All eyes were on Facebook yesterday and its record-breaking carnage. This was the first time in history that any company lost more than $100 billion in value in a single session ($114 billion). The news weighed on the technology sector where other high-flying names were also pressured.
The test for the market is rallying without the help of a few names. In the first half of the year, these names were responsible for more than 100% of the net S&P 500 gains.
Percent of Gains in S&P through 1H 2018 | |||
AMZN | 36% | GOOGL | 7% |
MSFT | 18% | MA | 7% |
AAPL | 15% | V | 6% |
NFLX | 15% | ADBE | 5% |
FB | 8% | NVDA | 5% |
Today, investors won’t have to see that worst-case scenario of all big tech having a bad week because Amazon surged at the opening bell. Headlines are focused on the company’s cloud business, but its revenue from advertising and operating margin in North America are remarkable.
North America
- Revenue $32.2 billion +43.8%
- Operating Profits $1.8 billion
- Operating margin 5.7% from 1.9%
International
- Revenue $14.6 billion +27.2%
- Operating Loss -$500 million
AWS
- Revenue $6.1 billion +48.9%
- Operating Profit $1.6 billion
- Operating margin 26.9% from 22.3%
Big Brother’s Big Move
Management notes tens of thousands of developers in 150 countries are building devices to deploy Alexa Voice Service.
Broad Market
Energy was the biggest winner yesterday as crude edged higher, but big earnings misses this morning from Chevron and others probably sends investors elsewhere. Airlines lifted industrial names and value investors sifted through consumer staples and materials names.
-0.30% | |
-0.52% | |
+0.53% | |
+1.10% | |
-0.07% | |
-0.28% | |
+0.77% | |
+0.57% | |
+0.34% | |
-1.54% | |
+1.11% |
GDP
Headline GDP came in at 4.1%, which missed consensus of 4.4%, but the street was busy coming down on their numbers all week. So, if there was a “whisper number,” it would have been this morning’s print. Bottom line, the number is huge and encouraging.
GDP Estimates | Monday | Today |
Macroeconomic Advisors | 4.9% | 4.5% |
JP Morgan | 4.4% | 3.9% |
Atlanta Fed | 4.5% | 3.8% |
Barclays | 5.2% | 5.2% |
The best quarter since 3Q2014 with final revision to 1Q2018 to 2.2% from 2.0%.
Consumption 4.0 from 0.5
- Goods 5.9 from -0.6
- Services 3.1 from 1.0
Investment -0.5 from 9.6
- Business 7.3 from 11.5
- Structure 13.3 from 13.9
- Equipment 3.9 from 8.5
Exports 9.3 from 3.6
Government 2.1 from 1.5
Real Final Demand of 5.1 is the strongest since 1Q2006
Some are calling this a Goldilocks number in part to the PCE price index coming in at 1.8 from 2.5 on headline and 2.0 from 2.2 ex food and energy. Naysayers will point to an increase in soybean exports, but the fact is, that is a small percentage of the number. Moreover, business inventories didn’t reflect panic, which means there is steady demand, and consumers strength should remain constant through the rest of the year.