The second half of October was a positive one for investors as third-quarter earnings season showed most companies reporting better than expected results, Brexit was postponed, the US and China progressed with their trade deal, and the Fed cut the interest rates again.
After having announced a “phase one” trade deal, the US and China continued to work out the details with some degree of success as trade negotiators from both countries continue their talks and expect an agreement to be signed in November.
There were also some updates regarding Brexit as the UK and the EU managed to figure out a new deal. However, before the deal was approved, the British Parliament voted to request Prime-Minister Boris Johnson to ask for another delay, which the EU granted, postponing the UK’s leave of the bloc until January 31. In the meantime, the UK is expected to hold a general election in December.
Amid positive developments on the international arena, the ongoing third-quarter earnings season is also encouraging bullish sentiment. According to FactSet, by November 1, 71% of the companies in the S&P 500 reported their results for the third quarter. Among these companies, 76% posted EPS above estimates, and 61% reported better than-expected revenues.
On the last day of the month, investors received some uplifting news from the Fed, although it was in line with expectations. The Federal Open Market Committee cut the interest rate target range by 25 basis points to between 1.50% and 1.75%. This is the third rate cut since July and many believe that it might be the last for some time, judging by the committee’s statement.
In the second half of October, the main US stock indices inched higher. The tech-laden NASDAQ Composite and S&P 500 appreciated by 1.76% and 1.40%, respectively. However, the Dow Jones Industrial Average inched up by much more modest 0.08%.
Financial Advisors also kept an eye on the earnings season and focused exclusively on large- and mega-cap stocks, according to data from TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors.
Looking at TrackStar’s list of 20 most-searched tickers, we see Apple Inc. (NASDAQ: AAPL) in the top spot. In addition to having recently unveiled a line of new products, including a new iPhone 11, the tech giant also posted EPS and sales above expectations and showed stronger than expected iPhone sales (a key metric for Apple).
Apple was followed by another tech behemoth, Amazon.com, Inc. (NASDAQ: AMZN). The company missed profit estimates and posted slightly disappointing fourth-quarter guidance, although it reported third-quarter revenue above the higher-end of the estimates.
AT&T Inc. (NYSE: T), Tesla, Inc. (NASDAQ: TSLA), and Microsoft Corporation (NASDAQ: MSFT) close the list of the five most searched tickers among Financial Advisors, all three of which also reported their results, in addition to other developments.
However, the biggest gainer among these five companies was Tesla, Inc. (NASDAQ: TSLA), whose stock surged by more than 21% in the last two weeks of October and went past $300 for the first time since February. The main catalyst for the stock was the company’s surprise profit. For the third quarter, Tesla reported a non-GAAP EPS of $1.91, which was much higher than the expected loss of $0.23 per share. In addition, the revenue of $6.3 billion, while 7.6% lower on the year, was just $180 million shy of the consensus estimate.
The automaker said that during the third quarter, it delivered 17,483 Model S or Model X vehicles and slightly over 79,700 Model 3 cars. It also said it’s confident that it will be able to deliver 360,000 vehicles this year and Model Y and Semi trucks will be released next year.
In addition to positive financial results and solid outlook, Tesla also received some positive news from China last month. The country’s industry ministry cleared the company to start producing at its new Gigafactory in Shanghai. The Gigafactory 3 is already up and running, although cars are being produced on a trial basis.
Tesla’s surprise profit was not overlooked by the Street and a number of analysts issued updates on the stock. Canaccord Genuity, Wedbush, and Nomura raised their price targets on the stock to $375, $270, and $300, respectively. However, while the analysts praised the company’s third-quarter performance, many also warned investors regarding the company’s momentum next year.
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