MARKET SNAPSHOT
Oil Keeps on Disappointing
- With durable goods orders and consumer confidence both on the decline, it’s no wonder U.S. stocks underperformed yesterday—after all, these two measurements act as common gauges for how the American economy is performing.
- Luckily, investors had a lot of other stuff on their minds, including a slew of earnings reports from corporate giants like Apple, and the always exciting announcement from the Federal Reserve, which will be released later today.
- Asian markets had a rough day as well, and while Chinese leaders discuss a 5-year plan for economic growth this week, the current data continues to disappoint: Chinese industrial profits dipped 0.1 percent in September, an improvement over August but unfortunately not enough to convince investors that the world’s second-largest economy is improving.
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CORPORATE PRIMER
The Rite Deal
As its tagline suggests, Walgreens seems to be at “the corner of happy,” announcing yesterday that it would be purchasing rival pharmaceutical company Rite Aid. The $10 billion deal will combine the second- and third-largest pharmaceutical chains (they both trail CVS). The acquisition is another in a recent string of recent healthcare acquisitions, as rapid drug price increases and effects from the Affordable Care Act are forcing companies to cut costs and join forces.
Strong Earnings, Mixed Reactions
Yesterday was another big day for earnings, with Alibaba, Pfizer and JetBlue all posting strong results. E-commerce giant Alibaba (up 4 percent) and drugmaker Pfizer (up 2.4 percent) both breezed past analyst expectations, posting $3.49 billion and $12.09 billion in revenue, respectively. In the transportation industry, JetBlue also fared well on paper but received mixed reactions from investors. The airline’s profit margin was up 10.5 percent, but shares nonetheless fell more than 3 percent on Tuesday, likely due to a decrease in JetBlue’s per-unit revenue.
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TODAY IN TECH
Apple Doesn’t Disappoint
Against all odds, Apple came back once again with very strong earnings. Total quarterly profit rose 31 percent due to increased demand for the iPhone in China—an impressive feat given China’s severe economic slowdown and doubts over whether Apple could maintain growth for its main product. And we mean main product: the iPhone is so crucial to Apple’s success that it accounts for 63 percent of its revenues.
Twitter Tanks
While Twitter managed to beat analysts’ expectations for third quarter earnings and revenue, the social media giant reported a disappointingly tiny increase in average monthly users, with a gain of just 3 million to 307 million. This metric carried the most weight for investors, as Twitter’s share price fell as much as 12 percent in after-hours trading. Co-founder Jack Dorsey assumed the role of CEO in July, and needless to say, he’s got a long way to go to right the ship; it’s fair to assume that job cuts were just the start.
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ECONOMIC CALENDAR
- Monday: Broadcom, MGM Resorts, Xerox Earnings; New Home Sales
- Tuesday: Aflac, Alibaba, Apple, BP, Coach, Comcast, Ford, Gilead, JetBlue, Panera, Pfizer, T-Mobile, Twitter, UPS Earnings; Durable Goods Orders
- Wednesday: GoPro, Volkswagen, Yelp Earnings; Fed FOMC Meeting Announcement
- Thursday: Baidu, Deckers, Deutsche Bank, LinkedIn, MasterCard, Samsung, Starbucks, Time Warner Cable Earnings; U.S. Q3 GDPs
- Friday: Chevron, CVS, Exxon Mobil, Phillips 66 Earnings; Personal Income/Spending
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U.S. MILITARY LEVELS UP
The U.S. military is leveling up. Yesterday, Pentagon officials confirmed that the Air Force is purchasing 100 new long-range stealth bombers from Northrop Grumman, in what’s being called a massively important military initiative. And it’s costing them a pretty penny, too:
- The total price tag for all 100 bombers: $79 billion. But don’t expect them to be in use any time soon: it will take until 2025 for the first 21 bombers to be built, with the next 79 to be constructed over the following few decades. It’s what we would call a super long-term contract.
- That comes out to $790 million per bomber. Sound like a lot? It definitely is, but consider that the Air Force’s last bomber, the B-2, cost an insane $2 billion for each of the 21 orders.
- So what’s so special about this bomber? Well, it’s classified, but some of the core functionality includes a 20,000 pound capacity, a range of up to 5,000 nautical miles and an all-new radar-evading design. Oh, and it will be capable of carrying nuclear weapons. All in a decade’s work.
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INTERVIEW QUESTION OF THE DAY
If you use a certain formula on 13, you end up with seven. Under the same formula, 2352 becomes 16, 246 becomes 14, 700 turns into 16 and 1030 becomes 14. What would 9304 become? (Answer)
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BUSINESS TERM OF THE DAY
Naked Trust — A straightforward type of trust into which a trustor transfers assets (money or property) in order to pass them on to beneficiaries. The initial owner of the assets (the trustor) loses all control over them once they are placed in the trust. The trustee has only nominal control of the assets in the trust. The trust’s beneficiary has absolute entitlement to the assets once he or she turns 18.
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FOOD FOR THOUGHT
10,000: the number of guns a man arrested on drug trafficking charges in South Carolina was found to be in possession of.
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