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Dow, S&P 500 Hit New Highs; Tesla, Netflix Are Earnings Winners

The stock market rally continued to advance, with the Dow Jones and S&P 500 hitting record highs and the Nasdaq moving up, even with Treasury yields hitting 5-month highs. But stocks sold off on Friday, especially techs. Tesla (TSLA) and Netflix (NFLX) were earnings winners, along with Tenet Healthcare (THC) and CSX (CSX). Snap (SNAP) plunged on results while Intel (INTC) and ASML (ASML) fell hard. Bitcoin hit a record high as the first Bitcoin futures ETF launched.




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Stock Market Rally

The Dow Jones and S&P 500 both reached record highs while growth stocks fueled the Nasdaq, but techs led a Friday sell-off. The 10-year Treasury yield rose to its best level in five months. Earnings are picking up steam. Growth stocks performed well, but so did financials and a number of other stocks.

Bitcoin Hits Fresh High As BITO ETF Launches

The first Bitcoin-linked ETF in the U.S., ProShares Bitcoin Strategy ETF (BITO), began trading on the NYSE Tuesday. BITO will invest primarily in Bitcoin futures contracts and does not directly invest in Bitcoin. BITO stock fell for the week. Bitcoin’s value hit a new high on Wednesday, racing past $66,000, before pulling back. Bitcoin stocks were mixed. Coinbase (COIN) jumped for the week, along with Riot Blockchain (RIOT). Marathon Digital Holdings (MARA) slashed gains. Grayscale Bitcoin Trust (GBTC), which aims to convert into a spot Bitcoin ETF, edged up, and Microstrategy (MSTR) fell hard.

Silvergate Capital (SI), a provider of payment and other financial services for digital currencies, reported third-quarter results that beat estimates. But shares fell sharply.

Coinbase (COIN), a cryptocurrency exchange, said it will serve as a custody partner for a trial run of Facebook (FB) digital wallet Novi.

Snap Dives On Revenue Miss

Snap (SNAP) stock crashed Friday after the company reported better-than-expected earnings, but missed on revenue and guided low for fourth-quarter revenue. Snap blamed Apple (AAPL) iOS privacy changes for hurting advertising revenue. The news also hit Facebook (FB), Twitter (TWTR), Pinterest (PINS), Trade Desk (TTD) and Google parent Alphabet (GOOGL). Facebook has cautioned about Apple privacy changes previously.

Tesla Earnings Soar

Tesla (TSLA) posted EPS of $1.86, 145% over the same quarter last year and above estimates, on a 57% sales increase to $13.76 billion, basically in line with views. Automotive revenue jumped 58% to $12.06 billion. Regulatory credits accounted for $279 million, below expectations. Automotive gross margins notched 30.5%, above forecasts, led by efficiencies at Tesla’s Shanghai Gigafactory. Average selling price for vehicles declined 6% year over year. Tesla rose to a new high.

Netflix Beats Subscriber Goal

The Internet television network added 4.38 million subscribers in the third quarter, topping Wall Street’s target of 3.78 million. Netflix (NFLX) got a boost in late September from the release of hit show “Squid Game.” It forecast adding 8.5 million subscribers in Q4, edging views. In the third quarter, Netflix earnings surged 83%, beating views. Revenue rose 16% to $7.48 billion, meeting targets. Shares jumped.

Chip Firms Miss Sales Targets

Semiconductor equipment suppliers ASML (ASML) and Lam Research (LRCX) both topped earnings estimates but came up short on sales. Their guidance also disappointed. It was the same story with chipmaker Intel (INTC). Supply chain challenges hurt laptop production, which lowered Intel’s PC processor sales. All three stocks fell sharply. Meanwhile, New York-based chip foundry GlobalFoundries set IPO terms, seeking a valuation near $25 billion.

Restaurant Earnings Under Pressure

Rising labor and food costs are cutting into profits at some of the nation’s largest dine-in restaurant chains. Still, Chipotle Mexican Grill (CMG) reported better-than-expected Q3 earnings of $7.02. Sales were just a fraction above views, with higher menu prices. Chili’s parent Brinker International (EAT) tumbled after preliminary earnings came in at just half of estimates. And BJ’s Restaurants (BJRI) reported a wider-than-expected loss on weak sales.

PayPal Eyes Pinterest

Digital payment firm PayPal (PYPL) reportedly is in talks to buy social media firm Pinterest (PINS), apparently for around $45 billion, or 70 a share. Pinterest is expanding its social commerce business among its 454 million active users. But user growth has slowed. About 80% of Pinterest’s users are outside the U.S., primarily in India/China. PayPal has 403 million users, but that growth may be slowing too. PayPal stock plunged. Pinterest rose.

Rail Earnings

Union Pacific (UNP), CSX (CSX) and Canadian National Railway (CNI) beat earnings and revenue views despite a tough railroad operating environment. All three rail operators cleared buy points, even though UNP cut its full-year volume goal. Canadian Pacific (CP) missed, but maintained guidance for double-digit EPS growth in 2021. It’s buying Kansas City Southern (KSU), which reported mixed results.

Freeport-McMoran Earnings Triple

Freeport-McMoRan earnings per share shot up up 207% from a year ago, beating, thanks to lower-than-expected costs. Revenue grew 58% to $6.08 billion, slightly below views. Sales rose 6% vs. Q2 as Freeport ramped up underground production at its Grasberg copper mine. FCX stock has rallied with rising, though volatile, copper prices this month. FCX stock fell slightly on Thursday following earnings, but was well off lows. The decline was at least partly due to a big drop in copper prices that day.

Steel Earnings Soar, Stocks Diverge

Cleveland-Cliffs (CLF), Steel Dynamics (STLD) and Nucor (NUE) all reported record profits in Q3. Yet with Wall Street starting to worry about how a possible peak in steel prices may impact the group, investors reacted to each earnings report in a different way. Nucor offered pretty bullish guidance, saying Q4 might be another record. But NUE stock held below its 50-day line. STLD, in contrast, made a run above its 50-day line, earning it IBD Stock Of The Day honors, then fought to hold the line. Steel Dynamics will soon launch a Sinton, Texas, flat roll mill, which could boost shipments by 15%-20% in 2022. CLF surged past its 50-day on Friday’s earnings news, clearing an early entry point. CLF is seeing huge synergies from two big mergers and predicting higher profits in 2022 due to its higher reliance on fixed-price contracts.

Hospital Earnings Healthy

HCA Healthcare (HCA) reported 138% EPS growth early Friday, well above Q3 estimates. Revenue grew 15% to $15.28 billion, topping estimates. HCA boosted the midpoint of full-year EPS guidance, but there were some concerns about Q4. HCA stock fell Friday after jumping Thursday with Tenet Healthcare (THC), but still rose for the week. Tenet earnings soared 211%, easily beating, though guidance implied a Q4 miss. Still, Wall Street gave a vote of confidence to Tenet’s ongoing strategic shift, rapidly growing its ambulatory surgery center division, which could soon drive a majority of earnings. THC stock jumped, flashing an early buy signal.

Oil Services Firms’ Results Mixed

Schlumberger (SLB) reported Q3 earnings Friday that met Wall Street views, but its revenue fell short. The oilfield services provider sees “favorable conditions” that “are expected to materially drive investment over the next few years.” Baker Hughes (BKR) earnings fell short of expectations Wednesday. Halliburton (HAL) results Tuesday largely met expectations and the company sees a “multi-year upcycle unfolding.” The oilfield service providers’ results come amid rising oil prices. Brent hit $85 per barrel, a three-year high and U.S. crude was above $83 per barrel.

Airlines Beat Estimates

United Airlines (UAL), American Airlines (AAL) and Southwest Airlines (LUV) all reported third-quarter results that beat Wall Street forecasts. The industry is riding a rebound in travel, but faces questions about rising fuel costs and its ability to attract and retain staff. Southwest held to its October sales forecast despite a wave of flight cancellations, but said it had “reined in” its flight-capacity plans “to adjust to the current staffing environment.” United, meanwhile, said it expects “record” flying to locations abroad next summer.

American Express, Discover Mixed

American Express (AXP) reported a 31% EPS jump, just missing views, on a 25% revenue rise to $10.928 billion, beating by 4%. Travel and entertainment spending continues to rebound, the company said, touting “tremendous growth momentum” in digital payments. Discover Financial Services (DFS) disclosed a 45% EPS gain to $3.54, beating views, but revenue unexpectedly declined. AXP stock jumped into a buy zone. DFS stock dived, undercutting the 10-week line.

News In Brief

Digital World Acquisition (DWAC), the SPAC merger partner for Donald Trump’s new social media venture, shot up 357% to 45.50 on Thursday, then kept running on Friday. Trump Media & Technology Group will have a social media site, Truth Social, as well a subscription-based video-on-demand service, TMTG+.

AT&T (T) added 928,000 postpaid wireless phone subscribers in Q3, far above views. Verizon (VZ) added 429,000, also topping. AT&T earnings rose 14% while Verizon’s grew 13%. Both telecom giants missed revenue targets.

Crocs (CROX) earned $2.47 a share, more than double a year ago, beating estimates for $1.87. Sales jumped 73% to $625.9 million, above views for $607 million. Shares soared.

Procter & Gamble (PG) topped fiscal first-quarter estimates, but its full-year EPS target came in just below forecasts. The packaged-goods giant will raise prices further as it expects higher commodity and freight costs.

SVB Financial (SIVB) reported a 26% EPS decline, but beat views. Revenue rose 42% to $1.52 billion, topping estimates.

Alphabet (GOOGL) will cut Google Play app store fees to 15% on many apps. That gave a big lift to Match Group (MTCH), Bumble (BMBL), Duolingo (DUOL), Roblox (RBLX) and more.

Johnson & Johnson (JNJ) reported adjusted EPS rose 18%, beating views. Sales grew 11% to $23.34 billion, but slightly missed.

Intuitive Surgical (ISRG) reported adjusted EPS grew 29% as sales climbed 30% to $1.4 billion, both beating expectations.

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