Facebook Renamed to Meta ($MVRS), Apple & Amazon Shares Fall On Latest Earnings

Okay, very good morning to you. It is Friday the 29th of October. Of course, we're going to talk about Facebook becoming Meta as Zuckerberg tries to push the idea of the metaverse forward and a rebranding overhaul of the parent company. So we'll have a look at that. We'll also have a look at Apple, Amazon earnings. They came out after market yesterday and they were down 3.5% and 4% each respectively. So we'll have a look at why they reacted so negatively in the overnight session. And then we're going to talk about ECB sources following the hawkish moves that were seen in the euro yesterday, which appreciated quite sharply. A lot of the focus was on inflation, of course, and some of the rhetoric was deemed as her being— or the market perception— her being too timid on the pushback of more aggressive pricing of rate hikes in the European area. And then we're going to talk about Capitol Hill updates on Biden's package And then a few things on China from China Evergrande making a last-minute payment again to kind of live another day for the time being. And then coal futures, which continue to decline quite rapidly on more verbal intervention on behalf of China to ease some of those commodity price pressures at the moment. So that's what's on the agenda. Um, before I get stuck into Mark and his metaverse, let's just have a look at the general flavor of how markets are looking at the moment. We had a positive finish across Wall Street last night. S&P was up 1%, the Dow 0.7%, the NASDAQ an outperformer, albeit slightly, at 1.4%. A bit of a drift lower though, as you can see in the NASDAQ future. After initially hitting those highs pretty much at the close, we then saw quite a rapid decline on the back of those tech giants coming out. Remember, Apple and Amazon are the second and third biggest companies in the S&P 500. The only company they're behind, of course, is is Microsoft. And so those two companies alone account for about 10% of the entire NASDAQ 100 index, and hence the reason why they— that stock index came off quite aggressively overnight session. The move obviously not quite as pronounced, but tracking in a similar fashion for the S&P, down 21 this morning. The DAX down about 94. Elsewhere, as far as the currency market is concerned, the dollar index this morning is up marginally around 0.14%. So, um, cable's pretty flat, euro's underperforming, but I don't think that comes as much a surprise given the, the sharp outperformance yesterday. The gain in the euro was more than in excess of 1%, and the previous 20-day daily range was more akin to a 0.2% move. So yesterday was a big move on the upside, so a little bit of a pullback from there wouldn't be too surprising. Gold, a little bit lower this morning, down $6. As too is the US 10-year, down 5 ticks. And then oil is trading absolutely flat at the moment. So that kind of area or band of support that we were eyeing around these previous resistance support areas in the $81 handle, working out not only yesterday overnight session but also during the kind of the switch between late European morning and US entrance yesterday, and for a pretty, pretty decent pullback up to the $83 mark for the moment where oil resides. Lack, lack of real news flow right now. Nothing meaningful overnight to mention on that front. But let's get stuck into Mark Zuckerberg and this change. And I don't know about you, but whenever I look at Zuckerberg, particularly in this image, he looks like a combination between a humanoid and an avatar. I'm not sure whether he's trying to do that on purpose, but He, he, the way that they dress him up and put the makeup on is slightly disconcerting. But nonetheless, what is Meta's vision? Well, their vision is that people will congregate and communicate by entering virtual environments, whether they're talking to colleagues in a boardroom or hanging out with friends in far-flung places all around the world. You name it. They can make it. The new name won't affect the company uses of it or how it shares its data, and the corporate structure is not changing. Apps including flagship social networks like Instagram, WhatsApp, they all keep exactly the same names and icons and so on that you, you've been used to. But leaning harder into the metaverse lets the company appear, of course, to be looking to pursue some kind of diversification at a time when they're facing many different levels of criticism, you know, over the years, obviously on data privacy. You had the Cambridge Analytica stuff on the political interventions and things like that being used in such, such fashion. You've now got this obviously youth issue with the impact it's having on mental health on young people. You've got the fact that they don't necessarily fully understand or control their algorithms to stop things like hate speech. And so yeah, it doesn't come as a surprise, this type of move. Whether or not it has longevity to really mask over some of these underlying issues is yet to be, to be seen. One of the interesting things also that I read this morning was that how Facebook might find it challenging to try and retain a lot of key staff, and if those staff aren't already working on things like AR and VR technology, then trying to maintain employees of a high quality when there's so much competition obviously in the tech space to, to stay at the company could be a long-term challenge that they'll also face. Building out the metaverse though will allow Meta to reduce its dependency on mobile operating system and browser makers such as Google, Apple to deliver their services to consumers. So as per the impact that's, that's been evident in the likes of Snap in particular, but other social media names as the new iOS privacy changes have come in on Apple, this as well goes some way to try and circumvent that, to retain some power over that user base and generating of their advertising revenues, which obviously is very critical to the business. So yeah, that's the latest there. This change won't come into effect, I don't believe, for another month or so anyhow. So it kind of is akin to how, uh, in terms of technicality, uh, how you still have Google but the parent company is Alphabet. Now you have Facebook, still app, but then you've got Meta that sits above that. Um, having a look at these aftermarket earnings, then we have Apple. So starting off with the EPS that came in in line, revenues a miss, $83.36 billion below the expected $84.7 billion. Their iPhone revenues were $38.87 billion below the expected $41.6 billion. And CEO Tim Cook said supply chain constraints hurt sales by $6 billion, and that was larger than expected. So yeah, not often you see numbers, um, that below expectations for Apple. Um, but such as the, the lofty heights of which the, the market generally looks at for these numbers to punch, you know, particularly strong numbers, that yeah, they just haven't really lived up to that this time around. And the supply chain constraints clearly evident on the firm, as suggested by Cook himself. So Apple shares after market down about 3.5%, as you can see here. And then Amazon They were even worse. They were down 4% in aftermarket trades. So, um, as you can see here, I just bring it up. So immediately after market, they reported and got hit quite hard and remained lower. Uh, their EPS at $6.12, Street estimate for $8.92. So well below expectations. Revenues and miss at $110.8 billion against $111.8 expected. Their outlook, though, was very disconcerting. They see Q4 net sales $130 to $140 billion range, so $135, that's below expectations of $141.6 on the street. That comes despite AWS putting in another solid performance. Of course, their sales were up 39% as the division's fastest growth or rate of growth since 2019. Um, so overall then, it's for Christmas they do see the forecast being quite considerably lower than what they previously had foreseen. Um, the company in itself though, um, you know, it was always going to be a challenge to live up to the pandemic just outperformance that they had. Obviously year to date they're pretty flat as we were discussing earlier in the week, comparative to companies like Alphabet which are up, you know, over 50% on the year. Amazon is also contending with mounting costs as it's in expanding its fulfillment networks. Remember, going to the seasonal shift, we tend to see that as well. Not only do they create more business, obviously, as people shop around Christmas, but also it becomes more expensive because you have to hire and retain more people. And earlier this month, the company did say intended to add 150,000 seasonal employees to handle that US holiday period. That's 50,000 more than it required last year. The additional problem here, of course, is that a tight labor market has prompted the company to have to offer higher than normal wages and sign-on bonuses of up to $3,000 in some markets. So not only are you hiring more employees, you're having to pay them more, just given the context of how the labor market is looking in the US at the moment. And hence the reason why overall then it's a little bit negative for the earnings report. Beyond this 3.5-4% move that we've seen after market, quite frankly, I think it doesn't really matter, these earnings, if I'm, if I'm being honest. And so it wouldn't shape my perception at all about what I think about these companies and the direction of, of travel, which they're generally getting higher and bigger all of the time. Don't see that changing despite these slightly softer numbers that we've had overnight. All right, other things just before I move on. Don't forget there is a brand new podcast episode that will be coming out later on today. So whether you're on Spotify or podcast or Apple Podcasts, Google, so on, just search for Amplify Me Market Maker and you'll get the latest weekly wrap-up episode. Myself and the head of trading will be having a chat a bit later on this morning and we'll talk about Meta, we'll talk about Tesla, Elon Musk, and anything you guys want to hear about. So some of the key topics of the week. Otherwise, quick look elsewhere. You've had ECB sources. This obviously follows that meeting yesterday, which did create a fairly meaningful move in the euro, as I discussed. It's becoming very usual fare now for ECB sources to come out shortly after the press conference. What is a source? Just to quickly cover this? Well, it's not like it's Bloomberg or Reuters speculating of what they think they've heard from hearsay. An ECB source is very much a person at the central bank using media agencies to, under the COVID of an anonymous source, communicate some more transparency to the market. And so generally speaking, then this is when the quality of what they're saying is very much to the point. It's very authentic and true. And so the market does listen to these things. And so the sources last night said Lagarde's mild rates of pushback reflected the ECB colleagues' view. So this is that divergence at the moment between the hawks and the doves. How do they feel about inflation? They paid heed that it was going to be more sticky than that they previously thought. However, they stuck to their transitory view, and it's the division then between what we're seeing with all central banks at the moment, which is this idea about, you know, is inflation indeed still transitory or not? And do we need to take action, tighten policy at a more rapid pace, which we're seeing in other places like the Bank of Canada, the Bank of England, so on and so forth. The other thing is officials advised not to say the market is wrong. So again, in a way, this is a hawkish source comment because the market is priced quite aggressively, some would say, comparative to the fundamentals in Europe. Which for different reasons perhaps is not at the point of warranting such tightening action. But if your officials are advising you not to say the market is wrong, you're effectively passively saying the market is right to price in a more aggressive rate cycle. So yeah, this came out, hasn't really had much of an impact, but just kind of plays into the hands of very much what the market takeaway was from, from yesterday overall. Uh, and then other news, uh, Joe Biden called on lawmakers to push ahead with the revised $1.75 trillion, uh, tax and spending plan, which has been scaled back, of course, from the previous north of $3 trillion. And the $550 billion infrastructure bill is also still pending. So there's kind of two ways to look at this. Obviously, this thing is dragged out forever, and that number is getting smaller as That's the mission to try and achieve a compromise of which Biden himself has said this isn't really what he's wanted. But there goes, you know, trying to make a deal and we have to compromise. The other thing, though, is that these things are moving forward and something is better than nothing. So hence the reason why I think the markets at the moment are a little bit fatigued by this whole situation, this whole dialogue happening in Congress at the moment. The impact has been fairly marginal. To be quite honest. And then Evergrande, uh, there was an update overnight. So they've made an interest payment for an offshore bond before a grace period expired today. The amount was 47.5 billion. If you remember this time last week, pretty similar to the situation with the 85 million, what was due at the time. And so this just kind of averts the trigger point then for a more mass sequence of events that could lead to a more significant default of the firm. So again, they're kind of surviving for the time being, keeping their head above water. Probably this is the status quo for, for the time being. And then in China, you did have coal futures. Now, very rarely I talk about coal futures, but they extended the dramatic decline in overnight trade. I think there's a chart here that you can look at. And this came as Chinese government said there's further room for prices to fall, essentially ratcheting, ratcheting up interventions in the market aimed at easing the energy crisis. It's very evident globally at the moment. So again, it's not what you do, it's what you say. In this instance, they're saying there's room for prices to fall further. So you're, you know, you're kind of intimating towards the fact that, look, will intervene. This isn't yet priced moderated enough. We'll, we'll continue to do and take action until it comes a little bit lower. What that point is, they've not been specific, but that's the, the overall takeaway. Um, Chinese authorities pressing coal producers to both raise output and lower prices to help address tight fuel supply that's prompted widespread shortages, seen power restricted for some heavy industrial users, and left many utility generating electricity at a loss. And so hence the reason why that is happening. As far as the calendar is concerned for today, this morning you've already had the French data out, the preliminary Q3 GDP at 3%. That was actually above the expected 2.1%. Yeah, you then get the flash German Q3 GDP reading, uh, the quarter-on-quarter expected 2.2%, the year-on-year expected at 2.4%. That'll be at 9 AM London time. You then get at 10 o'clock one of the main releases of the morning. You get the overall eurozone GDP flash reading, uh, the quarterly print expected 2%, year-on-year 3.5%. And you also get the HICP flash year-on-year reading for October, expected at 3.7%. And with a lot of eyes and attention on inflation, particularly coming on the coattails of Lagarde's commentary from yesterday, that's expected to go up year-on-year from 3.4% to 3.7%. You then, the afternoon, you've got US core PCE price index. You also get Chicago PMI for October in the States and the final University of Michigan reading for the same month as well. Earnings-wise, Exxon and Chevron are ones to just be aware of that will be coming out a bit later on today. So that is it. I wish you guys a good session ahead. Have a fantastic weekend, and please do remember to check out the podcast as well. All right, take care.