| Thursday's Headlines 1. Markets Split as Industrials Falter and Tech Gains 2. Amazon Misses Estimates, Likely on Purpose 3. Brexit Hits Another Roadblock 4. How Much Time Do We Spend on Our Money? Markets Closed
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Markets Today
It was a tale of two markets today. Industrial stocks faltered as tech continued its momentum on the back of strong earnings. Today's case study was industrial giant 3M (MMM), which also happens to sell Post-it notes and other consumer products. The industrial division, however, was beset by weakness, especially in components that 3M makes for auto parts and electronics. The company reduced its sales and profit forecasts for 2020 citing a "challenging macroeconomic environment," and a slowing Chinese economy. Shares fell more than 4%.
Microsoft, (MSFT) on the other hand, which reported better than expected results on Wednesday afternoon, saw its shares climb nearly 2% today, as investors were impressed by the 59% growth in its cloud computing business. More on the cloud later when we get to Amazon's results.
After rising from the ashes in 2018, Twitter (TWTR) fell back to earth again today as shares dove 20% as the company reported weaker results than anticipated. The company said its technology program called MAP, which allows advertisers to target users based on the devices they're using to access the platform, was not working as intended, which ultimately hurt its advertising revenue. In other words, one of Twitter's only ways of making money wasn't making money. The company discontinued the program back in August, but investors didn't pay attention until today.
With today's selloff, Twitter is basically back where it began the year, after an impressive climb.  Amazon Misses, Probably on Purpose Amazon (AMZN) reported third quarter results after the market close and missed profit expectations, only bringing $2.1 billion to the bottom line on sales of $68.83 billion for the quarter. Just think about that for a second. $68.83 billion in one quarter!!! Still, investors sent the stock down almost 10% after hours. Granted, the third quarter included Amazon Prime Day, which the company said was its biggest sales day in history.
The shortfall in profits was a result of Amazon's heavy investment in one day shipping. The company said it spent $800 million on that during each of the last two quarters, which ate into its profit margins. A year from now we'll likely look back at this earnings miss as a small bump in the road on Amazon's journey to retail domination. The company spent a decade purposefully not earning a profit so it could invest in warehouses and logistics. It can turn the profitability levers on or off, depending on what it wants to do, and investors have been happy to subsidize its astronomical growth.
Amazon did guide towards slightly lower revenue for the fourth quarter, which is usually its best, given holiday sales. The company said it expects sales to come in around $86.5 billion, and not the $87.4 billion analysts expected.
It's Amazon's cloud business that is worth watching. Amazon Web Services has become the dominant cloud computing service on the planet, and continues to show impressive growth. AWS pulled in $8.9 billion in the past quarter, and $2.2 billion in operating income. That $2.2 billion represented all of the overall company's net income for the entire quarter. While growth may be slowing a bit, AWS is still the King of the Cloud, at least for now.  U.S. Durable Goods Orders Fall This shouldn't come as a surprise to anyone, and recent earnings reports from industrial companies are reiterating the same message. Demand is fading and companies are tightening their belts as the global economy slows.
U.S. factory orders for durable goods fell 1.1% in September, the biggest decline in four months, according to the U.S. Commerce Dept. Durable goods are manufactured products that are supposed to last 3 years or more. Think heavy machinery, auto parts, machinery and airplane equipment. The shortfall was mostly due to weakness in automobile production, which we can attribute to the GM strike, and aircraft production, which can be tied to Boeing's issues with the 737 Max jet. But, even without those sectors, orders would have fallen 0.3%. These are not crisis levels, by any means. However, they are worth paying attention to as the global and U.S. economies slow down.
Source: tradingeconomics.com US Commerce Dept  Brexit Latest Just when it seemed like U.K. Prime Minister Boris Johnson had some leverage in his plan for an orderly, if not timely Brexit, Parliament threw up another roadblock by not approving the deal he had negotiated with the European Union.
Now Johnson, a member of the Conservative Party, is asking Parliament to call a general election in hopes that he will get a legislature more amenable to his deal. Because he needs a two-thirds majority to call an election, he would need to convince some of the opposition Labour party to approve an election, which they are currently reticent to do.
Calling a new election is a risky gambit. Theresa May tried calling a general election during her tenure as PM, and it resulted in her Conservative party losing seats.
The British Pound has made a lot of noise in the past week as some investors hoped a deal would be nigh. But it is right back where it started 5 days later.
Here's the Pound against the U.S. Dollar, courtesy of TradingView.com  How Much Time Do We Spend on Our Money? This chart caught my attention today. A lot of people think and worry about money all the time. They are either financially stressed or obsessed, depending on their current financial state. But, given the amount of time most of us spend with our money on our mind, we don't actually spend a lot of our daily time doing anything about it. That's according to the U.S. Bureau of Labor Statistics American Time Use Survey. We spend more time on laundry and relaxing than we do on managing our finances, according to the survey.
What about you? 
(chart courtesy YCHARTS)  Medical device maker Align Technology and semiconductor manufacturer Lam Research rose 14.5% and 13.8%, respectively, on earnings beats. O'Reilly Automotive also rose 9.2% on an earnings beat.  Social media company Twitter fell 21% today on a disastrous earnings report, for more see above. Marketing services firm Alliance Data Systems and energy company TechnipFMC, fell 13.5% and 11.8% respectively on earnings misses. Healthcare firm Baxter International is down 10.1% after it said it may need to amend earnings after accounting "misstatements." Word of the Day Incentive Stock Options (ISOs) An incentive stock option (ISO) is a company benefit that gives an employee the right to buy stock shares at a discounted price with the added allure of a tax break on the profit. The profit on incentive stock options is taxed at the capital gains rate, not the higher rate for ordinary income.  Today in History October 24, 1929 October 24, 1929 was known as "Black Thursday," as the Dow Jones Industrial Average dropped 11 percentage points at the bell. This was the start of the Great Wall Street Crash of 1929, that helped start the Great Depression. By the time the Dow bottomed out at 41.22 in July 1932, it was down 90% from its previous high of 381.2 in September 1929. It would not reach that high again until 1954.
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Thursday, October 24, 2019
In the Clouds
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