S&P 500 Milestone

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Posted: Oct 29, 2019 10:49 AM
S&P 500 Milestone

Source: AP Photo/Richard Drew

Yesterday, the S&P 500 opened at a new record high and held on for the rest of the session. For a moment, it looked as if the NASDAQ Composite might have joined the party, but it came up short at the last minute.  

The market breadth was more impressive than the actual print for the major indices:

NYSE

  • Advancers: 1,588
  • Decliners: 1,350
  • Up Volume: 1.9 billion
  • Down Volume: 1.7 billion
  • New Highs: 154
  • New Lows: 22

NASDAQ

  • Advancers: 2,019
  • Decliners: 1,116
  • Up Volume: 1.4 billion
  • Down Volume: 606 million
  • New Highs: 167
  • New Lows: 54

After the close, Alphabet (Google) posted quarterly financial results that initially sent shares tumbling more than 4%: 

  • Revenue: $40.5 billion, consensus: $40.3 billion
  • Earnings: $10.12, consensus: $12.42
  • Ad Revenue: $33.92 billion
  • Paid Clicks: +18%
  • Traffic Acquisition Costs (TAC): $7.49 billion from $7.48 billion
  • Properties Revenue: $28.65 billion +19%
  • Pixel/Cloud Revenue: $6.43 billion (consensus $6.23 billion); a year ago: $4.64 billion

Google Building for Future

Google is investing big time in its future and its race against other behemoths, while all seem to ignore the fact the larger they get, the bigger the bullseye on their backs.

  • Capital Expenditure (Capex): $6.73 billion from $5.28 billion

The company plans to triple its annual Cloud revenue from $8.0 billion, which played a role in the massive hiring during the quarter when new Cloud executives were among the 6,450 new employees. Interestingly, management suggested its recent breakthrough in quantum computing could power its cloud growth - no wonder the company’s rivals tried to throw cold water.

I wouldn’t consider selling the stock for a nano-second if I was a long-term holder. 

Any Bite Without FANG

Today is going to be a great test for the market, which has been rallying with so-called FANG stocks mixed at best. Keep watching semiconductors and software names to power Technology.

Coming into the week, FANG’s influence on the S&P:

  • Capitalization: 9.6%
  • Earnings: 3.6%
  • Revenue: 0.4%
  • Forward Price-to-Earnings (Forward P/E) with FANG: 17.1
  • Forward Price-to-Earnings (Forward P/E) without FANG: 16.0

S&P 500 Index

+0.56%

 

Communication Services (XLC)

+0.93%

 

Consumer Discretionary (XLY)

+0.31%

 

Consumer Staples (XLP)

 

-0.20%

Energy (XLE)

 

-0.57%

Financials (XLF)

+0.52%

 

Health Care (XLV)

+1.03%

 

Industrials (XLI)

+0.28%

 

Materials (XLB)

+0.31%

 

Real Estate (XLRE)

 

-1.06%

Technology (XLK)

+1.27%

 

Utilities (XLU)

 

-1.3

Portfolio Approach

We closed on Fastenal (FAST) for an 8% gain over a very short period. I like the stock, but I wanted cash and felt that the stock price could meander and grind away in the near term.  We added a new Consumer Discretionary yesterday as well. 

Communication Services

Consumer Discretionary

Consumer Staples

1

3

2

Energy

Financials

Healthcare

1

2

2

Industrials

Materials

Real Estate

3

1

1

Technology

Utilities

Cash

3

0

1

Today’s Session

Earnings Parade

General Motors posted great financial results:

  • Revenue $35.5 billion consensus $33.8 billion
  • Earnings per share $1.72 consensus $1.31

Note: UAW strike had $1.0 billion negative impact on revenue during the quarter.

Operating Income

  • North America $3.0 billion
  • International -$63 million

GM

Segment Volume

3Q2019

3Q2018

Share

Chevy Cars

75,000

118,000

7% from 10.4%

Chevy Trucks

249,000

231,000

30.8% from  30.8%

Chevy Crossovers

183,000

136,000

14.2% from 11.4%

US

739,000

695,000

16.6% from 15.8%

 

Cadillac

40,000

37,000

Buick

52,000

46,000

GMC

141,000

127,000

Merck (MRK)

  • Beat revenue
  • Beat earnings
  • Guides higher

Pfizer (PFE)

  • Beat revenue
  • Beat earnings $0.75 estimate $0.62
  • Guides higher

Kellogg’s (K)

  • Earnings $1.03 estimate $0.91
  • Organic sales $3.41 billion from $3.33 billion
  • Organic net sales growth was supported by consumption growth momentum in key brands such as Pringles, Cheez-It, Rice Krispies Treats, and Pop-Tart

MasterCard (MA)

  • Beat revenue
  • Beat earnings $2.15 versus consensus $2.01
  • Gross Dollar Volume
  • Credit cards $245 billion +14.9%
  • Debit cards $249 billion +8.8%

Auto Nation (AN)

  • Comp store +3.0% consensus +1.9%
  • Domestic car income +5%
  • Import car income +2%
  • Premium luxury car income +16%

The major indices are set to open under a little pressure.