's day seemed to be the same, with most of Wednesday's dramatic losses being swept away by huge gains for all major indices. After the close, however, some concerns appeared to reappear after Amazon and Alphabet missed Wall Street analysts' quarterly sales forecasts and Amazon departed from the quarterly outlook. holiday (see below).

The FAANGS all rode higher on Thursday, including spilled names like Netflix and Facebook. Amazon shares rose nearly 8% at the end of the session, ahead of the company's results. Alphabet rose 5% as investors waited for its quarterly result.

Although Thursday was, in some respects, the opposite of Wednesday, one element remained the same. In the last two weeks of turbulence, FAANG shares have apparently been the biggest upside and downside, so even investors who do not have these names may want to watch them closely.

Part of the strength of FAANG seems to also affect names of technologies like Cisco and Intel. The good results of Microsoft late Wednesday and Tesla early Thursday also appeared to help trigger the reversal.

The technological sector under study

If there is one thing to consider that comes out of the crazy week that we are living, it is that the feeling seems to be changing in the technology sector. Technology has been a big hero this past year, and some tech companies like Microsoft have posted impressive results this season, while others, such as Advanced Micro Devices and IBM, have been disappointing.

Many technological benefits await us, so it is too early to determine what the sector results will ultimately look like. Nevertheless, long-term investors may want to look at their portfolios and check their technology exposure to make sure they are still comfortable with their allocations because at least for now, at Judging by the market's action, the support has not been there recently for some of the high valuations we've seen.

We are about to make a profit. Long-term investors with technologies or considering using them may want to consider taking this opportunity to hear from the CEOs about the atmosphere they could create over the next three to six months. .

The soil still seems to move under the market

In a broader perspective, beyond mere technology, the market seems to have entered a new environment. The geopolitical scene remains cluttered with upcoming events that could have big impacts, including the mid-term US elections, the possibility of new tariffs on China and something that many people seem to have forgotten: the Brexit. Dozens of companies have mentioned rates as a factor in their earnings calls so far this quarter.

All this helps to explain why volatility has risen and that the Cboe Volatility index has returned above 20. The economy is still very hot, but low volatility, low interest rates and the high valuations many investors enjoyed a year ago are not necessarily the case is moving forward. In a sense, it's not too surprising. The Cboe volatility index is not normally in the 10-11 range where we saw it last year. The long-term average is in mid-adolescence. Interest rates do not normally stay below 2% year after year. Share valuations reached near record levels earlier this year.

When these things become more normal, long-term investors may want to stay disciplined and keep an eye on what the situation might look like in a few months or years, without focusing excessively on the day, on the day. noise by the minute.

But back a bit day by day: Thursday, Treasury yields increased slightly, remaining under 3.13% for the 10-year note. This is well below the highest monthly of 3.25%. The dollar also advanced against foreign currencies, with the dollar index ending the day near its peak of 2018, above 96.60.

Amazon, main host of the alphabet for the gains of the afternoon

After closing, both Amazon and Alphabet shares fell, despite companies reporting higher earnings per share than Wall Street analysts expected.

Alphabet posted strong earnings growth, with earnings per share of $ 13.06 exceeding the consensus-based third-party consensus of $ 10.42 by more than $ 2. However, revenues of $ 33.7 billion did not meet expectations of $ 34.04 billion. Perhaps the main concern of analysts is the potential downturn in the company's core business at a time when privacy concerns have triggered a thorough regulatory review of Alphabet and its contemporaries from FAANG.

Amazon's sales of $ 56.6 billion did not exceed the $ 57.1 billion expected by analysts, but earnings per share of $ 5.75 far exceeded consensus opinion of third parties, which was $ 3.12.

Amazon's fourth-quarter forecast also fell short of third-party consensus expectations of between $ 66.5 billion and $ 72.5 billion. Expectations were 73.79 billion dollars, the media reported. This letter could cast a shadow not only on Amazon's fortune, but could also raise questions about what this could mean for the Christmas shopping season in general. Revenue generated by Amazon Web Services (AWS), the company's cloud services division, reached $ 6.7 billion for the quarter, roughly in line with estimates. Amazon shares, which rose 7% during the session, made the bulk of the rise in transactions after hours.

Intel also reported better-than-expected earnings per share at $ 1.40 per share. Intel also beat its turnover to $ 19.16 billion, against a consensus of $ 18.11 billion among analysts, and an increase of 19% over the previous year. The publication pushed stocks up 6% and in positive territory for the year, but down 17% from the June high.

GDP Soon, and GDPNow: The first set of GDP data for the third quarter of 2018 is among the last releases of the week before market opening. Consensus estimates compiled by Briefing.com show an expected annualized GDP growth of 3.3%, down from its previous release at the end of September. Q2 reading of 4.2%. Although still robust compared to the less than 2% of readings observed over most of the last decade, readings could be dragged down by events since the end of the summer, such as colder readings on durable goods and housing, as well as uncertainty about trade and other macroeconomic issues.

But if you want to get an unsmoothed preview before the release of GDP, think of GDPNow, the forecast model of the Atlanta Fed, which keeps a forecast for the entire current year, based solely on the calculation of a selection of data, without subjective adjustment or smoothing. If you think the stock market has been volatile in 2018, take a look at this measure. It had started the year with an annual GDP growth forecast of 5.4% for 2018, but after a heartbreaking month of February, its projection fell to 1.9%. Recent updates ranged from 5% to 3.6%, with the most recent reading in the lower part of this range. His next update will be Monday, October 29th.

A dovish note? Fed Vice President Richard Clarida said on Thursday that he believes "further gradual adjustment of the federal funds rate would be appropriate" (or, according to the "Fed" principle, more rate increases). He said that at current rates, monetary policy "remains accommodative".

However, in discussing the Fed's possible policy by 2019, it seemed to indicate that even strong growth and employment would not automatically require further rate hikes, as long as inflation and expectations of inflation remain stable. "If growth and job gains are to continue and come with stable inflation, inflation expectations, and Fed policy expectations, this would argue against a rise in higher short-term interest rate than I currently expect, "said Clarida. I said.

Lately, most of the Fed's remarks have been dictated by the hawk, but some analysts have found a hint of transparency, at least in this part of Clarida's speech. Of course, 2019 is still a long way off and the expectations of the futures market point to a further rise this year and a 50% probability of another at the beginning of next year. Some analysts are now questioning whether the Fed will stop at two or add a third, which would represent rates above 3%.

Comment TD Ameritrade® for educational purposes only. ISPC Member.

">

The last two days have been crazy, and the FAANGs are at the heart of the situation.

The previous time the shares had launched a major daily rally a little over a week ago, FAANG shares have contributed to the rising market. Thursday's day seemed to be the same, with most of Wednesday's dramatic losses being swept away by huge gains for all major indices. After the close, however, some concerns appeared to reappear after Amazon and Alphabet missed Wall Street analysts' quarterly sales forecasts and Amazon departed from the quarterly outlook. holiday (see below).

The FAANGS all rode higher on Thursday, including spilled names like Netflix and Facebook. Amazon shares rose nearly 8% at the end of the session, ahead of the company's results. Alphabet rose 5% as investors waited for its quarterly result.

Although Thursday was, in some respects, the opposite of Wednesday, one element remained the same. In the last two weeks of turbulence, FAANG shares have apparently been the biggest upside and downside, so even investors who do not have these names may want to watch them closely.

Part of the strength of FAANG seems to also affect names of technologies like Cisco and Intel. The good results of Microsoft late Wednesday and Tesla early Thursday also seemed to help trigger the reversal.

The technological sector under study

If there is one thing to consider that comes out of the crazy week that we are living, it is that the feeling seems to be changing in the technology sector. Technology has been a big hero this past year, and some tech companies like Microsoft have posted impressive results this season, while others, such as Advanced Micro Devices and IBM, have been disappointing.

Many technological benefits await us, so it is too early to determine what the sector results will ultimately look like. Nevertheless, long-term investors may want to look at their portfolios and check their technology exposure to make sure they are still comfortable with their allocations because at least for now, at Judging by the market's action, the support has not been there recently for some of the high valuations we've seen.

We are about to make a profit. Long-term investors with technologies or considering using them may want to consider taking this opportunity to hear from the CEOs about the atmosphere they could create over the next three to six months. .

The soil still seems to move under the market

In a broader perspective, beyond mere technology, the market seems to have entered a new environment. The geopolitical scene remains cluttered with upcoming events that could have big impacts, including the mid-term US elections, the possibility of new tariffs on China and something that many people seem to have forgotten: the Brexit. Dozens of companies have mentioned rates as a factor in their earnings calls so far this quarter.

All this helps to explain why volatility has risen and that the Cboe Volatility index has returned above 20. The economy is still very hot, but low volatility, low interest rates and the high valuations many investors enjoyed a year ago are not necessarily the case is moving forward. In a sense, it's not too surprising. The Cboe volatility index is not normally in the 10-11 range where we saw it last year. The long-term average is in mid-adolescence. Interest rates do not normally stay below 2% year after year. Share valuations reached near record levels earlier this year.

When these things become more normal, long-term investors may want to stay disciplined and keep an eye on what the situation might look like in a few months or years, without focusing excessively on the day, on the day. noise by the minute.

But back a bit day by day: Thursday, Treasury yields increased slightly, remaining under 3.13% for the 10-year note. This is well below the highest monthly of 3.25%. The dollar also advanced against foreign currencies, with the dollar index ending the day near its peak of 2018, above 96.60.

Amazon, main host of the alphabet for the gains of the afternoon

After closing, both Amazon and Alphabet shares fell, despite companies reporting higher earnings per share than Wall Street analysts expected.

Alphabet posted strong earnings growth, with earnings per share of $ 13.06 exceeding the consensus-based third-party consensus of $ 10.42 by more than $ 2. However, revenues of $ 33.7 billion did not meet expectations of $ 34.04 billion. Perhaps the main concern of analysts is the potential downturn in the company's core business at a time when privacy concerns have triggered a thorough regulatory review of Alphabet and its contemporaries from FAANG.

Amazon's sales of $ 56.6 billion did not exceed the $ 57.1 billion expected by analysts, but earnings per share of $ 5.75 far exceeded consensus opinion of third parties, which was $ 3.12.

Amazon's fourth-quarter forecast also fell short of third-party consensus expectations of between $ 66.5 billion and $ 72.5 billion. Expectations were 73.79 billion dollars, the media reported. This letter could cast a shadow not only on Amazon's fortune, but could also raise questions about what this could mean for the Christmas shopping season in general. Revenue generated by Amazon Web Services (AWS), the company's cloud services division, reached $ 6.7 billion for the quarter, roughly in line with estimates. Amazon shares, which rose 7% during the session, made the bulk of the rise in transactions after hours.

Intel also reported better-than-expected earnings per share at $ 1.40 per share. Intel also beat its turnover to $ 19.16 billion, against a consensus of $ 18.11 billion among analysts, and an increase of 19% over the previous year. The publication pushed stocks up 6% and in positive territory for the year, but down 17% from the June high.

GDP Soon, and GDPNow: The first set of GDP data for the third quarter of 2018 is among the last releases of the week before market opening. Consensus estimates compiled by Briefing.com show an expected annualized GDP growth of 3.3%, down from its previous release at the end of September. Q2 reading of 4.2%. Although still robust compared to the less than 2% of readings observed over most of the last decade, readings could be dragged down by events since the end of the summer, such as colder readings on durable goods and housing, as well as uncertainty about trade and other macroeconomic issues.

But if you want to get an unsmoothed preview before the release of GDP, think of GDPNow, the forecast model of the Atlanta Fed, which keeps a forecast for the entire current year, based solely on the calculation of a selection of data, without subjective adjustment or smoothing. If you think the stock market has been volatile in 2018, take a look at this measure. It had started the year with an annual GDP growth forecast of 5.4% for 2018, but after a heartbreaking month of February, its projection fell to 1.9%. Recent updates ranged from 5% to 3.6%, with the most recent reading in the lower part of this range. His next update will be Monday, October 29th.

A dovish note? Fed Vice President Richard Clarida said on Thursday that he believes "further gradual adjustment of the federal funds rate would be appropriate" (or, according to the "Fed" principle, more rate increases). He said that at current rates, monetary policy "remains accommodative".

However, in discussing the Fed's possible policy by 2019, it seemed to indicate that even strong growth and employment would not automatically require further rate hikes, as long as inflation and expectations of inflation remain stable. "If growth and job gains are to continue and come with stable inflation, inflation expectations, and Fed policy expectations, this would argue against a rise in higher short-term interest rate than I currently expect, "Clarida said.

Lately, most of the Fed's remarks have been dictated by the hawk, but some analysts have found a hint of transparency, at least in this part of Clarida's speech. Of course, 2019 is still a long way off and the expectations of the futures market point to a further rise this year and a 50% probability of another at the beginning of next year. Some analysts are now questioning whether the Fed will stop at two or add a third, which would represent rates above 3%.

Comment TD Ameritrade® for educational purposes only. ISPC Member.