Tech Mixed, Industrials Strong: Earnings This Week

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It was the best of times and the worst of times. The saying was seldom truer than the past week’s earnings reports.

Starting with the bad news first, there’s one word everyone needs know: Facebook (FB). The social-media giant slammed into a wall of rising costs and slowing growth. Privacy and compliance lifted expenses, while market saturation and user attrition weighed on traffic. Analysts were stunned by the news, despite plenty of warnings. Next time maybe they should try listening to the CEO telling Congress that new privacy measures would “significantly impact our profitability.”

Other big technology firms, on the other hand, fared much better. Alphabet (GOOGL), for instance, ripped to a new all-time high after years of investment on initiatives like YouTube and cloud computing began to bear fruit. Ditto for Microsoft (MSFT), another Nasdaq giant to successfully ride the cloud-computing wave.

Chips also had a strong showing as Advanced Micro Devices (AMD) ripped to its highest level in over a decade. The catalyst? Surprise growth in legacy PCs, which had an unexpectedly strong quarter as President Trump’s tax cuts drove business investment. Qualcomm (QCOM) beat estimates as well, although much of its gains resulted from its decision to abandon an acquisition of NXP Semiconductors (NXPI).

Speaking of Trump, trade wars gave the big automakers their sharpest drops in over a year. General Motors (GM) warned higher steel and aluminum costs (thanks to U.S. tariffs) will hurt profits, while Ford Motors (F) cut guidance because of retaliatory duties in China.

Other industrials fared better as broader economic data shows steady gains in the domestic factory sector. Honeywell (HON) and United Technology (UTX) continued to beat estimates, 3M (MMM) showed signs of a turnaround following a big drop the previous quarter. Ingersoll-Rand (IR) also shot to a new high. Commercial aerospace remains a positive driver, although Boeing (BA) was hurt by cost overruns on its KC-46 military tanker plane.

Other military-related companies fell despite beating estimates: Raytheon (RTN), Lockheed Martin (LMT) and Northrup Grumman (NOC). Stay tuned for more on the unusual price action in this group!

Two big transportation stocks rallied on strong results as well: United Parcel Service (UPS) and Norfolk Southern (NSC).

Finally: refiners. They’re one of the strongest major groups this year and showed no signs of slowing as Valero Energy (VLO) and Marathon Petroleum (MPC) spiked after beating estimates.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.