US Earnings Update ($MSFT $GOOGL $TWTR $HOOD) & Macro Review

Okay, very good morning. It is Wednesday the 27th of October, so hope you're doing well. Uh, before I begin, really exciting day for Amplify, as you all know if you've been following the channel. Our new mission to democratize financial education for young people, and today this afternoon we're going to be training 1.4 thousand people in 2 hours. This afternoon. Fortunately, through our society network, we're going to be dealing with students from the likes of Queen Mary's in London, Durham, Imperial, lots of others. And so even if you're not part of any of these universities, you know, our mission is to really bring financial education to everyone, every young person. And so if you just go on to AmplifyMe.com, you can actually just jump on one of our open, free public events as well that are coming up. We do those on a weekly basis where you can get knees deep in a role in finance like market making, sales, trading, asset management, and so on. So remember to check that out, AmplifyMe.com. Again, we'd love to have you on our mission to get as many people access to this type of training. So please do check it out. Otherwise, quick look at the markets this morning and things are relatively quiet. We did touch, of course, a record momentarily for the Dow and S&P yesterday in US indices. Earnings still very much in focus. We had the likes of UPS, General Electric finished up around 7%, 2% each respectively yesterday. And for context, around 81% of the S&P 500 members have reported better than expected earnings results so far. And obviously this week, particularly busy one, 164 S&P companies reporting. And we did have a number of large mega-cap tech names reporting after the close yesterday. We'll have a look at those in a moment, but generally looking at the overall sentiment after those highs that were seen in North American indices shortly after the open, just drifted a little bit since then and overnight in the Asia-Pac session, but just bumping back up as European UK players come back into the markets. Overall pretty steady going, I'd say, in index futures. US seen marginally higher, the DAX down about 42, but finding some overnight support in the futures market. At the pivot level. In the FX market, the DXY is pretty much unchanged, and that's reflected largely in the major pairs trading pretty flat, as too really is gold and the US 10-year. Oil just printing session lows. I can see here, um, as I'm just looking at my chart, we're down $1.8362. Nothing particularly too meaningful from an oil perspective. We did have the API crude oil inventories last night, which we can recap But overall, as you can see here, largely, although a wide scale, a period of consolidation for crude oil given that big push that we've seen up over a multi-week period. So I'm going to get straight into corporate earnings from last night. Quite a bit to get through, so I'm going to try and keep this as brief and to the kind of need-to-know facts for each individual company. And I've got 5 or 6 in total to go through. So starting Starting off with the, the mega-cap tech names, so Microsoft. Microsoft traded up about 2% in aftermarket trade, so generally a positive response from the market. Their adjusted EPS came in at $2.27 against $2.07 on the street. Revenues as well were a beat, $45.3 billion, and this estimates were for just under $44 billion. In particular, as you can see here, the software giant gets a boost from demand for Azure and Office 365. So their intelligent cloud which is what that division is called, which is made up of the Azure and server software, that revenue rose to $17 billion. That was higher than expected, around $16.5 billion. And then Productivity Division, that mostly then entails the Office software and also in addition to personal computing, which is made up of things like Windows, the Surface tablet, Xbox, the gaming side of things. They also those two divisions both beat expectations as well. So generally some good news there, and shares already at a record rise on the 11th straight earnings beat there for Microsoft. For Alphabet, there actually was slightly lower aftermarket, but very marginally. And I definitely would stress that in context, you know, shares have been up close to 60% year to date. And so the fact that they've come off a percent or so, I'd say, is absolutely nothing. At all really to, to worry about. Um, looking at Alphabet specifically and their share price, they've been the big outperformer of course, uh, against those kind of big five, the Fab Five tech names. Definitely well outperforming the likes of Amazon, which overall are only up marginally on the year despite being a real pandemic standout of course that we had in 2020. In comparison, definitely these two firms, Alphabet and Microsoft, have really outperformed. The likes of Facebook, Apple, and Amazon. Looking at Alphabet, their EPS was at $27.99, $27.99. That was well and above expectations of $23.50. Revenues again, $65.12 billion, a firm beat. They had robust advertising spending, but they did have slightly disappointing results for YouTube and cloud computing divisions, which was what were the kind of weighing factor was and why they finished down in aftermarket trade. Otherwise, a couple of other quick ones. AMD, they were down marginally 0.7% aftermarket. Their revenues were a slight beat, but they, in terms of their, um, another bullish forecast, but overall not too much there that really got the market excited. So again, they did beat on AMD on their EPS adjusted basis, revenues, and they had a pretty decent outlook, but a lot of that already being factored in. Twitter was another one. Aftermarket, they were up about 3.5%. One of the standout things here was, is that social media names, given the privacy tracking changes that we've seen on the iOS, on Apple, we saw that last week absolutely decimate Snap shares, which fell around 25% or so. Concerns then about how Facebook numbers might have looked and other subsequent social media companies which are heavily dependent on advertising. I believe Twitter generates about 90% of its revenues from, from advertising. And so those tracking changes would be very detrimental, is what people were fearing. And in fact, um, they're having what the company called a modest impact on sales. And actually, that in itself was far lesser degree than what markets were expecting, and hence the reason why their, their shares were a little bit higher. Daily active users in Q3 was 211 million, 5 million more than the previous period and a 13% increase, in fact, from a year earlier for Twitter. And obviously those DAU numbers are particularly important for these types of stocks, and their revenues were broadly in line. Otherwise, Robinhood a percentage basis actually was one of the standouts. They actually were down about 8.5%, 8.5%. Their EPS was much worse than expected. It came in a loss of $2.06. Analysts were looking for a loss of just $1.37. You can see here revenue from crypto trading plunged 78% from the preceding quarter. Um, it's a strange one. Robinhood, I think kind of had its day. I'm definitely not calling them down and out yet, but they were so popular during that whole GameStop kind of meme squeeze that we had. But that's kind of a distant memory now. And the process of obviously IPOing takes time. And that as well is why we've had lots of other SPAC deals and things of late, given the time to market can be much quicker. But that's the kind of double-edged sword of being related to that kind of momentum WallStreetBets type marketplaces where, you know, really time is of the essence. And, and also the fact that there's just plenty more competition there now out for zero-commission kind of trading platforms— Robinhood. So one of the figures that stood out to me was something called the ARPU, which is the average revenue per user, and that decreased 36% to $65. So yeah, the, the company stock falling around 8.5% last night. Another big one as well, just to mention, was Visa. They were down about 2.5%. The EPS was a beat, as was their revenues, and they also boosted their quarterly dividend, but not perhaps up to the, the kind of more lofty heights that some analysts were anticipating. And so their shares just a little bit weaker. All right, jumping over to the macro side of things, quick update on China. Generally tone overnight in Asia was just a bit on the soft side, um, failing to really take on the positive handover from the US, where the S&P was up about 2 tenths. The Dow, NASDAQ generally were pretty flat. A couple things on the Evergrande side: Chinese authorities have told the billionaire Hui Ka Yan, who is the Evergrande founder, to use his personal wealth to alleviate the property developer's deepening crisis. According to people familiar with the matter on Bloomberg. And yeah, I'm not, I'm not sure what, what he can do. His personal wealth, I think it was in 2017 around $40, $50 billion. It's now down to just $7 billion. I say just, just $7 billion. I think that's US dollar based. So I mean, that's obviously a drop in the ocean of the some $300 billion or so that the company kind of requires and how deep their their debt is at this point in time. But I think it's more symbolic than that, that the government are very reluctant to bail out this particular company. And so they're just putting some pressure, I guess, from the kind of management of this situation on the likes of the founder in an attempt to, I guess, try and stop this type of activity manifesting into this situation again in the future in whatever other sector that might be. Um, for Evergrande themselves, the next test will be a dollar coupon payment, which comes due basically in a couple days' time on the 29th. That's when a 30-day grace period ends. And as you'll remember, they did actually pay that $85 million or so last time. That kind of kicked the can down the road a little bit further. Will they do that again? Probably so, I would imagine. Um, other things that I thought were quite interesting to mention from overnight was the ongoing tensions between Biden and Xi. They've obviously tried to re-establish some kind of line of communication, but the US Federal Commission— Communications Commission, the FCC, an independent government agency overseen by Congress— yesterday voted 4-0 to cancel permissions, um, for— to operate in the US for the unit of China Telecom. And China Telecom is one of the 3 leading communication providers in China. So, uh, the FCC citing national security concerns and government connections. So obviously this will increasingly frustrate, um, the counterparty in, in China, in Beijing. And so, uh, just not that surprising, I guess. This is kind of just keeping the pressure on as those talks, uh, continue between those two superpowers. Then the other thing talking about the Asia-Pacific region was Australia. Probably would have caught some of these headlines. The Aussie really hasn't moved a great deal, but the rates market has. And the rationale is the Australian 3-year bond yield has climbed to its highest level since July 2019, comes after consumer inflation picked up pace in September quarter, strengthening rate hike expectations. Perhaps I can show you this. The black line is the annual core inflation in Australia, and as you can see here, really ramped up here with you know, kind of surge in commodity prices that we've had, the supply chain disruptions which globally have obviously caused this very hot inflationary environment at the moment, and Australia is no different. So their core inflation number is very high, and then you've got the Aussie 3-year bond spread to cash rate in this orange line here, as you can see. So swap traders now have priced in 3 hikes by the RBA by the end of 2022 to take the cash rate up to what would be 0.75% according to overnight index swap futures. So if you heard tapping there, my, my toddler daughter knocking on the door trying to test out my focus. But yeah, that's then Wednesday. The report we had overnight was the inflation report from Australia. So annual trimmed mean gauge accelerated to 2.1% in the last quarter. And that's then to the RBA's 2 to 3% target, the first time it's really got to that point in 6 years. And hence the reason why this rates market has, has moved in the fashion that it has. I find it hard to see why they're— they've been lagging that a little bit, given the acceleration of inflation has been quite clear for some time. And the movement, though, really has been a global one that's been happening in the rates market over the last couple of weeks. Perhaps Australia just lagging that a little bit and playing a bit of catch-up in this most recent move. And then jumping elsewhere, COVID, um, and you might have seen these headlines again as well, uh, the pound not having any movement to this because it's just fitting with the trajectory generally of the cases that we've been seeing of late. Um, and it's something that we're monitoring to see whether or not essentially the government enacts, um, Plan B. And so UK reported its highest daily death toll, 263, from coronavirus since the beginning of March yesterday, adding to fears that tighter restrictions might well be needed this winter. Steadily increasing hospitalization death rates have put pressure on the government to enact Plan B, which would include mandatory face coverings and a recommendation to work from home. So we just continue to keep an eye on that and just generally the comms coming out of, of Number 10 about their decision-making going far going forward. The other thing today, of course, is UK budget. Um, Rishi Sunak, the Chancellor, will brandish new official forecasts showing that the economy generally has grown faster than expected this year and that long-term COVID scarring of the economy will be less severe than feared, freeing him vital fiscal room for maneuver. The upgraded forecast will allow the Chancellor to trumpet investment in priorities including the NHS, local transport, left-behind areas, and so on. The one thing I would say is that whenever we have the UK budget, it's always very clearly telegraphed. I.e., if you just jump on any of the UK national newspapers today, you can see a full list and breakdown of all of the major things that are going to be announced today. So as you can see here, lifts in the minimum wage, you've got extra £6 billion to be given to the NHS, the levelling up of transport outside London. And so on and so forth. So hence the reason why the budget doesn't really have intraday too much of an impact on market prices, because all of this is pretty much known at this point. The one thing in future, as a point of note, if you were trading the UK fixed income market, the announcement that typically bookends the Chancellor's speech, which begins at 12:30, so when it gets to around kind of 1 o'clock, 1:15, because the speech normally lasts for about 45 minutes or so, you get an announcement from the UK Treasury Debt Management Office, which is in charge of the issuance of fixed income supply. And depending on the supply, then that can have a short-term move on the 10-year yield in the UK. So something to just be aware of. But from a sterling perspective, not really expecting anything dramatic today, but certainly be interested and will generate a lot of headline buzz for sure. Then from Pfizer on the vaccine side, just a quick update. Pfizer-BioNTech shot for children as young as 5 has won US backing of the US FDA Vaccines Advisory Committee. So just rounding up that kind of coverage I've been doing over the last 2 days. A quick look at the day ahead. We've already had the German data, import prices month on month 1.3%, actually slightly softer than 1.5%. Again, not real reaction to that as you would expect. So the UK European morning is pretty quiet. As I mentioned, the budget from Rishi Sunak starts at 12:30. US-wise, you've got durable goods coming at 1:30, and then you've got the Bank of Canada interest rate decision at 3 o'clock. According to analysts at ING, the Bank of Canada is set to dial back its stimulus further by tapering weekly QE purchases from what is currently CAD$2 billion to CAD$1 billion. ING add that the BoC could adjust their language, which could conceivably see the prospect of an April rate hike being priced fully in. However, they suspect that this move will be likely at the December meeting when they bring QE in this latest tapering to a conclusion. So something to look out for. Obviously, if they start talking, um, a little bit more aggressively about that timeline, then all the more kind of CAD positive that would be. The lesser clarity on that, um, the, the probably the opposite. Vice versa effect. Okay. And then finishing up, you've got the oil inventory data coming out from the DOE this afternoon. Quick recap, the API last night was a build of around 2.3 million in the headline crude. Expectations were for actually a slight drawdown, but the Cushing number was the biggest draw since the beginning of the year at 3.734. So slightly conflicting their headlines, but As I said, overall crude just ticking a little lower as Europe are coming to the market this morning. And then finally, from an earnings perspective, pre-market today, interesting ones include the Dow giant Boeing. You've also got the likes of Coca-Cola, McDonald's. We've also got GM and Ford reporting today, as well as companies like Spotify, which I know are quite popular and well followed. And that is it. So I'm going to leave it there. You guys get on with the day. Again, for any students, if you're not part of a finance society, if you are part of a finance society and you want us to come to your university and run one of these sessions, doesn't come with any cost, anything like that. We just want to see and identify talent so that we can then talk to some of the big investment banks that we work closely with, and they're interested in trying to find the next Serena Williams. So, um, check it out, AmplifyMe.com. Feel free to get in contact with me directly at info@amplifiedtrading.com. Absolutely happy to help. Otherwise, have a great day. I'll see you same time tomorrow. Take care.