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  1. Home
  2. / Investing
  3. / Stocks

Riders on the Storm, More D.C. Nonsense, Early Take on Apple and Amazon

The two big names disappointed after hours Thursday, but one is more of a concern than the other.
By STEPHEN GUILFOYLE
Oct 29, 2021 | 07:12 AM EDT
Stocks quotes in this article: AAPL, AMZN, FB, F, LRCX, APPS, MRK, NOW, ABBV, CVX, CL, XOM, RCL, LMT

Take It As It Comes

"Time to live

Time to lie

Time to laugh

Time to die

Take it easy, baby

Take it as it comes

Don't move too fast

And you want your love to last

Ah, you've been moving much too fast"

--Kreiger, Morrison, Manzarek, Densmore (The Doors), 1967

Storm

I remember thinking "This ain't so bad," then I remember holding on to a railing attached to a metal staircase on the deck. My feet no longer made contact with anything. The strength in my arms, granted by a merciful creator and way too many push-ups, was all that prevented my permanent disappearance. How long would it take them to notice that I had gone for a swim? Was anyone else even still out here? I don't know. If only I could work my way back to the hatch. I couldn't really see anything, and now I could taste the ocean's fury. Don't know how, but at some point I found myself on the inside of that heavy metal door.

Markets granted traders and investors a reprieve from Wednesday's late sell-off on Thursday. Until the closing bell. That's when the tiny ship sailed right on into the tempest. A reunion with the spirit of Ariel was nothing I had expected late on Thursday afternoon. Hence, I may have been a fool to go anywhere, or do anything bearing any expectation whatsoever. Take it easy, baby. Take it as it comes.

Evolution

Everyone knew that Apple (AAPL) and Amazon (AMZN) were set to report after the bell. Everyone knew that Facebook (FB) would become something else. That something else, we know now, is Meta. In little more than a month, the ticker symbol will change as well. Prior to seeing quarterly results published by a number of firms, but especially the big two, capital poured back into equity markets.

All 11 sector select S&P SPDR ETFs closed in the green, led primarily by more cyclical groups in a reversal of recent action. Small-caps led mid-caps. Mid-caps led the Nasdaq Composite, and the Nasdaq Composite led the Transports. Everything else caught a bid, too, even the Utilities as yield spreads expanded, reversing the action in debt markets triggered by the Bank of Canada's move to halt its quantitative easing program a day earlier.

Winners beat losers by close to 5 to 2 at both of New York's primary equity exchanges. Advancing volume dominated declining volume, taking a 68% share of the action for New York Stock Exchange listed names and a 77% share for names listed up at Times Square. Just one caveat. Maybe it was an omen of some kind. Aggregate trading volume was slightly lower for stocks listed at 11 Wall Street, and considerably lower for Nasdaq listed stocks.

Catalysts

For there were two forces behind Thursday's perhaps undeserved euphoria. One, it appeared that President Biden and the Democratic caucus from the left had finally gotten their acts together. The market liked that there might have been an agreement on a much less daunting fiscal spending package that could unshackle the badly needed infrastructure package currently held hostage by House progressives. The market also seems to like the idea of a 15% corporate minimum tax that impacts the most profitable firms more than it does an increased corporate tax rate that hurts all businesses of all sizes, thus slowing economic activity.

Unfortunately, overnight, we have learned that the redone $1.75 billion to $2 billion social /climate-focused spending plan was not enough for the extreme left and that the plan that had gotten both the President and the Speaker fired up on Thursday would fail.

In addition, the Bureau of Economic Analysis released our first look at third-quarter GDP on Thursday morning. The headline print of 2.0% (quarter-over-quarter seasonally adjusted annual rate) growth may have disappointed Wall Street at first, but was much, much better than our worst fears, and once economists were able to take the data apart... guess what? This GDP print just ain't that bad. The harshly negatively impacted areas were durable goods sales and non-defense federal spending.

Well, a drop in durable goods sales is a supply issue due to the now famously choked ports of entry/kinks in the supply chains. This is indeed "transitory" and a huge driver for recent inflation. The 2020/2021 massive increase in non-defense federal spending is a pandemic story, and one that now hinges on the extreme left in the House actually agreeing to something other than "their way or the highway." In other words, the weakness in the report is certainly surmountable.

Now the strength in that GDP report? Right where it needs to be. Gross private domestic investment and final sales to domestic purchasers may be decelerating off of their 2021 quarterly pace, but are by no means unhealthy. The bid side for this market-based economy is still there.

On Meta (FB)

Just imagining next year's "Facebook Connect" conference will need to be called something else.

Trading

I was quite active on Thursday afternoon. Liz Claman asked me what I was trading on such a day during her show on Fox Business. I tried to explain that when the market runs like that, traders usually sell more than they buy, and vice versa for awful-looking days. During the regular session I shaved winners in Ford Motor (F) , Lam Research (LRCX) , Digital Turbine (APPS) , Merck (MRK) and ServiceNow (NOW) . I was also in and out of Lockheed Martin (LMT) all day long as that stock's beat-down early this week forced me to day trade the name for two days in order to get it back on the P/L plus side.

That was all easy. Now for the hard part. I came in long both Amazon and Apple. I am also short an AAPL $150/$147 bear put spread for a $0.71 average credit that looks like it might hurt a little. On the positive side, I had been overweight AMZN ahead of the numbers and returned the name to normal weight in time to at least not take a more significant mark-to-market uppercut than I have to. There was a decent enough profit on the portion sold.

Now it comes down to how one feels about the quarter reported and the near-term future for these names. Do you trust Apple CEO Tim Cook? I think that if anyone has been in AAPL for a while, you probably do. Do you trust Amazon CEO Andy Jassy? Not his fault one bit, but how can you? Not like Cook, and not like Bezos. Last night, I wanted to sell Amazon and had to sit on my hands. Last night, I wanted to buy that dip in Apple, and you bet your tail, that's just what I did.

I imagine I will have to go into this in much greater detail, so that will have to be in a second piece that will be available here at Real Money and Real Money Pro, but one of these two names seems to me to be a tale of inability to meet demand, which in my opinion pushed potentially incredible sales growth out into calendar year 2022. The other seems to be heading in a direction that I am not at all thrilled with.

We have to discuss. These are the kinds of days where I need to be able to communicate with you all more in a direct and intimate manner. Back shortly.

Your Pal

Economics (All Times Eastern)

08:30 - Personal Income (Sep): Expecting -0.1% m/m, Last 0.2% m/m.

08:30 - Consumer Spending (Sep): Expecting 0.5% m/m, Last 0.8% m/m.

08:30 - PCE Price Index (Sep): Expecting 4.4% y/y, Last 4.3% y/y.

08:30 - Core PCE Price Index (Sep): Expecting 3.7% y/y, Last 3.6% y/y.

08:30 - Employment Cost Index (Q3): Expecting 0.9% q/q, Last 0.7% q/q.

09:45 - Chicago PMI (Oct): Expecting 63.9, Last 64.7.

10:00 - U of M Consumer Sentiment (Oct-F): Flashed 71.4.

13:00 - Baker Hughes Oil Rig Count (Weekly): Last 443 (-2).

The Fed (All Times Eastern)

Fed Blackout Period.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: (ABBV) (3.22), (CVX) (2.20), (CL) (.80), (XOM) (1.51), (RCL) (-3.97)

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At the time of publication, Guilfoyle was long F, LRCX, APPS, MRK, NOW, LMT, AAPL, AMZN and ABBV equity and long AAPL puts and short AAPL puts.

TAGS: Earnings | Indexes | Investing | Politics | Stocks | Consumer | Media | Software & Services | Technology | Technology Hardware & Equipment | E-Commerce | Real Money | Consumer Discretionary

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