“It’s not about the number of products we open. It’s whether customers want and need the products and services we’re offering them. That’s how we measure ourselves” — Paul Donofrio, CFO of Bank of America, in a not-so-subtle jab at Wells Fargo, which has come under fire recently for opening bank accounts without customer consent. Way to hit ‘em while they’re down, Paul.
Market Snapshot
- U.S. markets finished lower after Jeffrey Gundlach, also known as the “Bond King,” issued an “inflation is high” warning. Oil prices dropping below $50 didn’t help either
- Healthcare stocks slid (now down 4% in 2016) as the sector continues trading with a negative correlation to Clinton’s poll numbers. Her accusations over price gouging hit the sector hard, and as her lead increases, healthcare just keeps getting pummeled
The Dream is Dead
…Say goodbye to the Apple Car. Yes, it’s a shocker, but the writing was all over the wall. Take a seat, let’s take a trip down memory lane: Apple launched its secretive auto division, epically named Project Titan, in 2014 to compete with the likes of Tesla and Google. From there, it was all downhill. Last year, clashes over how to manage the division led to major leadership changes in early 2016. Next came a mass exodus of Apple engineers over the summer. So what’s left now? According to a Bloomberg report, Apple has narrowed its ambitions significantly to just self-driving car technology—and it’s giving the Titan team until the end of 2017 to determine the project’s feasibility. It’s a far cry from Apple’s ambitions of a full-fledged “Apple Car”—but we can’t all be Tesla. Now, back to those headphones…
Even Wall Street is Binging
…Netflix (+20% after hours) crushes earnings estimates. After a lackluster second quarter, Netflix silenced the haters good, doubling estimated earnings per share. Respect. With increased competition from Hulu and Amazon, how is Netflix still killing it? Boosted by popular original shows like “Stranger Things” and “Narcos,” Netflix wowed the crowd by adding another 3.57 million subscribers, easily beating the 2.3 million expected. And if you consider yourself an avid “Netflixer,” we’ve got some good news for you: Netflix plans to release 1,000 hours of original programming in 2017. It may sound insane—and if you’re a pessimist, just know the company is burning through cash like there’s no tomorrow. For now though, Netflix is all smiles.
Sigh*…Just Not Good Enough
…At least, not for investors. IBM (-3% after hours) also released earnings yesterday, beating Wall Street’s expectations but posting lackluster sales. While IBM’s cloud and analytics services have been growing rapidly and driving business for the tech giant, stagnant sales left investors weary.
BofA Makes it Through
…Cue the sighs of relief. On the heels of strong performances by Citigroup and JPMorgan last week, next came Bank of America (+0.31%), which posted earnings yesterday that basically hit it out of the park. Revenue in its trading units was up a monstrous 39% and net income climbed more than 7% versus last year. Let’s hope things look just as good at Goldman and Morgan Stanley later this week.
No One Loves the Middle Child
…Just ask Supervalu (+5.79%). Amidst a divide in the grocery store industry that’s left consumers chasing either the discounters or the high-end specialty stores, there’s just not enough love to go around for middle-tier grocers—even those with comically perfect supermarket names like Supervalu. So yesterday, the retailer sold its Save-A-Lot supermarket chain to a Canadian private equity company for $1.37 billion. The sale will give Supervalu a little wiggle room to operate in the industry’s razor-thin margins, and it’ll help pay down over $750 million in debt. Is that a win-win? You tell us, fam.
Other Stories
- Target pulls clown masks from shelves amid nationwide creepy clown terror
- Jim Beam whiskey makers go on strike
- PepsiCo unveils ambitious targets to reduce sugar and cut calories
- Airbnb is offering a night in Dracula’s Transylvanian castle this Halloween
Economic Calendar
- Monday: Netflix (+), Bank of America (+), IBM (+/-), United (-), Hasbro (+) Earnings; Industrial Production (+)
- Tuesday: Johnson & Johnson, Intel, Goldman Sachs, Philip Morris, BlackRock, UnitedHealth, Domino’s, Harley-Davidson Earnings; Consumer Price Index; Housing Market Index
- Wednesday: Morgan Stanley, American Express, Halliburton, eBay Earnings; Housing Starts
- Thursday: Microsoft, Verizon, Walgreens, Schlumberger, PayPal, American Airlines, Dunkin’ Brands, Skechers Earnings; Weekly Jobless Claims; Existing Home Sales
- Friday: General Electric, McDonald’s, Honeywell Earnings
Stock Picking: Out of Season
Once upon a time, bright-eyed investors would visit the stock market to hand-pick individual stocks for their portfolios. The stock market crash and the Great Recession put an end to that real quick…or so it seems. More and more, it’s looking like investors are giving up on active funds. These funds are the traditional bread and butter of Wall Street investing, where funds pick individual stocks to try to outperform the market. Key word: try. As these active funds struggle to perform in recent years, the trendier pick has become passive funds that simply track a market index. Let’s look at the facts:
- Over the past three years, investors have added almost $1.3 trillion into passive funds, while also pulling more than $250 billion from active funds. Ouch.
- Why the haters? Three things: active funds are harder to understand, they charge higher fees and they’re underperforming. Since 2011, only 11% of U.S. large-cap mutual funds outperformed the Vanguard 500 Index Fund.
- Institutional investors are taking note: in 2015, public pension plans had 60% of their U.S. stock allocations in index funds, up from 38% in 2012. In short, index funds might be boring, but hey, safety first.
Interview Question of the Day
Why is macroeconomic stability important? (Answer)
Business People of the Day
Yep, we’ve got more than one today: two prominent CEOs announced their resignations yesterday: Charles Scharf and Doug Oberhelman. Scharf is the CEO for Visa (-1% after hours), a San Francisco-based company. Why’s that important? After four years in San Fran, Scharf decided that he needed to be closer to his family in New York. Oberhelman is the CEO of machinery giant Caterpillar (-0.43%). His reign saw the company take major risks to try to boost sales. That didn’t work out as commodities prices have fallen in recent years, and Caterpillar’s sales followed suit.
Food for Thought
It’s that time of the year again. The Thanksgiving holiday is a time for us all to give thanks for family, friends and the many joys of disposable income. That said, nobody is more grateful on Thanksgiving than big retailers—at least it used to be that way. This year, some retailers, like Office Depot, are closing on Thanksgiving, finding that opening on the holiday hasn’t translated to extra sales. But Macy’s has a different idea: open one hour earlier to steal business from rivals.
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