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Sunday April 22, 2018



Apple Reports Drop in iPhone Sales

Apple Inc. (APPL) announced its quarterly earnings on Tuesday, May 2. While earnings in the second quarter surpassed Wall Street's expectations, revenue fell short due to lackluster iPhone sales, causing shares to fall 2% in after-hours trading.

Apple reported revenue of $52.9 billion in the second quarter, falling short of the $53.1 billion in revenue expected by analysts. Last year, revenue in the second quarter came in at $50.6 billion.

"We are proud to report a strong March quarter, with revenue growth accelerating from the December quarter and continued robust demand for iPhone 7 Plus," said Apple CEO Tim Cook. "We've seen great customer response to both models of the new iPhone 7 (PRODUCT) RED Special Edition and we're thrilled with the strong momentum of our Services business, with our highest revenue ever for a 13-week quarter."

Apple reported $11.03 billion in net income for the second quarter, up from $10.52 billion a year ago. On an adjusted earnings per share basis, the company reported profit of $2.10 per share, beating analysts' earnings predictions of $2.02 per share.

Apple's iPhone sales decreased slightly to 50.8 million units in the second quarter compared to 51.2 million iPhones sold in the same quarter last year. Cook blamed the sales slump on rumors and reports about the release of future iPhone models, causing consumers to delay iPhone purchases until the newest product is released. While Apple is remaining silent about its next product release, a note released by JPMorgan on Tuesday indicated that the next iPhone will have wireless charging capabilities and support Bluetooth 5.0.

Apple Inc. (APPL) shares ended the week at $148.96 on 5/5, up 2.7% for the week.

Tesla Doubles Revenue in Q1

Tesla Inc. (TSLA) announced its first quarter earnings on Wednesday, May 3. The electric car maker reported a loss in earnings for the quarter but revenue that more than doubled year-over-year.

Tesla reported quarterly revenue of $2.7 billion. This was an increase from last year's first quarter revenue of $1.1 billion.

"We have made a solid start to what should be an exciting 2017," said Tesla CEO Elon Musk in a letter to shareholders on Wednesday. "Vehicle production in Q1 increased by 64% compared to a year ago, which enabled us to set new quarterly records of 25,051 deliveries and $2.7 billion in GAAP revenue."

Tesla announced a loss of $1.33 per share, compared to a loss of $1.46 per share a year ago. Analysts were expecting a loss of $0.84 per share.

Tesla said that it is on track to start production on its mass market sedan, the Model 3, in July. The company said that it expects to produce 5,000 Model 3 vehicles per week later this year and 10,000 per week in 2018. The Model 3 will be priced at $35,000, making it Tesla's most affordable vehicle to date. The sedan is described by Tesla CEO Elon Musk as a "smaller, more affordable version of Model S," with "less range, power and fewer features."

Tesla (TSLA) shares ended the week at $308.35 on 5/5, down 2.1% for the week.

Facebook Reports Strong First Quarter

Facebook Inc. (FB) reported quarterly earnings on Wednesday, April 12. The company's revenue nearly doubled in the first quarter and surpassed analysts' expectations.

Facebook announced revenue for the first quarter was $8.03 billion—topping the $7.83 billion in revenue that analysts predicted. Last year, revenue in the first quarter was $5.38 billion.

"We had a good start to 2017," said Facebook CEO Mark Zuckerberg. "We're continuing to build tools to support a strong global community."

Facebook reported net income of $3.06 billion, up from last year's first quarter earnings of $1.74 billion. Earnings per share for the first quarter were $1.04, up from $0.60 per share a year ago. The company announced that it will no longer report earnings on an adjusted, or non-GAAP, basis.

The social media giant reported an increase in both monthly and daily active users in the first quarter, bringing the total number of users to 1.93 billion. Advertising continues to drive Facebook's revenue, with mobile advertising making up approximately 85% of all advertising revenue. During the earnings call on Wednesday, Zuckerberg emphasized the company's efforts to prevent and screen inappropriate and offensive content. Facebook plans to hire an additional 3,000 employees this year to review reports of banned content, including hate speech and content that promotes violence.

Facebook Inc. (FB) shares ended the week at $150.24 on 5/5, down 1% for the week.

The Dow started the week of 5/1 at 20,963 and closed at 21,007 on 5/5. The S&P 500 started the week at 2,389 and closed at 2,399. The NASDAQ started the week at 6,068 and closed at 6,101.

Yields Hold Steady Following Fed Meeting

Treasury yields remained stable this week following statements made by the Federal Reserve on Wednesday. While interest rates remained unchanged this week, the Fed concluded its two-day policy meeting by indicating that two more rate hikes are expected before the end of 2017.

On Wednesday, the Fed highlighted the strengthening labor market, which created optimism among investors and bolstered expectations for a June rate hike. Further bolstering this optimism on Friday was the release of the latest jobs report which showed 211,000 jobs were added in April, surpassing the 188,000 estimate.

"The Fed is looking past the Q1 weakness and continues to lay the groundwork for more rate hikes this year, with the next one most likely being in June," said Peter Boockvar, chief market analyst for the Lindsey Group. "They made a conscious effort to look past the first quarter data and the two-year note yield is higher by three basis points to 1.29% to reflect this."

Earlier in the week, Treasury Secretary Steven Mnuchin said that the Treasury is considering the possibility of "ultra-long" bonds with maturities greater than 30 years. On Wednesday, the Treasury Department said that it would be meeting with "a broad variety of market participants" to weigh the pros and cons of issuing bonds with 50 or 100-year maturities.

"The Treasury needs money so a 50-year zero coupon would make no sense for them," said Ward McCarthy, chief financial economist at Janney Montgomery. "The reason they are considering other options is they have no choice. They need to do this in order to address a tidal wave of increased financing from budget deficits, the Fed shrinking its balance sheet and maybe from Trump tax cuts and infrastructure spending."

After the announcement, the Treasury Borrowing Advisory Committee recommended that the Department look at revising the 20-year bond in addition to increase sales on the 10 and 30-year bonds. The committee noted that 40 and 50-year bonds should be further explored, but that a 100-year bond is "not worth considering."

The 10-year Treasury note yield finished the week of 5/1 at 2.35%, while the 30-year Treasury note yield was 2.99%.

Mortgage Rates Show Little Change

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, May 4. The report showed mortgage rates remaining steady for the week.

The 30-year fixed rate mortgage averaged 4.02% this week. This represents a slight decrease from last week when it averaged 4.03%. Last year at this time, the 30-year fixed rate mortgage averaged 3.61%.

This week, the 15-year fixed rate mortgage remained unchanged from last week, averaging 3.27%. The 15-year fixed rate mortgage averaged 2.86% one year ago.

"The 10-year Treasury yield remained relatively flat this week, as did the 30-year mortgage rate which fell one basis point to 4.02%," said Sean Becketti, Chief Economist at Freddie Mac. "Markets have been erring on the side of caution following a weak advance estimate for first-quarter GDP and the FOMC's broadly expected decision to leave rates unchanged."

Based on published national averages, the money market account finished the week of 5/1 at 0.72%. The 1-year CD finished at 1.35%.

Published May 5, 2017
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