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Thursday August 16, 2018



Apple Earnings Exceed Expectations

Apple Inc. (AAPL) released its quarterly earnings report on Tuesday, August 1. The company's earnings exceeded analysts' expectations.

The technology giant reported net sales of $45.4 billion for the quarter, exceeding analysts' estimated revenue of $44.9 billion. Net sales are up from $42.4 billion at this time last year.

"With revenue up 7% year-over-year, we're happy to report our third consecutive quarter of accelerating growth and an all-time quarterly record for Services revenue," said Apple CEO Tim Cook. "We hosted an incredibly successful Worldwide Developers Conference in June, and we're very excited about the advances in iOS, macOS, watchOS and tvOS coming this fall."

Apple's net income for the quarter was $8.7 billion, or $1.67 per share. During the same quarter last year, the company reported net income of $7.8 billion, or $1.43 per share.

Apple's latest earnings release comes as the company is on the cusp of releasing its latest version of the iPhone. The iPhone 8, as it is likely to be known, is speculated to be announced in September. While the months leading up to the next iPhone release have historically been slow for sales, Apple was able to outperform Wall Street's expectations.

Apple Inc. (AAPL) stock finished the week at $156.39, up 4.3% for the week.

Sprint Releases Earnings Report

Sprint Corporation (S) reported its latest quarterly earnings on Tuesday, August 1. The company posted a profit for the first time in three years.

The telecommunications company posted net operating revenues of $8.2 billion. This is up from $8.0 billion during the same quarter last year.

"Sprint reached an important milestone this quarter by returning to profitability for the first time in three years," said Marcelo Claure, Sprint CEO. "This represents the progress of a turnaround journey that has delivered improvements in postpaid phone and prepaid customer growth, a return to top-line growth, and significantly transformed cost structure."

Net income for the quarter was $206 million or $0.05 per share. This is an improvement over a net loss of $302 million, or $0.08 per share in the previous year's quarter.

Sprint's return to profitability comes at a time when the company is looking to merge with another major communications company. Sprint has recently made overtures to Charter Communications, but the cable company declined to move forward. Despite Charter's lack of interest, Sprint intends to continue exploring the possibility of merging with one of a number of companies.

Sprint Corporation (S) shares ended the week at $8.70, up .06% for the week.

Tesla Reports Expected Loss

Tesla, Inc. (TSLA) released its latest quarterly earnings report on Wednesday, August 2. The company reported a net loss for the quarter as it ramps up production of its latest electric car.

The maker of electric automobiles posted revenue of $2.8 billion, up from $1.3 billion during the same quarter last year. This beat the Wall Street consensus estimate of $2.5 billion in revenue.

"During Q2, our engineering, manufacturing and supply chain teams were focused on the final stages of Model 3 product development and building the 'machine-that-makes-the-machine' for the start of production," said Tesla Chairman and CEO Elon Musk and CFO Deepak Ahuja in a letter to shareholders. "Model 3 has been designed to be affordably priced and to provide compelling customer value, even without government incentives, while achieving a target gross margin comparable to Model S and Model X as production scales into 2018."

Tesla reported a net loss of $336 million for the quarter, or $1.33 per share. This was higher than last year's reported net loss of $293 million, or $1.61 per share. The company's earnings, however, beat analysts' estimated loss of $1.82 per share.

Tesla delivered the first of its new Model 3 units during a launch party on July 28. The Model 3 is Tesla's attempt at a more moderately priced vehicle, following release of the higher-end Model S and Model X. While the first units are now being delivered, there is a backlog of orders, with company founder Elon Musk commenting that a reservation placed today would result in a delivery date near the end of 2018.

Tesla, Inc. (TSLA) shares ended the week at $356.91, up .06% for the week.

The Dow started the week of 7/31 at 21,863 and closed at 22,092 on 8/4. The S&P 500 started the week at 2,475 and closed at 2,476. The NASDAQ started the week at 6,394 and closed at 6,351.

Treasury Yields Stop Their Decline After Jobs Report

It has been another bumpy week for bonds. Yields fell after the release of the Personal Consumption Expenditures (PCE) and the Treasury's statement that it plans to it borrow $96 billion in the third quarter. The 10-year Treasury yield opened the week at 2.28%, while the 30-year Treasury bond yield opened at 2.88%.

The PCE report indicated that consumer spending rose by 0.1%, just below analysts' forecasts, while personal income remained flat. The core PCE price index increased above expectations in June, which brought a spark of hope to investors. The debt ceiling remains a primary concern as the Treasury is projecting that borrowing may grow to $501 billion in the fourth quarter.

"By any measure, real long-term interest rates are much too low and therefore unsustainable," said Alan Greenspan, former Federal Reserve chairman. "When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace."

The jobs report was released Friday and exceeded expectations. The unemployment rate fell to a 16 year low of 4.3%. Average hourly nonfarm payrolls increased by 9 cents an hour, with a year to date increase of 2.5%. The report indicated 209,000 jobs were added to the economy last month, much higher than the predicted amount of 180,000. Treasury yields made a small jump in reaction.

"We got our number over 200,000. That part's good. The wage number 2.5 (percent) is respectable. It just fits into the slow and steady ... This does not give the Federal Reserve a clue one way or the other. It fits exactly into the trend," said Jack Albin, CIO at BMO Private Bank.

With the debt ceiling looming, September will bring news as to how the Federal Reserve will react in terms of changing rates and scaling back the balance sheet. Greenspan believes that a change in rates will affect bond prices, but will not produce growth. His fear is stagflation will set in.

The 10-year Treasury note yield finished the week of 7/31 at 2.21%, while the 30-year Treasury note yield was 2.84%.

Mortgage Rates Hold

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, August 3. The report revealed that mortgage rates had a slight response to the growth in the U.S. Gross Domestic Product.

The 30-year fixed rate mortgage averaged 3.93% this week. This represents an increase from last week when it averaged 3.92%. Last year at this time, the 30-year fixed rate mortgage averaged 3.43%.

This week, the 15-year fixed rate mortgage averaged 3.18%. This was lower than last week's average of 3.20%. The 15-year fixed rate mortgage averaged 2.74% one year ago.

"The 10-year Treasury yield was relatively flat this week, as was the 30-year mortgage rate which rose 1 basis point to 3.93 percent." said Sean Becketti, Chief Economist at Freddie Mac. "Despite a strong advance estimate for second quarter GDP, markets are erring on the side of caution."

Based on published national averages, the money market account finished the week of 7/31 at 0.76%. The 1-year CD finished at 1.42%.

Published August 4, 2017
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