Tech Domination in Earnings Round-Up – Including Apple’s report this week, as of this writing, we now have Q3 reports from 32 of the 64 Tech companies in the S&P 500 (which, combined, account for 65.6% of the sector’s total market cap in the index). Total earnings for these 32 Tech companies in the S&P 500 are up +9.2% from the same period last year on +5.3% higher revenues, with 68.8% beating earnings per share estimates and 62.5% beating revenue estimates. Among those that exceeded estimates were Microsoft, Amazon and Alphabet (Google).


Microsoft announced cloud sale increases of 8% last quarter with expectations for $20 billion in annualized commercial cloud revenue run rate by 2018. Amazon surprised analysts after reporting a profit on a 23% sales gain and Alphabet (Google) posted stronger-than-expected earnings and revenues while also authorizing a buy-back of $5.1 billion worth of Class C shares.

Welcome to the Future of Retail – the new battle zone for mammoth retailers? The air. Earlier this week, Wal-Mart applied to the Federal Aviation Administration for permission to test drones for home deliveries, curbside pickup and warehouse inventory checks. This is a clear sign they are being driven to market by Amazon and are eager to compete for the space of shopping from anywhere, anytime.

It’s a Bird…It’s a Plane….It’s a Budget Deal? – Hard to believe, but it appears as though Congress has reached a tentative deal on a two-year budget plan that would suspend the debt limit through mid-March 2017 and boost spending by $80 billion through September 2017. Let’s not go popping champagne yet however. The agreement still needs the votes in the House which will be new Speaker of the House Paul Ryan’s first task. He won the speakership this week with 236 votes compared to the 184 cast for Pelosi.

China Keeps Tweaking (In a Good Way) – China continues making bold moves as it recalibrates its economic, social, and political approach. Late last week, the People’s Bank of China removed the cap on deposit rates (and cut interest rates for the sixth time since November) toward liberalizing its financial system. And, this week, the state ended a 36-year limit on reproduction (one baby limit) as last year, for the first time in two decades, the working-age population shrank while the older demographic is expected to grow rapidly. Additionally, China is strategically positioning to grow the future population of consumers as they shift from being a more investment-based to more consumer-based economy. As President Xi Jinping puts it, he wants to build a “moderately prosperous society” with an economy powered by services, consumers and innovation. That means accepting a “new normal” of slower expansion, which many fear but really shouldn’t (around 6% growth for the coming year or two is just fine).

The U.S. Economy – Steady as She Goes – The Bureau of Economic Analysis released preliminary U.S. GDP numbers for Q3 showing that it increased at an annual rate of 1.5%. Of course, we know this number is likely to change in the coming weeks, so investors should not really fret a downward revision too much just like you shouldn’t over-cheer an upward revision. In my view, positive is positive and there is typically seasonal weakness in the third quarter so any momentum is good momentum. According to the report, positive contributions from personal consumption expenditures (PCE), state and local government spending, nonresidential fixed investment, exports and residential fixed investment were partly offset by negative contributions from private inventory investment. In this sense, though, the cyclicality of inventory changes in effect masks resilient domestic demand.


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