Friday Morning Reads

Friday Morning Reads




Open Interest




Volatility returns after Big Tech parade

Alphabet (GOOGGOOGL) took the spotlight of yesterday's Big Tech earnings show, rallying as much as 8% AH as ad sales bounced back sharply from a pandemic slump (YouTube pulled in more than $5B alone). While other peers did quite well, the quarterly reports led traders to pull out of the sector. Facebook (NASDAQ:FB) slipped nearly 3% amid a user decline and "a significant amount of COVID-related uncertainty," though revenues were up more than 20% despite ad boycotts. Amazon (NASDAQ:AMZN) also fell 1.5% after predicting $4B in pandemic costs next quarter, while Apple (NASDAQ:AAPL) declined 4% as iPhone sales missed estimates due to customers holding off on purchases before the release of the iPhone 12.
Go Deeper: Twitter tumbles amid slowing user growth and ad uncertainty.

Wild swings

Solid earnings from America's largest tech firms weren't enough to keep investors from selling late Thursday, with U.S. stock index futures reflecting the sentiment overnight: Dow -1.5%; S&P 500 -1.5%; Nasdaq -2%. Outlooks hit by COVID, valuation fears, regulatory scrutiny and election uncertainty all seemed to come back to the fore after a session that saw stocks rebound from the worst selloff in four months. The earnings cycle continues this morning with results from the energy industry: Exxon Mobil (NYSE:XOM), Chevron (CVX) and Phillips 66 (NYSE:PSX) are all scheduled to report.

Record GDP growth rate

U.S. GDP came roaring back in Q3 at an annualized rate of 33.1% (vs. +30.9% consensus estimate and -31.4% prior). The number of U.S. workers filing initial claims for unemployment insurance also fell by 40,000 to 751,000 last week to the lowest level since the pandemic began, though some are skeptical about taking a quick look at the data. "Much of the Q3 gain came from carry-over effects from fast progress in May-July while real GDP remains down 2.9% Y/Y," said Gregory Daco, chief U.S. economist for Oxford Economics. Furthermore, "the average 7.4% (or 33.1% annualized) advance tells us little, if anything, about momentum heading into Q4."

Blame game

"Your ALL OR NOTHING approach is hurting hard-working Americans who need help NOW," Treasury Secretary Steven Mnuchin said in response to a letter from House Speaker Nancy Pelosi, which detailed six areas that need to be addressed before stimulus talks can move forward. Those include state and local funding, school safety, child care, tax credits for working families, unemployment insurance and worker liability. While an aid package is out of sight before the election, Pelosi said it may be possible to strike a COVID relief deal in the so-called the lame-duck session of Congress.

Aftermath of Zeta

At least six people have been killed across Louisiana, Alabama, Mississippi and Georgia, while more than 2M people were without power after Hurricane Zeta slammed into the Gulf Coast. It's the 27th named storm this season, one less than the record set in 2005, and has halted up to 85% of offshore Gulf of Mexico oil production this week and nearly 58% of its natural gas output. Oil prices collapsed, regardless, as new coronavirus lockdowns in Europe and surging infections elsewhere weighed on the demand outlook. Crews have now begun returning to Gulf offshore facilities, with Chevron (NYSE:CVX) and Royal Dutch Shell (RDS.ARDS.B) redeploying personnel to restore production.

Netflix price increase

Shares of Netflix (NASDAQ:NFLX) closed up 3.7% on Thursday after saying it would bump up its most popular standard plan by a buck to $14/month (premium goes to $18/month and the lowest tier stays at $9/month). The increase was signaled during last week's earnings call, when COO/Chief Product Officer Greg Peters said, "You heard from Ted [Sarandos] the number of original productions we're doing... if we do that, we feel like there is that opportunity to occasionally go back and ask, for members where we've delivered that extra value in those countries to pay a little bit more." A rise to $14/month puts Netflix's most popular plan almost at parity with HBO Max ($15/month) - which launched at a price point that some observers thought might be too much for a streaming service.

Walmart pulls guns off shelves

The company removed firearms and ammunition from its U.S. store floors this week "due to the current unrest in isolated areas of the country and out of an abundance of caution." Customers can still purchase the items upon request even though they are no longer on display. Walmart (NYSE:WMT) also removed guns from stores this summer following the killing of George Floyd, when several of its stores were damaged, and raised the minimum purchase age to 21 after a deadly shooting at a high school in Parkland, Fla., in 2018.

Juul cuts valuation to $10B

Once one of the most highly valued startups, Juul (JUUL) has been stricken over the past two years by regulatory crackdowns, lawsuits and probes into whether it marketed vaping products to teens. Latest? The e-cigarette maker has lowered its valuation to about $10B, after being valued at around $38B just two years ago when Altria (NYSE:MO) took a 35% stake. Last month, Juul cut more than half its workforce and said it was exploring pulling out of most overseas markets.

China tech drive

Presenting the first glimpses of its economic plans for the next five years, China promised to become a self-reliant technological powerhouse, marking another twist to the conflict with the U.S. over chips and intellectual property. "Core technologies" were not named in the communique, but likely include similar areas highlighted in other government plans, ranging from semiconductors and telecommunications to big data and artificial intelligence. It also emphasized "quality growth over speed" and underscored the roles of innovation, real economy, a strong domestic market, rural vitalization and green development.

What else is happening...

Sustainable energy, heavy infrastructure on the ballot for Nov. 3.

Bankruptcy judge approves $1.65B loan for Hertz (NYSE:HTZ).

Exxon (XOM) expects to shed up to 15% of global workforce.

ConocoPhillips (NYSE:COP) warns on Alaska production if voters pass tax.

Delta Air Lines (NYSE:DAL), pilots union reach deal to avoid furloughs.

Thursday's Key Earnings

Activision Blizzard (NASDAQ:ATVI) -1.3% AH seeing significantly lower cash flow.
Alphabet (NASDAQ:GOOG) +6.7% as ad sales bounced back sharply.
Amazon (AMZN-1.5% increasing spending for COVID-19.
Apple (AAPL-4.1% as iPhone sales missed estimates.
Comcast (NASDAQ:CMCSA) +2.6% buoyed by record Internet subscriber adds.
ConocoPhillips (COP+1.3% matching analyst EPS expectations.
DuPont (NYSE:DD) +3.7% forecasting upside full-year profit.
Facebook (FB-2.9% warning of continued uncertainty.
Kraft Heinz (NASDAQ:KHC) +2.8% as at-home demand remained strong.
Moderna (NASDAQ:MRNA) +8.4% on COVID-19 vaccine upfront payments.
Shopify (NYSE:SHOP) -4.8% despite continued e-commerce strength.
Southern Co. (NYSE:SO) -0.3% in a quarter of 'unprecedented circumstances.'
Starbucks (NASDAQ:SBUX) -0.6% AH as outlook came up short.
Twitter (NYSE:TWTR) -16.7% amid slowing user growth and ad concerns.

Today's Markets

In Asia, Japan -1.5%. Hong Kong -2%. China -1.5%. India -0.3%.
In Europe, at midday, London -0.2%. Paris +0.4%. Frankfurt +0.1%.
Futures at 6:20, Dow -1.5%. S&P -1%. Nasdaq -2%. Crude +0.8% to $36.47. Gold +0.4% at $1874.60. Bitcoin +1% to $13336.
Ten-year Treasury Yield -2 bps to 0.82%

Today's Economic Calendar

8:30 Personal Income and Outlays
8:30 Employment Cost Index
9:45 Chicago PMI
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
3:00 PM Farm Prices

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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