Stocks rebounded from yesterday’s selloff. One thing that appears to be happening is that during the trading day, ETF investors are buying and selling and at the end of the day the ETF counterparties need to square their books and match the sales. This has led to either massive buying or selling at the end of the day in what is now known as “happy hour”. Yesterday happy hour was sad and today happy hour was happy as the Dow closed up 401 points on heavy volume to 24,984.
Market watchers continue to express the thinking that October’s market pullback, which is the worst since early 2009, is more technical than fundamental meaning that people are selling and trading stocks while underlying corporate earnings and economic data continue to exhibit strength. Ford and Twitter reported good earnings while AMD and Merck had disappointing results.
Microsoft reported a 19% increase in sales and a 36% jump in profits yesterday sending shares higher. Both top and bottom lines beat analyst estimates. The big driver of Microsoft’s results was continued growth in cloud services which is now a global match race between Amazon Web Services and Microsoft Azure. The gurus continue to express confidence in Microsoft’s outlook and like what CEO Nadella is doing.
Tesla reported its best ever earnings last night and the company blew away estimates as it earned a profit of $2.90 per share versus consensus estimates calling for a 55 cent per share loss. Revenue was up 129% as Model 3 production is humming and sales are robust. The Model 3 is now the #1 selling car in America by value. Tesla also hinted at coming out with a ride sharing business to compete with Uber and Lyft. Going forward the company expects continued profitability with a backlog of over 300,000 Model 3’s. Several big investment houses however kept “sell” ratings on Tesla and expressed worry that the company still faces capital constraints. Shares moved up after the report. I cannot emphasis what a big deal this report is in terms of disruption to IC (Internal combustion) cars and on a global scale affecting Germany, Japan and Canada which have exposure to the US EV car market. Right now, Tesla out sells all other EVs by a ratio of 9 to 1. AAA did a survey and noted that 20% of all car buyers want an EV over an IC. In one fell swoop the US, thanks to Elon Musk, has become the leader in the global car industry