Highlights

  • Global markets put in a mixed performance last week. The S&P 500 managed to cling to a small weekly gain due to Tuesday’s session, which saw the S&P 500 Index, Dow, and Nasdaq all post their biggest one-day declines since March.
  • Economic data throughout the week that included reports on the housing market, industrial production and retail sales indicated the U.S. economy remains on solid footing. Minutes from the Federal Reserve’s September policy meeting contributed to broad equity weakness on Thursday.
  • China GDP data largely disappointed. China posted Q3 GDP growth of 6.5%, down from 6.7% in the prior quarter and below 6.6% consensus, but stocks saw a big bounce (+2.6%) on coordinated efforts by government officials to calm nerves. Still the Chinese market is off for the week and down 20% YTD in AUD.

5-day returns to 17 October 2018

 Local currencyAUD currency
S&P+0.02%+0.09%
NASDAQ-0.64%-0.57%
Europe+0.51%+0.21%
Nikkei-0.72%-0.89%
Hong Kong+1.17%+1.15%
China-1.13%-1.16%
ASX+0.74+0.74%
WTI OilUS69.12 (-2.5%)N/A
AUD/USD71.10N/A
Treasury (10 year)3.19%N/A

Notable U.S. economic stats this week

Fed minutes point to continued, gradual interest-rate increases

Federal Reserve officials said they will watch for evidence their moves are keeping economic growth healthy. Officials voted unanimously at their September 25-26 meeting to raise their benchmark rate to a range between 2% and 2.25%. Minutes released after the meeting show most officials expected they would need to raise rates one more time this year and around three times in 2019 if the economy performs in line with current forecasts. No surprise really. A bit “hawkish” perhaps but realistic in our view.


Vue movers

Johnson and Johnson (NYSE: JNJ)

Johnson & Johnson Q3 Non-GAAP EPS of $2.05 beats by $0.02; Revenue of $20.35B (+3.6% Y/Y) beats by $300M. Revenues: $20,348M (+3.6%); Consumer: $3,415M (+1.8%); Pharmaceutical: $10,346M (+6.7%); Medical Devices: $6,587M (-0.2%).

Guided FY earnings and revenues up. Decent result. Stock up 3.9% for the week.

Johnson and Johnson is held in Macrovue’s Asian Healthcare Vue.

Bank of America (NYSE: BAC)

Bank of America (BAC US) released earnings results on 16 October 2018. Bank of America’s third-quarter profit rose 32%, as higher interest rates and last year’s corporate tax cut continued to lift bank earnings. BAC generated a quarterly profit of US$7.167 billion, versus US$5.424 billion a year ago.

Q3 GAAP EPS of US$0.66 beat consensus by $0.04. Revenue of US$22.78B (+4.3% Y/Y) was US$150M ahead of estimates. Profits rose in all of the bank’s major business segments, but retail banking and wealth-management units were the greatest contributors to the overall result. Investment banking was a bit lackluster. A solid result overall from America’s second largest bank (by assets).

Bank of America is held in Macrovue’s Bank On It Vue.

Netflix (NASDAQ: NFLX)

Netflix Q3 GAAP EPS of $0.89 beats by $0.21. Revenue of $4B (+33.8% Y/Y) in-line. NFLX reported 1.09M domestic streaming additions vs. 674K consensus and guidance for 650K. International streaming additions were up 5.87M during the quarter vs. 4.46M consensus and guidance for 4.35M. Total streaming adds were 6.96M for the quarter. A big beat across the board.

Total memberships were 130.14M at the end of the quarter. Looking ahead, Netflix expects Q4 total streaming adds of 9.40M vs. 7.64M consensus. Shares traded as much as +15.2% in aftermarket.

Netflix is held in Macrovue’s Entertainment Vue.

Ericsson (NASDAQ: ERIC)

Ericsson said it earned 2.7 billion Swedish kronor (USD $301 million) in the third quarter, compared with a loss of 3.5 billion kronor in the same quarter a year earlier. Sales grew 9% to 53.8 billion kronor, up from 49.4 billion kronor a year earlier. The company cited strong demand from North American and Latin American carriers for cellular-tower electronics and 5G related equipment.

3Q Networks gross margin (excluding restructuring) stood at 41.5%, higher than consensus expectation by some 117bps. The improvement in Networks gross margin was driven by a favorable regional mix, increased ERS (Ericsson Radio System) share and continued cost reductions. Stock reacted positively +8.5%.

Ericsson is held in Macrovue’s 5G Vue.

PayPal (NASDAQ: PYPL)

Prior to their earnings announcement this week, PayPal got an upgrade from broker Bank of America Merrill Lynch as the stock was added to their best ideas “US1 List”.

PayPal Holdings Inc. exceeded analysts’ earnings estimates and reported adjusted 3Q earnings per share of 58 cents above analysts’ estimates of 54 cents. Revenue in the third quarter rose 14% to $3.68 billion. Analysts had projected $3.67 billion on average.

PayPal also boosted its outlook for fourth-quarter revenue from $4.2 billion to $4.28 billion. Account additions (+15% y/y to 254 million) and engagement metrics (+9.5% y/y payment transactions per active account; +45% y/y mobile payment volume growth) remained solid.

Venmo growth was +78% y/y (Venmo is a mobile payment service owned by PayPal). Shares rose 9.4% in Friday’s session.

PayPal is held in Macrovue’s Disruptive Technology Vue.


The week ahead

A third of the Dow index and 30% of the S&P 500 reports in the coming week, and particular emphasis will be on the tech bellwethers. Alphabet (NASDAQ: GOOGL), Amazon.com (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) are all reporting.

Vue stocks reporting:

  • 23/10: Haliburton
  • 24/10: Corning, Capital One, McDonalds, Texas Instruments
  • 25/10: Microsoft, PTC Inc, Xilinx
  • 26/10: Alphabet (Google), Amazon, Borg Warner, ConocoPhilips, Flex, Twitter, Cypress Semiconductor, Daimler
  • 27/10: Autoliv

Economic Calendar

This week’s calendar is a bit light however we do have U.S. pending home sales, durable goods orders and preliminary third-quarter U.S. GDP figures.

Week Shares Forecast October 23 -26

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Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual and does not constitute financial advice. Consider the appropriateness of the information in regards to your circumstances.This content may contain opinions, conclusions, estimates and other forward-looking statements which are subject to various risks and uncertainties. Actual events or results may differ materially, positively or negatively, from those reflected or contemplated in such forward-looking statements.Past performance is not a reliable indicator of previous performance. See how our performance is calculated.

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