Tuesday January 18, 2022
Alphabet Reports Earnings
Alphabet Inc. (GOOGL) released its latest quarterly earnings on Tuesday, October 26. The tech titan reported revenue and income that exceeded expectations.
The company reported revenue of $65.12 billion, up 41% from $46.17 billion during the same quarter last year. This beat analysts' expected revenue of $63.34 billion.
"This quarter's results show how our investments there are enabling us to build more helpful products for
people and our partners," said Alphabet CEO Sundar Pichai. "Ongoing improvements to Search, and the new Pixel 6, are great examples. And as the digital transformation and shift to hybrid work continue, our Cloud services are helping organizations collaborate and stay secure."
Alphabet posted net income of $18.94 billion, or $27.99 per share, for the third quarter. This was up from $11.25 billion, or $16.40 per share, during the same time last year and surpassed analysts' estimates of $23.48 per share.
Despite the strong earnings report, the parent company of Google saw shares fall 2% following the earnings release. The Google Cloud segment, which offers workspace collaboration tools such as Gmail and Google Drive, reported revenue of $4.99 billion, up from $3.44 billion but falling short of an estimated $5.07 billion. The company has invested heavily in its Cloud segment in an effort to become more competitive with Amazon Web Services and Microsoft Azure.
Alphabet Inc. (GOOGL) shares ended the week at $2,960.92, up 7.6% for the week.
Amazon Posts Earnings
Amazon.com, Inc. (AMZN) reported its latest quarterly earnings on Thursday, October 28. Shares fell around 4% after results missed earnings expectations.
The company's net sales reached $110.8 billion for the third quarter. This was up 15% from $96.1 billion at this time last year, but fell short of analysts' estimates of $111.8 billion.
"We've always said that when confronted with the choice between optimizing for short-term profits versus what's best for customers over the long term, we will choose the latter—and you can see that during every phase of this pandemic," said Amazon CEO Andy Jassy. "In the first several months of COVID-19, Amazonians played an essential role to help people secure the requisite PPE, food, and other in-demand items needed, and we worked closely with businesses and governments to leverage AWS [Amazon Web Services] to maintain business continuity as they responded to the pandemic."
The company's net income for the quarter was $3.2 billion, down from $6.3 billion at the same time last year. On an adjusted per share basis, net income was $6.12, below analysts' estimates of $8.96.
The company reported net service sales of $55.9 billion, surpassing its net product sales of $54.9 billion. The AWS cloud services division reported revenue of $16.1 billion, up 39% from this time last year. Amazon noted collaborations with companies in the manufacturing, hospitality, telecom, financial services, healthcare and security sectors that have adopted AWS for cloud services. As the company heads into the holiday season, it expects to incur several billion dollars of additional costs during the fourth quarter as it navigates labor shortages, increased wages, supply chain issues and increased shipping costs.
Amazon.com, Inc. (AMZN) shares ended the week at $3,372.43, up 1% for the week.
Apple Releases Earnings Report
Apple, Inc. (AAPL) reported quarterly earnings on Thursday, October 28. Revenue fell short of expectations as chip supply shortages and manufacturing disruptions continue to impact consumer electronics companies.
Revenue for the fourth quarter came in at $83.4 billion. This was up 29% from $64.7 billion during the same quarter last year, but missed the $85.1 billion expected by Wall Street.
"This year we launched our most powerful products ever, from M1-powered Macs to an iPhone 13 lineup that is setting a new standard for performance and empowering our customers to create and connect in new ways," said Apple CEO Tim Cook. "We are infusing our values into everything we make — moving closer to our 2030 goal of being carbon neutral up and down our supply chain and across the lifecycle of our products, and ever advancing our mission to build a more equitable future."
Apple's quarterly net income was $20.6 billion. This was up from $12.7 billion in net income at this time last year.
The company reported an increase of 47% in iPhone sales to $38.9 billion for the quarter. For the Services segment, sales increased 26% to $18.3 billion. The Wearables, Home and Accessories segment posted revenue of $8.8 billion. Mac and iPad sales brought in $9.2 billion and $8.3 billion respectively.
Apple, Inc. (AAPL) shares ended the week at $149.80, relatively unchanged for the week.
The Dow started the week at 35,693 and closed at 35,820 on 10/29. The S&P 500 started the week at 4,554 and closed at 4,605. The NASDAQ started the week at 15,143 and closed at 15,498.
Treasury Yields Fluctuate
U.S. Treasury yields dipped midweek as investors looked for indications that global central banks would roll back policy changes brought about by COVID-19. Yields fluctuated this week as rising inflation, slowing economic growth and supply chain disruptions weighed on investors' minds.
On Wednesday, the Bank of Canada announced it was ending its quantitative easing program, whereas on Thursday, the European Central Bank indicated it would continue its asset purchases. The Federal Reserve is scheduled to meet next week.
"The last few weeks have seen the 'hawkish' global central banks making a lot of noise (BOE/BOC/ Reserve Bank of New Zealand) but the ECB and Fed (who are dovish compared to those) have been relatively quiet," said Tom Essaye of the Sevens Report. "Point being, it's been a consistent drum beat of hawkishness while the 'doves' have been quiet. Well, that potentially changes starting today with the ECB."
The yield on the benchmark 10-year Treasury note opened the week at 1.636% and reached a low of 1.521% on Wednesday. The 30-year Treasury bond yield was at 2.072% on Monday and reached a low of 1.925% on Thursday.
On Friday, the U.S Commerce Department reported the core Personal Consumption Expenditures (PCE) price index rose 0.2% in September and 3.6% year-over-year. The core PCE is used by the Federal Reserve to monitor inflation.
"Year-over-year inflation remains high and will for some time simply because of what's already happened in the first months of the year," said Treasury Secretary Janet Yellen. "But monthly rates I believe will come down in the second half of the year. I think we'll see a return to levels close to 2%."
The 10-year Treasury note yield closed at 1.56%, while the 30-year Treasury bond yield was 1.93%.
Mortgage Rates Increase
Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, October 28. The report showed an increase in mortgage rates.
This week, the 30-year fixed rate mortgage averaged 3.14%, up from last week's average of 3.09%. At this time last year, the 30-year fixed rate mortgage averaged 2.81%.
The 15-year fixed rate mortgage averaged 2.37% this week, up from 2.33% last week. During the same period last year, the 15-year fixed rate mortgage averaged 2.32%.
"The yield on the 10-year Treasury note has been trending up due to the decline in new COVID cases, increasing consumer optimism, as well as broadening inflation and persistent shortages," said Sam Khater, Chief Economist at Freddie Mac. "Mortgage rates are also rising, but purchase demand remains firm, showing that latent purchase demand exists among consumers."
Based on published national averages, the savings rate was 0.06% as of 10/18. The one-year CD averaged 0.14%.
Published October 29, 2021
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