S&P 500 Closes at All-Time High, Tesla Reports Q3 Earnings, IBM Reports Q3 Earnings, FDA Clears Moderna and J&J COVID-19 Boosters, and PayPal is Exploring Deal to Acquire Pinterest.
1. Nasdaq 100 Leads on Tuesday
Stocks were mostly up on Tuesday as the Nasdaq 100 +0.6%, S&P 500 +0.4%, DJIA +0.3% all gained but the Russell 2000 fell -0.5%. In sector performance, Healthcare was the top gainer on the day up 0.4% while Industrials was the top loser falling -0.6%. Tuesday’s top gainers were UPS, Nvidia, Draftkings, Crowdstrike, and Centene. The top losers were Lockheed Martin, Upstart, FUTU, Asana, and Logitech. In earnings news, Eli Lilly, UPS, General Electric, and Sherwin Williams are up after posting quarterly results while Facebook, Raytheon, Lockheed Martin, and Waste Management all fell after posting quarterly results. In economic data, the S&P 500 Composite Home Price Index showed a 19.8% gain year-over-year for the average price of a home in major markets. And Consumer Confidence rose higher than expected. In other markets, Crude Oil gained 0.9% to $84.60/Barrel, Gold fell -0.7% to $1794/Ounce, and Bitcoin fell -1% to $61,900/Coin.
2. Facebook Falls After Earnings
On Tuesday, Facebook stock is down 2% after reporting Q3 earnings of $3.22 EPS and revenue of $29B, beating the consensus earnings estimate of $3.20 EPS, but missing on the revenue estimate of $29.5B. However, the company saw revenue grow over 35% on a year-over-year basis. Facebook also said they’re adding $50B to its stock buyback program. The social media giant matched on the expected daily active users, totaling 1.93B vs. 1.93B expected, according to StreetAccount. StreetAccount also reported monthly active users over 2.91B, coming in below the expected 2.93B. Facebook will make significant changes in the next year to focus more on its full-screen video Reels feature, which competes directly with TikTok. CEO Mark Zuckerberg stated to analysts that it’d be part of an effort to make Facebook and Instagram more appealing to users between the ages of 18 and 29. He continued during the earnings call saying that Over the last decade as the audience that uses our apps have expanded so much and we focus on serving everyone, our services have gotten dialed to be the best for the most people who use them rather than specifically for young adults. This shift will take years, not months, to fully execute, and that ultimately it will be as significant to Facebook as the adoption of the News Feed and Stories features. Reels have the potential to be something of that scale. The earnings call was kicked off with Zuckerberg’s adamant defense of his company, following an onslaught of reports that stemmed from documents leaked by Frances Haugen, a whistleblower, and former employee. The documents released by Haugen showed that the number of teenage users of the Facebook app in the U.S. has declined by 13% since 2019, with a projected drop of 45% over the next two years. The number of users between the ages of 20 and 30 was expected to decline by 4% during that time frame. The report also shows that Facebook is aware of many of the harms its apps and services cause, particularly to teenage girls, but either doesn’t rectify the issues or struggles to address them. More documents are expected to be shared daily over the coming weeks. Zuckerberg fought back against the claims and said to the latest news cycle as a coordinated effort to selectively use leaked documents to paint a false picture of his company. Facebook expects its investment in the hardware and VR segment to reduce operating profit in 2021 by approximately $10B.
3. Lockheed Martin Misses Big on Earnings
On Tuesday, Lockheed Martin Corporation stock is down over 12% after reporting Q3 earnings of $6.66 EPS and revenue of $16B, beating the consensus earnings estimate of $1.96 EPS, but missing on the revenue estimate of $17.2B. The company also saw revenue drop 2.8% compared to the same quarter a year ago amid a drop in revenue in its crucial aeronautics division due to a decline in F-35 jet sales. Aeronautics division sales came in at $6.5B vs. 6.6B in 2020, while sales from missiles and fire control products and services totaled $2.7B vs. $2.9B in Q3 of 2020. Sales dropped in all four of Lockheed’s main business segments, with space revenues declining by 5%. A look ahead to fiscal 2022, Lockheed expects net sales to decline from projected 2021 levels to approximately $66B, below The Street estimate for revenues of around $70.5B. The results released today included a non-cash after-tax pension settlement charge of $1.3B or $4.72 EPS, related to the purchase of group annuity contracts to transfer $4.9B of gross pension obligations and related plan assets to an insurance company. The earnings reflect a non-cash pension-settlement charge of $1.7B, or $4.72 EPS, after-tax. Wall Street was projecting for around $1.97 EPS, including the pension charge. The company also included unrealized after-tax gains of $74M, or $0.27 a share, due to an increase in the fair value of investments held in the Lockheed Martin Ventures Fund. CEO James Talclet stated that they have recently undertaken a reassessment of their five-year business plan given external and programmatic events. He continued saying that their conclusions, which are reflected in our updated 2021 guidance and subsequent trend information, reflect continuing strong cash-flow generation. Lockheed also increased its share-repurchase authorization, signaling increased confidence in future cash flow. However, earnings aren’t peaking investors’ interests as the company is reporting diluted earnings of $2.21 EPS, a decline from $6.25 in 2020.
4. UPS Up Big After Earnings Report
On Tuesday, United Parcel Service (UPS) stock was up over 7% after reporting Q3 earnings of $2.71 EPS and revenue of $23.2B, beating the consensus earnings estimate of $2.52 EPS and revenue estimate of $22.6B. The company also saw revenue rise over 9% on a year-over-year basis. The number of items being shipped daily by UPS declined 2%, marking the second straight quarter that shipping volume fell after around a decade of increases. UPS also raised its margin outlook for 2021, showing that it can operate more profitably even as costs increase heading into the peak holiday shipping season. The company is also in the process of hiring up to 100,000 seasonal workers to help handle the expected surge in package volume. UPS also plans to have tight control over the amount of shipping volume that it handles this holiday season to avoid overwhelming its network. Previously in 2021, UPS cut off some shippers temporarily during some of the busiest shipping periods, such as after Thanksgiving. The trend reflects the company’s strategy under CEO Carol Tome to focus on shipping packages and courting customers that generate more revenue and profit. Earlier in 2021, UPS said that consumers returning to in-store shopping slowed down shipping volume. CEO Tome stated that the company will continue to push prices higher and that UPS’ rate increase will average 5.9% in 2022, matching the planned increase that FedEx Corp. announced in September, which is the highest annual increase by either company in eight years, raising pressure on online merchants to either raise the price or find other ways to offset higher costs. Tome continued saying that UPS is getting more business from small and medium-size shippers, while larger customers, including Amazon Inc., represent a smaller portion of the overall shipping volume that they did in 2020. UPS plans to help Amazon grow, but UPS intentions aren’t to be their supply chain, they’re part of their supply chain. UPS also raised its plans for capital spending for the year by $200M to $4.2B.
5. Consumer Confidence Rises in October Following Three Straight Declines
On Tuesday, the Conference Board announced that the index of U.S. consumer confidence increased to 113.8 in October, improving from a revised 109.8 in September. This is the highest level since July when the index reached 125.1 points. The gain also follows three straight declines in the sentiment. The Expectations Index, consumers’ short-term outlook for income, business, and labor market conditions, improved to 91.3 from 86.7. Consumers’ appraisal of current business conditions was mixed in the report, showing that 18.6% of consumers said business conditions are good, down from 19.1%. However, 24.9% of consumers stated business conditions are bad, down from 25.3%. Consumers’ assessment of the labor market was slightly more favorable as 55.6% of consumers stated jobs are plentiful, down from 56.5%. Also, 10.6% of consumers said jobs are hard to get, which was down from 13%. Senior director of economic indicators at the board, Lynn Franco stated Consumer confidence improved in October, reversing a three-month downward trend as concerns about the spread of the Delta variant eased. While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted. The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October, a sign that consumer spending will continue to support economic growth through the final months of 2021. In the same realm, nearly half of respondents (47.6%) said they intend to take a vacation within the next six months, the highest level since February 2020, a reflection of the ongoing resurgence in consumers’ willingness to travel and spend on in-person services.