Making sense of the markets this week: November 5, 2023

Apple earnings are solid if not spectacular

When a company makes a habit of achieving record-breaking growth, it can be hard to give proper context to earnings reports. (All earnings figures in the first two sections are in U.S. currency.)

On Thursday, Apple (APPL/NASDAQ) released its quarterly earnings numbers. 

• Earnings per share came in at $1.46 (versus $1.39 predicted) and total revenues were $89.5 billion (versus $89.28 billion predicted).

Despite slightly beating expectations, shares were down 3% in after-market trading as the market seems to hold Apple to a higher standard.

It can be hard to visualize just how massive this company is at times. 

All that to say: Apple can play by its own set of rules, so to speak. While Apple’s total sales are down for the fourth consecutive quarter, it makes sense when you consider how many consumers splurged to buy the latest tech items during the pandemic.

Apple CEO TimCook noted that the market for personal computers is “challenging.”

How about the rest of Tech?

Another solid quarter for American tech overall. 

If you’re wondering what’s going on with that outlier profit number for Airbnb, it’s simply a one-time income tax benefit of $4.37 billion. It makes for an eye-popping quarterly profit, but the real story is the underlying revenues essentially being even with predicted outcomes.

Both hardware and software continue to siphon profits from all over the world back to the U.S.A. and into shareholders’ pockets. No big surprises.

Air Canada and Cameco fly high

Air Canada was so confident in its profits this quarter that executive vice-president of network planning and revenue management Mark Galardo stated:

“We see relatively strong demand for (the fourth quarter) in almost every single geography that we operate in, in almost every single segment that we operate in. […] We’re not seeing any major slowdown at this point in time.”

Despite Air Canada’s results, share prices closed down slightly on Monday, as shareholders appear skeptical that the good times can continue. You can read more about investing in Air Canada at MillionDollarJourney.ca.

Cameco’s quarterly report didn’t dive into operations too deeply, but instead it focused on the bigger picture for nuclear energy. President and CEO Tim Gitzel stated:

“Increasing average global temperatures and the fires and floods that are becoming more and more frequent can’t be ignored. The evidence continues to point to our carbon-based energy systems as a key contributor to the problem. This has led to electron accountability and proposals by countries and companies for achieving net zero targets taking center stage. And today it’s clear, achieving those targets does not happen without nuclear power. That itself is a notable difference, but it goes even deeper. This time policymakers are not shying away from proposing nuclear as a key part of their energy mix, some even reversing their previously anti-nuclear stance.”

Despite the positive long-term view and substantial earnings beat, share prices were nearly flat on Wednesday, closing at $56.88. That said, the stock is up about 10% this week, as we go to press.

Nutrien’s bad quarter can be chalked up to the volatile price of potash. (Nutrien is a Canadian company based in Saskatoon, but trades on the New York Stock Exchange and reports in U.S. dollars.) As an almost pure play on the resource, Nutrien’s stock generally rises and falls with supply and demand in that single market. It’s similar to the dynamics behind an oil producer.

With more potash products from Russian and Belarus slipping through the sanctions net and onto the world market, Nutrien’s brief period of market dominance is at its end. That said, the share price didn’t move much this week, so it appears the market somewhat anticipated the bad news. It rose 2.3% to USD$55.39 at the close Thursday. 

The U.S. Fed tones down hawkishness 

The U.S. Federal Reserve continues to be the predominant market mover. 

By simply moderating his tone slightly on Wednesday (as opposed to announcing any policy changes), U.S. Fed Chair Jay Powell sent markets sharply upward. 

The Dow closed up 221.71 points to 33274.58, a gain of 0.7% on Wednesday. The Nasdaq did even better, closing up 210.23 to 13061.47, a jump of 1.6%. Further substantial gains followed on Thursday.

After 11 interest rate increases since March 2022, the U.S. Fed’s Open Market Committee announced this week that it would be standing pat for the second straight meeting. The federal funds rate will continue to be between 5.25% and 5.5%.

By saying central banks could now proceed “carefully” with future decisions, Powell was notably less enthusiastic about the prospect of continuing to raise rates. That said, his remarks were still quite muted:

“We are committed to achieving a stance of monetary policy that is sufficiently restrictive to bring down inflation to 2% over time and we’re not confident yet that we have achieved such a stance.”

When asked about a possible U.S. Fed pivot to lowering interest rates, Powell responded: 

“It’s not something we’re talking about or considering.”

These remarks come amidst surprisingly strong recent economic news in the United States. The Job Openings and Labor Turnover Survey (JOLTS) report, released on Wednesday revealed there are still 1.5 job openings for every unemployed person. That’s up from the 1.2 ratio from in 2019. Job openings were up 56,000 to 9.55 million.  

On the back of an incredibly strong gross domestic product (GDP) report last week that showed a blistering 4.9% annualized rate of growth for the U.S. economy, the JOLTS report continues to put pressure on the U.S. Fed not to pivot too quickly at the risk of inflation shooting back up again.  

I have yet to read a prognosticator who predicted U.S. benchmark interest rates would go up to 5.5%, and that the country would still achieve nearly 5% growth and a booming labour market. This macroeconomic story continues to drive markets all over the world.

About Kyle Prevost

Kyle Prevost is a financial educator, author and speaker. He is also the creator of 4 Steps to a Worry-Free Retirement, Canada’s DIY retirement planning course.

Linkedin Twitter Facebook Website