Earnings highlights and durable goods
The high flying growth and tech stocks are getting taken to the cleaners this earnings season. Facebook was the latest to suffer from poor earnings. Their report was a flaming dumpster fire. Revenue was down 4%, costs up 19%, ad prices down 18%. They even added 19k employees. This was a big miss.
Apple skated by for the time being. Earnings per share beat at $1.29 versus an expected $1.26. Revenue beat at $90.15B, expected $88.64B. P/E ratio for Apple (of 28.1) continues to be well above the S&P500 average (of 20.6). I feel that the selling pressure is coming for AAPL. I don’t believe the hype around the newest phone was anything close to what they were expecting. With inflation on the rise in gas and food prices, consumers have less disposable income to spend on the latest gadget, which is what AAPL makes.
However, durable goods continues to hang on. Figures were up 0.4% month-over-month and 11.3% year-over-year. This is following an upward revision of 0.2% in August. New orders have been up six of the last seven months. Excluding defense, new orders increased 1.4%. This seems quite strong considering the chaos that has unfolded elsewhere in the market.
The mainstream press has caught on that the yield curve is getting seriously distorted. We’ve seen the 2-10y curve negative for quite some time. Now the 3mo-10y curve has gone negative. However, the 3mo-30y is hanging on by a thread.
Many mainstream traders have come out in the financial press calling Powell and the FOMC every name in the book in an attempt to get the Fed to “pivot”. The latest has been Blackcrook.
The pivotoors continue to beat the pivot drum. It is getting comical at this point how far they are taking this. Yes the Fed will eventually slow down the pace at which they are raising rates. They may even stop. Will they reverse, I find that to be highly unlikely until the overseas dollar markets run dry destroying the Euro and possibly several other currencies. Currently, the CME’s FedTool has a 88.5% chance of a 75 basis point hike after next week’s meeting. Then there is a 58.9% chance of a 50bp hike in December.
