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Monday December 9, 2019



Slow Sales Bite Apple

Apple, Inc. (AAPL) reported its latest earnings results on Tuesday, January 29. The company reported a decrease in both sales and profits.

The technology giant posted total net sales of $84.31 billion for the quarter. This is down from $88.29 billion for the same quarter last year.

"While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter's results demonstrate that the underlying strength of our business runs deep and wide," said Apple's CEO, Tim Cook. "Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments."

Apple reported net income of $19.96 billion for the quarter, or $4.18 per share. At this time last year, the company posted net income of $20.07 billion.

Sales of the company's iPhone devices dropped to $51.98 billion for the quarter, a nearly 15% decrease from the same quarter last year. The company's other product categories each produced an uptick in quarterly sales. Apple's Services segment, which includes iCloud and Apple Music, grew to $10.88 billion in revenue for the quarter.

Apple, Inc. (AAPL) shares ended the week at $166.52, up 6.9% for the week.

Amazon Delivers Prime Results

Amazon.com, Inc. (AMZN) released its fourth quarter results on Thursday, January 31. The company reported increases in both quarterly and full-year profits.

The digital retailer reported $72.38 billion in revenue for the quarter, up from $60.45 billion during the same quarter last year. For the full year, Amazon reported $232.89 billion in revenue.

"Alexa was very busy during her holiday season. Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year," said Jeff Bezos, CEO and founder of Amazon. "The number of research scientists working on Alexa has more than doubled in the past year, and the results of the team's hard work are clear."

Amazon reported net income of $3.03 billion in the fourth quarter, up from $1.86 billion at this time last year. The company posted full-year net income of $10.07 billion, topping the $3.03 billion reported the previous year.

The company's North America segment led the way with $44.12 billion in net sales during the quarter and $141.37 billion during the full year. International net sales reached $20.83 billion for the quarter and $65.86 billion for the year. Amazon Web Services (AWS) posted $7.43 billion in quarterly sales and $25.66 billion for the year.

Amazon (AMZN) shares ended the week at $1,626.23, down 1.1% for the week.

Tesla Profits Stall

Tesla, Inc. (TSLA) posted its latest earnings report on Wednesday, January 30. The company posted declining profits despite increased revenue.

The automaker reported revenue of $7.23 billion for the quarter, up from $6.82 billion during the same quarter last year. For the full year, the company reported $21.46 billion in revenue, up from $11.76 billion during the previous year.

"Last year was the most pivotal year in Tesla's history," wrote company CEO Elon Musk and CFO Deepak Ahuja in a letter to shareholders. "During our Model 3 production ramp, we went through significant challenges with the battery module line at Gigafactory 1 in Nevada, and later with our general assembly line in Fremont. Thanks to the hard work and ingenuity of our manufacturing teams, by mid-2018 we successfully overcame these challenges and stabilized Model 3 production at high volumes."

The company reported net income of $139.5 million for the quarter. This is down from net income of $311.5 million at this time last year.

Tesla's shares fell roughly 5% following the earnings release. During the earnings webcast, the company announced that its CEO, Deepak Ahuja, would be retiring from the company later this year. Ahuja initially retired from the company in 2015, but returned in 2017 after the departure of CEO Jason Wheeler.

Tesla (TSLA) shares ended the week at $312.21, up 6.6% for the week.

The Dow started the week of 1/28 at 24,597 and closed at 25,064 on 2/1. The S&P 500 started the week at 2,645 and closed at 2,707. The NASDAQ started the week at 7,075 and closed at 7,264.

Treasury Yields Rise Following Strong Jobs Report

As the week came to an end, U.S. Treasury yields rose in response to a jobs report that outpaced expectations. The rise in yields reversed the previous day's decline.

On Friday, the Bureau of Labor Statistics released its monthly Employment Situation Summary. The report showed nonfarm payroll employment rose by 304,000 in January. Analysts expected an increase of only 165,000 jobs for the month. The unemployment rate ticked upward 0.1% to 4%.

"The labor force was little changed but the drop in employment was enough to lift the participation rate by a tenth to a new cycle high," said Ian Shepherdson, Chief Economist with Pantheon Macroeconomics. "But the increase in participation in recent months is not enough yet to call a meaningful shift from the flat trend of the past few years, and we still expect unemployment to fall over the course of this year."

The benchmark 10-year Treasury note was at 2.688% during trading on Friday after falling to a low of 2.613% on Thursday. Likewise, the 30-year Treasury bond was at 3.031% on Friday after bottoming out at 2.989% the day prior.

Thursday's dip in yields followed a statement released on Wednesday by the Federal Open Market Committee which indicated a slow-down in further rate hikes. In its statement, the Fed announced that the target federal funds rate would remain at a range of 2.25% — 2.5%.

"The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2% objective as the most likely outcomes," noted the Federal Reserve in Wednesday's statement. "In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes."

The 10-year Treasury note yield closed at 2.69%, while the 30-year Treasury bond yield was 3.03%.

Mortgage Rates Rise

Freddie Mac released the results of its latest Primary Mortgage Market Survey on Thursday, January 31. The report showed a slight increase in interest rates.

This week, the 30-year fixed rate mortgage averaged 4.46%, up from 4.45% at this time last week. Last year at this time, the 30-year fixed rate mortgage averaged 4.22%.

The 15-year fixed rate mortgage averaged 3.89% this week, up from last week's average of 3.88%. During the same period last year, the 15-year fixed rate mortgage averaged 3.68%.

"Purchase applications were down this week after soaring early in the year," said Freddie Mac's Chief Economist, Sam Khater. "However, softening house price appreciation along with increasing inventory of homes on the market — and historically low mortgage rates — should give a boost to the spring homebuying season."

Based on published national averages, the money market account closed at 1.29% on 2/1. The one-year CD finished at 2.76%.

Published February 1, 2019
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