On Thursday, the market posted a strong session as fundamentals continue to prove that the early enthusiasm in the economy and stock market wasn’t misplaced. Yet there are several surveys showing confidence in the stock market plunging. I’ve been fighting hard to underscore the reasons to believe in this economy and the stock market, but a number of factors from political hijinks in Washington, D.C., growing debt, and anxiety over interest rate policies have taken a toll.
However, the biggest problem is that lower sentiment simply triggers even deeper declines in sentiment, coupled with wild gyrations and sessions with monumental point declines. As for active investors, I continue to say the biggest problem is indifference. A number of investors are calling themselves neutral.
History has shown over and over again that the number should be the exact opposite with bullishness surging in a down market as opportunities develop.
Privacy? Who Cares!
The stock of the day was Facebook (FB), which powered away on amazing earnings results and its confident guidance. The company must continue to grapple with the notion of tweaks to the business model and higher taxes and fees. But, as management stays committed to its advertising model, will the public flee out of privacy concerns?
The poll suggests this could be a problem.
Fox News Poll
Care If Facebook Shares Your Information with Others?
Yes 73%
No 25%
Considered Deleting Your Facebook Account to Protect Your Privacy?
Yes 43%
No 54%
Favorable Unfavorable
Facebook 48% 41%
Recommended
Mark Zuckerberg 37% 45%
That last question may provide and explain why Shakespeare answered the questions about user outrage over privacy: "Methinks thou dost protest too much."
People seem to view Mark Zuckerberg and not the company as the problem. As for current business trends, America has peaked with respect to user growth up just 1.6% in the last quarter, while Asia soared 24% and the rest of the world enjoyed double-digit growth.
Daily Average Users | Total (Million USD) | Yearly Change | Revenue |
United States/Canada | 185 | +1.6% | $5.7 billion |
Europe | 282 | +5.6% | $3.0 billion |
Asia | 529 | +23.9% | $2.1 billion |
Rest of World | 453 | +11.0% | $1.2 billion |
Earnings After the Close
Amazon (AMZN) crushed it again:
- Revenue: $51 billion
- Earnings: $3.27, 157% better than expected
- $1.93 billion operating income versus $1.04 billion estimate
- AWS (Cloud) $5.44 billion in sales and $1.4 billion in operating income
Intel Corp (INTC) beat on revenue and posted earnings of $0.87, which is $0.15 more than estimated, and management raised guidance.
The news could spark a major reversal semiconductor.
Microsoft (MSFT) beat on revenue and earnings but will need another masterful conference call as the shares are under slight pressure.
Expedite shares popping on earnings:
Western Digital (WDC) beat on revenue and earnings - $0.32 better than expected.
Baidu Inc (ADR) absolutely crushed it, sending its shares up 11% in after-hours trading.
Starbucks (SBUX) results were largely in-line, and the stock mostly shrugged as a result.
U.S. Steel (X) got smoked after posting results.
Technical View
So, will these results be enough to reverse the trend of lower highs?
Thursday was a great session, picking up from yesterday where the Dow Jones Industrial Average climbed off the canvas to erase a 200-point decline.
- Upside tests - 24,321
- Big breakout at 24,544
Today’s Session
We woke up this morning to dramatic images of the North Korean dictator strolling across the demilitarized zone (DMZ) to meet the leader of South Korea. This meeting was unimaginable last November when North Korea launched its most successful rocket test and saber-rattling was strong enough to move a real Doomsday Clock within seconds of midnight.
Critics are still dismissing the entire event, but there is no denying its historic importance as a potential launching pad for peace, not war.
Several promises have been made, including full denuclearization on the Korean peninsula. There is absolutely no doubt this meeting wouldn’t have occurred without the heavy-handed approach by President Trump.
Will there eventually be peace?
I have a good feeling North Korea wants to move into this current century and avoid military confrontation at the same time.
GDP Report
The first quarter GDP report is a homerun at 2.3% versus consensus of 1.8%. I will have more details in the afternoon note, but this is the kind of economic momentum and persistence that lends to even better growth down the line.
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