Expect a ton of earnings reports as third-quarter earnings season hits its stride. A few could even move a sector or maybe even the market as a whole. The biggie for the week, I’d argue, is Nvidia (NVDA) on Wednesday, November 16, after the market close. But we’ve also got big news in the retail sector with Walmart (WMT) due to report on November 15.
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On Tuesday, November 1, Chinese stocks roared back on an unverified online rumor that the government had formed a committee to assess scenarios on how the country could end its Covid lockdown policy. Today, that rally has stopped dead after the Chinese Foreign Ministry said it was unaware of such a committee and after the government announced a seven-day Covid lockdown at the factory that produces Apple’s iPhone
Alphabet (GOOG) reported a drop of 24% in third-quarter earnings after the market closed on Tuesday, October 25. Gross revenue rose just 6% to $69.09 billion. In the third quarter of 2021, revenue grew by just 6% to $69.09 billion from the third quarter of 2021. In that 2021 quarter revenue had grown by 41%. Analysts had expected earnings of $1.25 a share–instead of the reported $1.06 a share.
Today I posted my one-hundred-ninety-sixth YouTube video: Trend of the Week Seasonal Trends in Energy. This week’s Trend of the Week: Seasonal Trends in Energy. There’s a predictable pattern in oil and natural gas prices. In late fall, October to November, you can expect a deep dive to begin and carry on through the winter, with a sharp rise in March and early spring. You can see this trend looking at previous years in the United States Oil Fund (NYSEARCA: USO) and the United States Natural Gas Fund, LP (NYSEARCA: UNG). Right now, we’re heading into that dip in energy prices but you should not sell – in fact, you should be adding to these positions. This seasonal fall in energy prices will allow you to get ahead of the spring bounce. Europe’s energy supply is enough to get through the upcoming winter but, in March, as they look toward next year’s supply, they’ll need to start rebuilding inventories in a market strained by the war in Ukraine, cuts in production, and a hostile OPEC. Stateside, the US Energy Information Administration is projecting record production from the Permian Basin of Texas and Oklahoma, as well as record production of natural gas this year. Even though we’re not seeing a whole lot of capital expenditure, they’re uncapping wells and pumping them harder. Look at USO and UNG as ETF oil and natural gas buys For individual stocks I’d look at Pioneer Natural Resources (NYSE: PXD), ConocoPhillips (NYSE: COP), and EQUINOR (NYSE: EQNR)–all of which I own in portfolios and have no intention of selling anytime soon.
It’s not like the grain export deal that Russian President Vladimir Putin signed is working all that all. Grain exports from Ukrainian ports on the Black Sea are running at an estimated 25% to 30% of pre-war levels. But any exports of Ukrainian grain have been a boon for consumers struggling with food inflation. And especially for consumers in developing economies where the issue hasn’t been just the price of food but also its availability at all. But that deal expires on November 19 and no one knows whether or not President Putin will renew it.
This morning before the stock market open Coca-Cola reported earnings of 69 cents a share for the third quarter. That was up from 65 cents a share in the third quarter of 2021 and was above the 64 cents a share expected by Wall Street analysts. Revenue of $11.1 billion was higher than the $10.5 billion projected by Wall Street.
Rising production and slowing sales have led Tesla (TSLA) to cut the price of the cheapest Model 3 sedan, built in China, by 5% to 265,900 yuan ($36,774), today, Monday, October 24. The company dropped the starting price of the Model Y SUV by 8.8% to 288,900 yuan. The roots of the problem include competition from local Chinese electric vehicle makers led by BYD Co. (BYDDY)–which sold a record 200,973 vehicles last month
Earnings. Earnings. And more earnings. From the big bellwether technology stocks: Apple, Amazon, Microsoft, Meta Platforms, and Alphabet. Wall Street has already slashed earnings forecast for these stocks so there’s a good chance these companies will report earnings that surpass expectations even if only by a few pennies. By and large, though, these reports will show either an absolute drop from the September quarter of 2021 or, at best, a slowing of revenue and earnings growth. Key to the market’s reaction will be what these companies say about expectations for the next quarter or two. Will they emphasize what are already clear slowdowns in PC and smartphone sales? Will they speak to the elephant in the room–the U.S/China trade war? Will they say that a strong dollar plus inflation is cutting into sales outside the United States and U.S. sales to domestic customers who are showing signs of “price fatigue”?
I hate to do this. Taiwan Semiconductor Manufacturing (TSM) is the premier chip manufacturer in the world and I see the company continuing to grow revenue from the increasing demand for smaller and more powerful chips. And I certainly hate to sell a stock that’s down 46% for the year to date as of the close on October 18. Under ordinary circumstances, I would hold on and ride out the current slump in the semiconductor cycle. After all, we’ve been here before, right? Except that the U.S.-China trade war and the possibility that China will look for a confrontation over Taiwan make the current circumstances anything but “ordinary.”
I don’t like the economic and financial environment looming ahead for banks. I see bad loans rising with a need to reserve more against bad loans. Slowing economies aren’t good for loan demand or credit card delinquencies either. So I’m taking advantage of this moment to sell Truist Financial out of this portfolio in spite of the stock’s hefty dividend. I’ve got a loss on this position of 4.07% since I added it to this portfolio on June 13, 2022. The stock is down 22.19% for 2022 to date as of the close on October 12.
I’m adding Puts on Apple (AAPL) and Alphabet (GOOG) to my Volatility Portfolio today as insurance against a big market dip on a bad (as in high) Consume Price Index inflation number tomorrow, October 13, and against selling in the shares of these two stocks on their earnings reports on October 27 and October 25, respectively.
