On Sunday, 36% of Greece voted for the Syriza party, enough to declare the far-left party as the “winner” of the election. Alexis Tsipras, the leader of the party, became the Prime Minister of Greece. While the election results were not surprising, Greek stocks tumbled as Tsipras halted privatization plans agreed under the country’s bailout deal with its European Union creditors. Standard & Poor’s cut its outlook on Greek sovereign debt to negative (from stable). While the European Central Bank (ECB) has stated it will do whatever it takes to preserve the Eurozone, Greece’s future as a member of the EU is still uncertain.
U.S. GDP Rises Less than Forecast:
The U.S. economy expanded at a slower pace than forecast in the fourth quarter as Gross Domestic Product (GDP) grew at a 2.6% annualized rate. This was less than the average economist forecast of 4% and was attributed to cooling business investment, a slump in government outlays and a widening trade gap took. These overshadowed the biggest gain in consumer spending in almost nine years. Government outlays can change very quickly, but consumer spending typically does not. Given this fact, a rise in consumer spending is a strong indication that the U.S. economy is gaining momentum. This rise is likely due to a stronger job market, lower oil prices, and increases in consumer confidence.
Corporate Earnings Produce Question Marks and Volatility:
Corporate earnings controlled the markets this week, sending the markets lower this week. While many companies report earnings this week, we have include a few highlights below:
Apple (AAPL) blew past even the most bullish analyst expectations on Tuesday, earning $3.06 per share. The average analyst was expecting $2.60 per share. $3.06 is $18 Billion in profits for the fourth quarter and is the highest quarterly profit earned by one company in history. To put this into perspective, this number translates into Apple earning $8.3 Million in profits every hour of the fourth quarter or almost $2,300 in profits every second! Beyond these numbers, there was a lot to like from the earnings report. The company sold more iPhones than expected, at higher prices than expected, all while also earning more on each sale (better margins than expected). The company grew sales in China by 70% and 20% in Europe. Apple Pay now accounts for two of every three dollars spent via contactless payments for Visa, MasterCard and American Express, a growing segment of the payment market. Apple also announced that the Apple Watch is on track to be released in April. As their first new product launch since the iPad, it will be important to track sales versus company projections
Freeport McMoRan (FCX) reported a large fourth quarter loss Tuesday on falling commodity prices. Overall, the company lost $2.75 per share, much more than analysts expected. The company, which controls almost 10% of global copper production, said it will ramp up copper production by 20% in 2015 as they anticipate a strong rebound in the copper markets. Freeport will also cut costs in its oil and gas division in response to lower oil prices.
Boeing (BA) posted stronger than expected fourth quarter results on strong commercial jet demand. The company earned $2.31 per share, better than the average analyst estimate of $2.11 per share. Shares have risen nearly 10% since the earnings were released on Tuesday on Boeing’s improved revenue guidance for 2015. Boeing’s backlog for commercial jets is a record $430 Billion. The company did caution that 2015 could see a lower jet demand if oil prices continue to stay low, as airlines would put off buying a newer, more fuel efficient plane.
Visa (V) topped analyst expectations, earning $2.53 per share. The company attributed this to better than expected growth in payment volume. The company also announced a 4-1 stock split. As a reminder, a 4-1 stock split means the company will increase its number of shares outstanding by 4 times while simultaneously reducing the share price by 4 times. As Visa is a part of the Dow Jones Industrial Average, a lower share price lessens the movements in Visa’s stock price will have on the Dow. Visa is currently the highest priced stock in the Dow.
Chevron (CVX) beat analyst expectations, earning $1.85 per share last quarter, higher than the average analyst estimate of $1.63 per share. Though lower oil prices hurt the oil and gas production side of the business, Chevron’s refining division benefited from the lower oil prices. Chevron also began selling assets in anticipation of low oil prices remaining in the near future. The company also suspended its share buyback program due to changes in the market conditions of oil.
Please join us in congratulating Matt Schaller and his wife Elise for the birth of their baby girl! Hannah was born 1/14/2015. Everyone is healthy and doing fine.
This publication is provided as a service to our clients and associates of PFA solely for their own use and information. The material is derived from sources believed to be reliable but its accuracy and the opinions based thereon are not guaranteed and have not been verified. The content in this publication is for general information only and not intended to serve as individual investment advice. You should seek independent advice from a professional based on your individual circumstances.