 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Tuesday's Headlines 1. Buffett Adds $10 Billion to Occidental's Bid for Anadarko 2. Google's Parent Loses $70 Billion in Market Value... in One Day! 3. Europe Might be OK, Actually Markets Closed
 U.S. Markets Back Off Record Highs Alphabet's disappointing earnings report Monday carried over into today, knocking $70 billion off of the company's market cap, and bringing the tech-heavy Nasdaq off its record highs. The S&P500 did squeeze out a slight gain, pushing the index to another record. James has more on Alphabet/Google's historically bad day - the worst in six years, below, but suffice to say that investors sold off Class A, B, and C shares of the company without mercy. (Alphabet... get it?)
Quick recap: Alphabet hit profit estimates for the first quarter, but underdelivered on revenue, blaming weakness in its advertising businesses on Google.com and YouTube. Investors have no patience this earnings season for companies that don't crush expectations.
Speaking of expectations... Apple beat analysts forecasts for both earnings and revenue, although both were lower than a year ago. Investors expected that, as Apple has been fairly transparent about its challenges selling new iPhones, especially in China. Still, the company generated $58 billion in sales in just one quarter. For the six month period ending March 31, it brought in $142 billion in sales.
Here are some highlights:
The big news for investors... Apple announced it will repurchase an additional 75 million shares and is increasing its dividend 5% to $0.77/share.
Shares of Apple are up 5% in after-hours trading, and will likely lead the market even higher tomorrow. Investors love dividends!
If you bought Apple at the beginning of the year, when many investors were bailing out of it, you are up 34%.
chart from tradingview.com  Guess who owns owns 5% of Apple's outstanding shares?  More on Buffett and his latest deal, below... but it is worth noting that the FAANG Stocks, which have been market leaders in the first half of the year, are all experiencing sales slowdowns. The law of large numbers means it will be more and more difficult for companies like Apple, Amazon and Facebook to post the kind of sales growth that turned them into the juggernauts they are today.
Apple has an installed base of 1.4 billion. Yes, there are 7.53 billion on the planet today, so there is opportunity, but don't expect sales growth of 40-50% in the future.
Facebook just posted 25% quarterly sales growth, and it was the slowest in the company's history.
Here's a chart from Charlie Bilello, illustrating the trend.  Buffett Wades in Warren Buffett waded into the bidding war between Chevron and Occidental Petroleum for Anadarko Petroleum, by offering Occidental $10 billion to finance the purchase of the driller. Quick recap, Chevron bid $33 billion for Anadarko a few weeks ago, which seemed like a done deal until Occidental topped the bid last week, offering $38 billion.
Here's our full write-up on the deal: Why Buffett is Betting $10 Billion on Occidental
Buffett's $10 billion offer is contingent on Anadarko accepting the higher bid. If it does, Buffett and Berkshire Hathaway get the following:
Historical Context Buffett and Berkshire Hathaway are no strangers to the oil and gas world. Berkshire Hathaway owns a little under 1% of Canada's Suncor Energy, and owns the largest interstate natural gas pipeline company in the U.S., Northern Natural Gas.
Anadarko owns major oil fields in the Permian Basin, which straddles New Mexico and Texas. It also owns major fields in the Gulf of Mexico and Northern Africa.
Buffett has lamented that he and partner Charlie Munger can't find enough big acquisitions to suit Berkshire's enormous cash pile because valuations are too high for big companies, making them too pricey for the frugal pair. The potential Occidental/Anadarko deal presented a great opportunity to put that cash to work in a near risk-free proposition. Occidental only gets the money if the deal is approved. Once it is, Buffett and Berkshire get 100,000 shares of preferred stock and the right to buy 80 million more shares at a discount. Slick deal! Expect Buffett and Munger to get a lot of questions about this at the company's annual meeting in Omaha, Nebraska this weekend. Europe Might be OK At the end of 2018, Europe looked like it was on the verge of an extreme economic slowdown and a potential recession. Brexit was a mess (as it still is). Germany, the most powerful economy in the EuroZone was limping badly. New tariffs, courtesy of the U.S., were hurting Italy and Spain. The International Monetary Fund (IMF), had lowered growth forecasts from 1.8% to 1.6% for 2019, and that was considered optimistic.
But then, the European Central Bank got to work. It held interest rates at bay and offered cheap loans to banks to spur liquidity and business spending. France enacted a tax break and a tax bonus to boost consumer spending, and Brexit was pushed off all the way to the end of October.
The result, GDP for the Eurozone grew at a 1.5% rate in the three months ending March 31, up from the 0.9% growth for the three months ending December 31, 2018.
While the Eurozone is still trailing China and the U.S. in terms of GDP growth, the economic situation is better today than most people thought it would be. 
Charts courtesy of www.koyfin.com  General Electric showed some progress selling off assets and paying down its debt today. Seagate technologies makes hard drives and other hardware. The company reported a strong first quarter and said business looks good for the rest of the year. It also issued a cash dividend of $0.63 per share. Investors love dividends.  When you see "Alphabet", think Google. It has several share classes, and all of them were sold off hard today.  Word of the Day Why today: Because, today, President Trump implored the Federal Reserve to cut interest rates by 1% and resume quantitative easing, to stimulate the economy.
What is Quantitative Easing?  Today in History  April 20, 2009: Chrysler becomes the first U.S. automaker to file for Chapter 11 bankruptcy protection. At the time, Chrysler had about 35,000 U.S. workers, including 21,150 in Michigan. Under the deal the automaker struck with the Obama administration, Chrysler formed an alliance with Italian automaker Fiat SpA, which took a 20 percent stake in the company. At the time, Chrysler was owned by Cerebus Capital Management, a private equity firm. Its CEO was Robert Nardelli.
The federal government agreed to provide Chrysler with about $3.5 billion in debtor-in-possession financing to allow the company to pay bills and operate while in bankruptcy. Upon exiting bankruptcy, Chrysler received another $4 billion from the government in addition to loans from the Canadian government.
In 2011, Chrysler, now a part of Fiat, returned its first profit since 2006, and repaid the U.S. and Canadian Governments $7.6 billion.
source: https://www.mlive.com/auto/2009/04/chrysler_becomes_first_automak.html Chart of the Day: Alphabet Tumbles on Revenue Miss  Alphabet Inc. (GOOGL) tumbled well more than 8% at its worst on Tuesday. Driving this stock plunge was the company's earnings release after the market close on Monday, which revealed substantially slowing sales growth in the first quarter compared to previous quarters and estimates. Despite higher-than-expected earnings, Alphabet announced its slowest overall sales growth in several years.
This slowdown was driven largely by the company's key source of revenue: advertising. The company reported that ad sales rose a relatively tepid 15% in its fiscal fourth quarter, down from 24% in the same period a year ago. As a comparison, previous quarters have seen consistent revenue growth at or above 20%, which makes Monday's report stand out like a sore thumb. Making matters even worse, Alphabet executives were vague and, by some accounts, confusing when explaining the slowing sales growth. This confusion likely exerted even more pressure on the stock.
The chart above clearly shows Tuesday's large gap down from what was a new record high on Monday, just short of $1300 per share. Prior to the drop, GOOGL had been up 24% year to date and was entrenched in a sharp uptrend from the late-December lows. After the drop, the stock has reached back down to its 50-day moving average.
Where might the stock go from here? Tuesday's plunge may well have been overdone, but a slowdown in revenue is a clear, fundamental signal that something may be wrong or that Alphabet's business may be changing, especially since the company relies so heavily on advertising sales. If the stock remains below its 50-day moving average, the next dynamic target is around the key 200-day moving average. If that is unable to hold, Alphabet will likely have significantly further to fall.
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Tuesday, April 30, 2019
Warren Buffett's Slick Deal
GOOGL Throws a Wet Blanket on Wall Street
 Chart Advisor | Focus on the Price
By John Jagerson, CFA, CMT Tuesday, April 30, 2019 1. After-hours selling sinks GOOGL 2. S&P 500 sets another record 3. Margin debt levels highlight cautious traders Major Moves If you want to know why the S&P 500 didn't move even higher than it did today, look no further than Alphabet (GOOGL) – the parent company of Google – which accounts for more than 3% of the index.
The company reported its quarterly earnings on Monday after the closing bell, and the numbers were ugly. GOOGL missed revenue expectations by a full $1.02 billion and earnings expectations by $0.41 per share – coming in at $36.34 billion and $9.50 per share, respectively.
The company did manage to beat its Non-GAAP earnings estimates of $11.90 by $1.74 per share, but traders didn't seem to care. They were too focused on the revenue flop.
Most of GOOGL's revenue – 84.5% to be exact – comes from advertising. Because it is such a crucial part of the company's business, traders watch advertising sales growth like a hawk and tend to get panicky when growth rates slow down, like they did last quarter.
Advertising sales growth has been slowing for the past year, but Q1 2019 saw that fastest decline. Here are the numbers for the past five quarters:
As you can see, Q4 2018 was the first time in a while that growth fell below 20%, and the 15.3% growth rate in Q1 2019 is utterly disappointing compared to what it has been in the past.
As you can see in the 5-minute chart below, traders crushed GOOGL in after-hours trading (the yellow-shaded section) on Monday when they heard the news. It only took the bears 10 minutes from 4pm to 4:10pm EDT to push the stock from an after-hours high of $1,297 to $1,236, and things only got worse from there.
This one-day decline is GOOGL's worst since 2008.  S&P 500 The S&P 500 closed at a new all-time high for the second day in a row today.
Thanks to the disaster that was GOOGL today, the index wasn't able to add much to yesterday's gains, but it was able to climb 0.1% to close at 2,945.83.
Amazingly, GOOGL wasn't the S&P 500's worst performer today. Diamond Offshore Drilling (DO) took home that honor by dropping another 9.42% today in the wake of yesterday's earnings-induced losses. It appears traders are still concerned crude oil prices aren't going to rise high enough to boost earnings in the oil exploration industry.
On the positive side, Seagate Technology (STX), General Electric (GE) and Mohawk Industries (MHK) led all S&P 500 components with gains of 7.52%, 4.52% and 4.36%, respectively. 
Risk Indicators - Margin Debt As the S&P 500 has been climbing back up to a new all-time high, I've been watching margin debt levels to see if the bullish run of 2019 was going to have as much buy in as the bullish run of 2018.
Unfortunately, it doesn't look like it does at the moment.
This doesn't mean the S&P 500 can't, or won't, climb higher. There is obviously bullish momentum in the market. Otherwise, the index wouldn't have reached a new intra-day high 2,949.52 on Monday.
It simply means traders – based on what I'm seeing in the margin debt numbers – don't seem to be as willing to increase the leverage in their portfolios today as they were in 2018.
Traders can increase the leverage in their portfolios by borrowing up to 50% of the purchase price of a stock – according to Regulation T of the Federal Reserve Board.
This means if a stock costs $100, a trader only needs to invest $50 of her own money to purchase the stock. She can borrow the other $50 from her broker.
Borrowing money to buy stocks is referred to as buying on margin, and the amount of money a trader has borrowed to buy stock is called "margin debt."
I like to track the total amount of margin debt being used to buy stocks in the market to get a sense of not only how much demand there is on Wall Street but also how confident traders are.
Confident traders tend to borrow more because they know increased leverage can boost the return on their investment. Nervous traders tend to borrow less because they know increased leverage can also amplify their losses.
Margin debt rose dramatically during the bull run of 2018 – reaching an all-time high of $668,940,000,000 in May 2018 before it started to level off in mid-2018. After bottoming out at 554,285,000,000 in December 2018, margin debt started to rebound for a few months in early-2019.
However, the increase in borrowing didn't hold during March. Margin debt dropped from 581,205,000,000 in February to 574,013,000,000.
Unfortunately, FINRA releases its margin debt data one month after the fact. That's why we are just now seeing the data for March. We'll have to wait until the last week in May to see April's data.
This wasn't a huge drop, and it may end up being a short-term pullback in the middle of a longer-term uptrend, but it is worth noting. Traders are being more cautious in 2019 than they were in 2018.  Bottom Line - Earnings Giveth and Taketh Away This earnings season has been a wild one so far.
We saw Alphabet (GOOGL) disappoint and get clobbered today, but we also saw companies like Mastercard (MA) and Pfizer (PFE) beat expectations and gap higher.
On balance, the positive earnings surprises have been able to lift the broad market indexes, but the big misses have served as a reminder we must be constantly vigilant with the stocks in our portfolios. How can we improve the new Chart Advisor? Tell us at chartadvisor@investopedia.com
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