What's happening: Apple (AAPL), Amazon (AMZN), Facebook (FB) and Alphabet (GOOGL) al
l reported impressive results on Thursday for the July to September period. Their ability to generate tens of billions of dollars in revenue during a pandemic has made these companies the envy of Wall Street, which predicts Big Tech will continue to benefit from changes to daily life caused by Covid-19.
Expectations are so high for these companies, however, that their stocks are extremely sensitive. Shares of Apple are down 4% in premarket trading, while Facebook and Amazon are off about 1%. Google's stock is rallying 7%.
Breaking it down:
● Apple: The iPhone maker reported nearly $65 billion in revenue for the quarter, up 1% from the same period last year and $1 billion ahead of what analysts had expected. But iPhone sales disappointed due to a delay in the release of the iPhone 12, which is expected to drive a wave of new purchases.
● Facebook: Facebook's revenue jumped 22% over the previous year to $21.5 billion, also beating analysts' forecasts. Yet the huge bump in usage that the company experienced early in the pandemic appears to be waning. Daily and monthly active users in the US and Canada, a core market, declined slightly in the third quarter.
● Amazon: Amazon's sales grew 37% to $96 billion year-over-year (yes, you read that correctly). Profit increased 197% to more than $6 billion. "There is no doubt that Amazon's latest results show it continues to be a winner from disruption caused by the pandemic," Neil Saunders, analyst at GlobalData Retail, told clients.
● Google: Parent Alphabet reported revenue of $46 billion — a 14% increase from the same period last year. The company made more than $11 billion in profit. The report marks a strong turnaround from the previous quarter, when Alphabet posted its first revenue decline in history as online ad spending dropped in the early days of the pandemic. Between July and September, Google's advertising revenue jumped nearly 10% year-on-year, with search advertising revenue growing 6.5% and YouTube ad revenue surging 32%.
Big picture: Even if some results aren't playing as well this morning, on a macro level, tech's top companies are clearly emerging from a tumultuous economic period with even more clout. This helps justify their growing importance to US stock markets, but likely won't stop warnings that their dominance creates vulnerabilities. (Just think: If Apple were to really tumble, it could take the market down with it.)
On the radar: Strong earnings in a tough environment could also ramp up calls in Washington for greater regulation.
Google's results are particularly awkward given that the US Justice Department has brought a huge antitrust lawsuit against the company. One has to wonder: Will blockbuster revenue make it harder for Google to argue that it doesn't have a lock on the search market?
Stocks are set for another choppy session A volatile week could end with another bumpy trading day.
The latest: US stock futures are lower again after the Dow, S&P 500 and Nasdaq Composite gained ground on Thursday. Concerns about rising Covid-19 cases in North America and Europe have sent the S&P 500 down 4.5% this week, putting the index on track for its second straight month of losses.
One warning sign has been the price of oil. West Texas Intermediate futures, the US benchmark, have shed more than 10% this week, with oil now trading around $36 per barrel.
The worst drop in US oil prices since March reflects growing fears that the demand outlook could be hit by another wave of shutdowns. France and Germany will enact tight new restrictions on Friday and Monday that echo the strict measures taken earlier this year.
"Many nations with high oil consumption across the world are seeing infection levels that they didn't have even during the first wave," said Paola Rodriguez-Masiu, senior analyst at Rystad Energy. "Demand will not fall as much as during the pandemic's first wave as the world is now better prepared, but is sure to take a hit."
Watch this space: Analysts expect markets to experience a relief rally once a winner emerges in the US presidential election, since that will eliminate a major area of uncertainty. But that outcome may take time given the complexities of tallying votes during a pandemic and a tense political environment. Next week could be turbulent, too.
The truth about a record economic bounce
There's plenty to celebrate in the latest GDP reports out of the United States and Europe. Over the summer, the US economy grew at a record annualized rate of 33.1%, while the 19 countries that use the euro saw output jump 12.7% compared to the previous quarter, the fastest growth rate going back to 1995.
But the reality of what could happen to the economy during the fourth quarter means few people (other than the US president) are cheering the results. Economies are still well behind where they were before the crisis, and fresh restrictions in the fall and winter could stall or reverse early progress, economists warn.
"Incoming information signals that the euro area economic recovery is losing momentum more rapidly than expected after a strong yet partial and uneven rebound in economic activity over the summer months," European Central Bank President Christine Lagarde said Thursday.
With Europe staring at a potential double-dip recession, anxiety is rising that the United States isn't far behind. The Back-to-Normal Index from CNN Business and Moody's
Analytics edged higher in October, but some view new social distancing rules as inevitable as coronavirus cases spike. An inability to agree on another stimulus package in Congress could make matters worse.
"An intensifying pandemic and probable lack of another round of fiscal aid this year will almost certainly dampen overall economic activity to close the year and to begin 2021," said Joseph Brusuelas, chief economist at RSM US.
The truth about a record economic bounce
There's plenty to celebrate in the latest GDP reports out of the United States and Europe.
Over the summer, the US economy grew at a record annualized rate of 33.1%, while the 19 countries that use the euro saw output jump 12.7% compared to the previous quarter, the fastest growth rate going back to 1995.
But the reality of what could happen to the economy during the fourth quarter means few people (other than the US president) are cheering the results. Economies are still well behind where they were before the crisis, and fresh restrictions in the fall and winter could stall or reverse early progress, economists warn.
"Incoming information signals that the euro area economic recovery is losing momentum more rapidly than expected after a strong yet partial and uneven rebound in economic activity over the summer months," European Central Bank President Christine Lagarde said Thursday.
With Europe staring at a potential double-dip recession, anxiety is rising that the United States isn't far behind. The Back-to-Normal Index from CNN Business and Moody's Analytics edged higher in October, but some view new social distancing rules as inevitable as coronavirus cases spike. An inability to agree on another stimulus package in Congress could make matters worse.
"An intensifying pandemic and probable lack of another round of fiscal aid this year will almost certainly dampen overall economic activity to close the year and to begin 2021," said Joseph Brusuelas, chief economist at RSM US.
Up next
Altria (MO), Chevron (CVX), Colgate-Palmolive (CL), ExxonMobil (XOM), Honeywell (HON), Newell Brands (NWL), Phillips 66 (PSX) and Under Armour (UA) report results before US markets open.
Also today: US personal income and spending data post at 8:30 a.m. ET, along with the PCE Price Index, a crucial reading of US inflation.
Coming up: The US election, now just five days away, will dominate markets next week. Want to stay in the loop? Special editions of Before the Bell will hit your inbox starting Sunday.