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Monday January 22, 2018



Apple Breaks Records and Emerges from Slump

Apple Inc. (AAPL) announced its quarterly earnings on Tuesday, January 31. The computer electronics company reported a boost in revenue and earnings in the first quarter.

Apple announced record quarterly revenue of $78.4 billion in the first quarter. Last year the company reported first quarter revenue of $75.9 billion.

"We're thrilled to report that our holiday quarter results generated Apple's highest quarterly revenue ever, and broke multiple records along the way," said Apple CEO Tim Cook. "We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch. Revenue from Services grew strongly over last year, led by record customer activity on the App Store, and we are very excited about the products in our pipeline."

Apple reported $17.9 billion in net income for the first quarter. On an earnings per share basis, profit rose to $3.36 per share compared to $3.28 per share in the same quarter last year.

In the holiday quarter, Apple sold a record 78.3 million iPhones, surpassing the 74.8 million iPhones that were sold in the same quarter last year. This boost was driven in large part by strong demand for Apple's latest mobile device, the iPhone 7 Plus. Revenue in the quarter was also boosted by an 18% increase in the company's Services division's sales, which includes Apple Pay and AppleCare.

Apple Inc. (AAPL) shares ended the week at $129.08, up 6.3% for the week.

Amazon Misses the Mark on Earnings

Amazon.com, Inc. (AMZN) announced its fourth quarter earnings on Thursday, February 2. While the company's earnings beat Wall Street's expectations, revenue fell short, causing shares to drop 4% after earnings were released.

Amazon announced quarterly revenue of $43.7 billion, up 22% from last year's fourth quarter revenue of $35.7 billion. This was below the $44.7 billion in revenue expected by analysts.

"Our Prime team's customer obsession kept them busy in 2016," said Amazon CEO Jeff Bezos. "Prime members can now choose from over 50 million items with free two-day shipping — up 73% since 2015. New benefits were also added to the list, like Prime Reading, Audible Channels for Prime, Twitch Prime and more."

Amazon announced adjusted earnings of $1.54 per share. Last year at this time, Amazon reported adjusted earnings of $1.00 per share.

The company's non-retail cloud service, AWS, continues to prosper with its Prime Video and movie offerings leading the way. Amazon Studios earned seven Academy Award nominations and 11 Golden Globe nominations this year. However, Amazon's retail segment is about to face some stiff competition. Earlier this week, Wal-Mart announced that it is will be offering free two-day shipping on two million items when customers spend $35 or more and, unlike Amazon Prime, there is no membership required.

Amazon.com Inc. (AMZN) shares ended the week at $810.20, down 2.8% for the week.

Facebook Beats Expectations

Facebook, Inc. (FB) reported quarterly earnings on Wednesday, February 1. The company crushed analysts' expectations with revenue and earnings that soared above last year's numbers.

Facebook announced that revenue for the fourth quarter was $8.81 billion, compared to last year's fourth quarter revenue of $5.84 billion. This fell below the $8.51 in revenue predicted by analysts.

"Our mission to connect the world is more important now than ever," said Facebook CEO Mark Zuckerberg. "Our business did well in 2016, but we have a lot of work ahead to help bring people together."

The company reported net income of $3.57 billion, up from last year's fourth quarter earnings of $1.57 billion. Adjusted earnings per share for the fourth quarter were $1.21, up from $0.54 per share a year ago and below analysts' estimates of $0.98 per share.

With 1.15 billion daily mobile active users, Facebook is continuing to expand its reach. In the previous quarter, the social network reported that the number of users increased 17% from a year ago. Zuckerberg continues to expand Facebook's reach and brand the company as more than just a social network. In the fourth quarter, the company introduced "Marketplace," a new feature that allows users to buy and sell items to other Facebook users, and "Workplace," which functions as a communication platform for businesses, non-profits and other organizations.

Facebook, Inc. (FB) shares ended the week at $130.88, down 0.5% for the week.

The Dow started the week of 01/30 at 20,029 and closed at 20,071 on 02/03. The S&P 500 started the week at 2,286 and closed at 2,297. The NASDAQ started the week at 5,636 and closed at 5,667.

Yields Fall From January Highs

U.S. benchmark Treasury yields fell on Friday after the latest jobs report revealed weak wage growth that could impact the Federal Reserve's next rate hike decision. The fall marks a departure from January's gains.

While the economy added more than 227,000 jobs in January, the U.S. Labor Department also reported that hourly wages rose only 0.1%, which fell short of the 0.3% predicted by analysts. Following the report's release, the yield on the 10-year Treasury note fell 2.2 basis points to 2.448%.

"The good news was payrolls were muscular, but the bad news was average hourly earnings only grew 0.1%," said Ward McCarthy, chief financial economist at Jefferies. "From the Fed's standpoint, this reduces the urgency to push the button."

Many analysts, who were hoping that a solid jobs report would push the Fed to raise interest rates in March, echoed McCarthy's sentiment on Friday. The disappointing wage data has added to uncertainty regarding the Fed's next rate hike.

"This certainly brings into question the likelihood that the Fed moves in March," said Ian Lyngen, strategist and BMO Capital Markets in a written statement. "In fact, heading into the release, the market had the odds of a hike at 24% and as we write, it's closer to 12%."

The Fed has indicated that it will raise interest rates three times this year. However, analysts were disappointed at the conclusion of the Federal Reserve's meeting this week when the Fed's policy statement failed to indicate when the next rate hike might occur. The uncertainty caused Treasury yields to fall slightly after the statement was released.

The 10-year Treasury note yield finished the week of 01/30 at 2.49%, while the 30-year Treasury note yield was 3.11%.

Mortgage Rates Stay Steady

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, February 2. The report revealed that rates have held steady after rising last week.

The 30-year fixed rate mortgage remained unchanged after last week, averaging 4.19% this week. Last year at this time, the 30-year fixed rate mortgage averaged 3.72%.

This week, the 15-year fixed rate mortgage averaged 3.41%. This was slightly higher than last week's average of 3.40%. The 15-year fixed rate mortgage averaged 3.01% one year ago.

"The 30-year mortgage rate remained flat at 4.19%, starting the month 47 basis points higher than this time last year," said Sean Becketti, Chief Economist at Freddie Mac. "Despite the uncertainty in the market, the pending home sales index increased 1.6% in December, up from a decline of 2.5% the month prior."

Based on published national averages, the money market account finished the week of 1/30 at 0.58%. The 1-year CD finished at 1.23%.

Published February 3, 2017
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