What a day it’s been for U.S stocks, capping off a strong week of trading. We saw the Russell 2000 run 1.14% on Friday, while the Nasdaq Composite and S&P 500 hit new all-time highs. The Dow Jones Industrial Average eked out a 19 basis point gain, but didn’t keep investor sentiment from sagging.
With the SPDR S&P 500 ETF (NYSEARCA:SPY) and the PowerShares QQQ ETF (NASDAQ:QQQ) logging all-time highs, how could stock market investors not be excited going into the weekend?
Today’s Stock Market News
That excitement is particularly justified given the strength in earnings. Earlier this month, the banks told us that consumer spending was healthy, while reports from Chipotle Mexican Grill (NYSE:CMG) and Starbucks (NASDAQ:SBUX) — which both hit new all-time highs this week — seem to confirm it.
Regarding Starbucks, the stock climbed 8.9% on Friday and has now more than doubled in less than 13 months. Give CEO Kevin Johnson some kudos with this one as even lofty expectations heading into this quarter were smashed out of the park.
SBUX beat on earnings per share and revenue estimates, and crushed comp-store sales expectations. Even better, management raised its full-year earnings outlook. The trend is still in investors’ favor, but at some point, will they question the stock’s 93% one-year rally and valuation of ~35 times earnings?
We’ll dish on earnings more in a bit, but keeping with the economics theme, many seem to be overlooking the fact that the Fed is poised to cut interest rates next week. Market participants are pricing in an 80% chance of a 25 basis point cut, while 20% are pricing in a 50 basis point cut. Notice today’s stock markets are not pricing in a no-cut scenario. If the Fed doesn’t cut, it will create some serious waves in U.S. stocks.
All of this comes as the Q2 GDP report came in at 2.1% today. Despite beating estimates of 1.9%, it was a mixed result and down from the 3.1% print we saw in the first quarter.
It also showed that business investment is drying up, with the reading posting its biggest drop in three years. Picking up the slack, economically speaking, was the consumer (as we noted above via earnings) amid a strong labor market.
Stock Earnings
Amazon (NASDAQ:AMZN) was unable to rally as it continues to dump money into its one-day shipping initiatives. (Here’s how to trade it, by the way). Other FANG comrade Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) was a different story though.
Shares erupted more than 10% on Friday, after beating on earnings and revenue expectations. The company broke out its cloud figures for a change and announced a $25 billion share buyback plan.
Also rallying almost 10% on the day? Twitter (NYSE:TWTR). Given the solid reports from both Snap (NYSE:SNAP) and Facebook (NASDAQ:FB) earlier this week, this one should come as little surprise. Still, it’s worth discussing.
Twitter missed on non-GAAP earnings estimates, but revenue of $841 million grew 18.4% year-over-year and beat expectations by almost $13 million. However, management’s Q3 midpoint outlook for $815 million to $875 million in sales topped consensus views of ~$829 million. Further, monthly daily active users of 139 million easily topped estimates 135.4 million and did so both internationally and domestically.
Ad engagements were up 20% year-over year, while I found the following figure possibly most important. According to Rich Greenfield, there are “~50% more people using Twitter daily than four years ago and 26% more using Twitter daily vs. two years ago.”
Big Moves in U.S. Stock Market
The DoJ formerly gave the green light to Sprint (NYSE:S) and T-Mobile U.S. (NASDAQ:TMUS) to merge. Dish will take on the divested assets of spectrum, Boost Mobile, Virgin Mobile and Sprint prepaid. Let’s hope the drama around this one is finally done. S and TMUS climbed 7.4% and 5.5% on the news, respectively, while Dish Networks (NASDAQ:DISH) jumped 87 basis points.
Elsewhere, Apple (NASDAQ:AAPL) was in the news for a few reasons. First, reports surfaced that its Apple credit card, co-branded with Goldman Sachs (NYSE:GS), will come in August. Apple’s hope is that the card will encourage more use of its financial services products, driving its Services segment revenues higher. It also hopes to strengthen its ecosystem with the move.
The other bit of news came on the trade front, with President Trump tweeting that Apple’s MacBook Pro parts would not spared of tariffs. The company plans to move some production to China and had applied for tariff exclusions. Not happening, apparently.
The Trade Desk (NASDAQ:TTD) exploded higher on Friday, climbing 9.1% to new all-time highs. While this stock has plenty of bullish momentum behind it, it was actually news that Amazon “is letting advertisers use external ad-buying tools like Trade Desk for advertising on its Fire TV platform.”
It’s not hard to see why investors bid this name higher on that news, given the size and scope that Amazon’s platform provides.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AMZN, GOOGL, AAPL and TTD.
