Stock Market Rally Pauses Amid Stalled Stimulus; Apple iPhone, Amazon Prime Day In Focus, Fastly, Vertex Plunge – Investor's Business Daily

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The stock market rally had big gains Monday, led by megacap techs such as Apple (AAPL) and Amazon.com (AMZN). The following day Apple unveiled its 5G iPhone while the Amazon Prime Day began. Fastly (FSLY) crashed on a revenue warning, while Vertex Pharmaceuticals (VRTX) plunged after ending development on a new drug. Disney (DIS) is reorganizing to focus on streaming. JPMorgan (JPM) beat EPS views amid mixed results for major banks. UnitedHealth (UNH), Taiwan Semiconductor (TSM) and ASML (ASML) topped estimates. Tesla (TSLA) cut the Model S price twice in one week.

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Stocks Jump, Then Pause

The stock market rally extended its recent run with strong gains Monday for big-cap techs such Apple (AAPL), Amazon (AMZN) and Microsoft (MSFT). The indexes then fell for a few days, but were all slightly for the week. Several leading stocks, mimicking the major indexes, may be forming handles on their consolidations. Fastly (FSLY) dived on its warning, but other hot software stocks held up.

Apple Debuts 5G iPhones

Apple (AAPL) introduced its highly anticipated iPhone 12 series. In addition to ultrafast 5G wireless connectivity, the 14th-generation iPhones have improved cameras, speedier processors and a new design. The handsets have display sizes of 5.4, 6.1 and 6.7 inches and starting prices ranging from $699 to $1,099. Two models will be available starting Oct. 23 and the other two will come out on Nov. 13. Apple also introduced the $99 HomePod Mini smart speaker. The cheaper music speaker will give the company a better competitive footing against market leaders Amazon.com (AMZN) and Google (GOOGL).

Fastly Dives After Warning

Fastly (FSLY) crashed after warning that Q3 revenue would miss guidance amid lower-than-expected data traffic from its largest customer, social media platform TikTok. Fastly said it expects revenue in a range of $70 million to $71 million versus earlier forecasts of $73.5 million to $75.5 million. President Trump has threatened to ban TikTok in the U.S. because of national security issues. A federal judge recently granted TikTok’s Chinese parent ByteDance a temporary injunction on app download bans. The U.S. government has given preliminary approval to a deal struck by Oracle (ORCL) and Walmart (WMT) that would let the U.S. companies stake in the mobile video app.


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Coronavirus Setbacks, Progress

After months mostly good news in the race for Covid-19 treatments and vaccines, Johnson & Johnson (JNJ) paused its vaccine trials when a participant became seriously ill, while Eli Lilly (LLY) paused trials for its antibody treatment when U.S. regulators had safety concerns. A WHO study said antiviral remdesivir, from Gilead Sciences (GILD), didn’t reduce mortality among coronavirus patients. Gilead questioned the study. But Pfizer (PFE) said its coronavirus vaccine candidate could have preliminary final-stage trial data by the end of this month. Pfizer and partner BioNTech (BNTX) could file for emergency FDA approval by late November. And a vaccine candidate from Sanofi (SNY) and Translate Bio (TBIO) prepared for first human trials after getting positive results in mice and nonhuman primates. And Moderna (MRNA) said European regulators accepted its application for possible fast-track emergency approval of its vaccine candidate.

Chip Firms’ Outlook Disappoints

Semiconductor equipment maker ASML (ASML) and chip foundry Taiwan Semiconductor Manufacturing (TSM) Netherlands-based ASML earned the equivalent of $2.97 a share, up 80% year over year, on sales of $4.63 billion, up 40%, in the September quarter. Taiwan Semiconductor earnings jumped 45% on sales of $12.14 billion, up 28%. ASML guided in line, Taiwan Semi guided up for Q4 revenue. Both stocks fell.


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Amazon Prime Day

Amazon (AMZN) wrapped up its annual Prime Day sales extravaganza, which ran Oct. 13-14. The company does not release sales figures for Prime Day but has been consistent in saying it tops all other big shopping events, such as Black Friday, in terms of its sales. Estimates for Prime Day sales ranged from $7.5 billion to $9.9 billion, with the midpoint believed to be a 40% gain from last year’s summertime Prime Day. This year’s delayed Amazon Prime Day event served as a quasi-Black Friday, with many other retailers also pushing big sales.

Tesla Cuts Model S Price

Tesla lowered the price of its flagship Model S sedan twice in one week. The electric car leader first made a 4% cut to $71,990 on Tuesday, followed with a 3.5% cut to $69,420 on Thursday. Tesla’s second price cut came after electric vehicle startup Lucid Motors set the base price of the upcoming Lucid Air at a competitive $69,900, after tax credits. Tesla’s seeing more luxury-auto makers enter the growing market for electric vehicles, especially in Europe. Also on Tuesday, Tesla reduced by 3% the Model S price in China, where it had previously cut the starting price of its smaller, mass-market Model 3 sedan. Several China EV companies, such as Nio (NIO), have emerged this year as a credible threat to Tesla’s dominance there. Meanwhile, Tesla also announced extended ranges for its Fremont-made Model 3 and Model Y cars.

China EV Sales Jump

Electric cars vastly outpaced sales of traditional vehicles in China last month. Sales of so-called new energy vehicles (NEVs) vaulted 68% in September, rising for a third straight month. Overall auto sales rose 13%, growing for a sixth straight month as the Chinese market continues to come off coronavirus lows. Tesla (TSLA) ranked third, behind a General Motors (GM) joint venture and BYD (BYDFF), in September NEV sales. Domestic EV upstarts Nio (NIO), Li Auto (LI) and Xpeng Motors (XPEV) also reported strong September and Q3 sales. Tesla sales have plateaued in recent months, lagging production. In Q3, General Motors grew China sales 12%, lagging Ford’s 25% gain but marking GM’s first quarterly gain in that country in two years.

Nio stock soared to record highs on a JPMorgan price target hike.

Shipping Companies

Kansas City Southern (KSU) reported a 1% EPS increase to $1.96, beating views for $1.88. Revenue fell 12% to $659.6 million, worse than expected, driven by lower volumes. The railroad operator cited the coronavirus pandemic and unfavorable foreign currency impact. Trucking frim JB Hunt (JBHT) earnings fell 16%, missing, while revenue grew 5% to $2.47 billion.

Disney Focuses On Streaming

Disney (DIS) is prioritizing its streaming business amid Covid-19 pressure on its traditional operations. Under the new structure, Disney will focus on developing and producing original content for its streaming services and legacy platforms. Content distribution and commercialization will be centralized into a single, global media and entertainment group. The new group will be headed by Kareem Daniel, formerly president of consumer products, games and publishing. The move comes as a result of the company’s recent success with direct-to-consumer releases on Disney+. It also comes with movie theaters closed or doing scant business, while theme parks are closed or running with limited capacity.

Trading Boost Banks’ Q3

JPMorgan Chase (JPM), Citigroup (C), Goldman Sachs (GS) and Morgan Stanley (MS) reported third-quarter financials that beat expectations, while Bank of America (BAC) and Wells Fargo (WFC) reported mixed results. As markets churned, trading results rose. But the coronavirus pandemic weighed on areas like loan growth and credit-card spending and kept interest rates near zero. And JPMorgan executives said while they were seeing more encouraging signs in the economy, a well-crafted stimulus package would help more, and cautioned that customers’ debt troubles could mount in the months ahead.

UnitedHealth Earnings Beat

EPS fell 9.5% vs. a year earlier as members began using medical care again, as UnitedHealth Group (UNH) blew past Q3 earnings and sales estimates. The health insurer gave somewhat conservative guidance, citing a potential increase in costs due to deferred care. Further attrition of commercial insured members is expected, but UnitedHealth touted strong growth in Medicare Advantage. UnitedHealth stock fell below a buy point on earnings, but soon rebounded.

Big Losses For Delta, United Airlines

Delta Air Lines (DAL) and United Airlines (UAL) reported deeper-than-expected losses for the third quarter. But they found ways to burn less cash after the coronavirus pandemic thrust it into what United called “the worst financial crisis in aviation history.” Delta said it could take “two years or more” before sales returned to normal. United suggested business travel — a big profit driver — might not get there until 2024.

Vertex Pharmaceuticals Drug Fails

The biotech late Wednesday announced it would stop testing a drug designed to treat protein deficiencies, halting a Phase 2 trial for safety concerns and not meeting goals. It was testing its VX-814 to treat AAT deficiency, or alpha-1 antitrypsin. With AAT, the liver doesn’t produce enough of a protein needed to protect the lungs. Vertex Pharmaceuticals (VRTX) plunged. Arrowhead Pharmaceuticals (ARWR), which is developing similar treatments, jumped.

Intuitive Surgical Beats, Doesn’t Guide

The robotic-surgery device maker reported Q3 earnings and sales that fell vs. a year earlier but handily beat Wall Street expectations. However, for the second straight quarter, Intuitive Surgical (ISRG) declined to provide full-year guidance, citing coronavirus uncertainties. Q3 da Vinci procedures rose 7% from the year-earlier quarter, the company said, but da Vinci shipments declined 29%. Shares fell Friday.

Boeing 737 Max gets Europe’s OK

The Boeing 737 Max got approval from Europe’s aviation regulator, clearing the way for possible flights before year-end. That could be a boon to sales, though air travel remains depressed. Boeing (BA) received no new orders in September, the fifth month in 2020 that it hasn’t received.

News In Brief

Twilio (TWLO) agreed to buy Segment for $3.2 billion in stock. The deal moves Twilio into customer relationship management software vs. Salesforce.com (CRM) and Adobe (ADBE).

Walgreens (WBA) earnings fell 29% vs. a year earlier, but beating views. Revenue rose just over 2% to $34.75 billion, slightly above views for the Dow Jones

China-based educational firm New Oriental (EDU) topped fiscal Q1 analyst estimates by 14 cents but EPS fell 20% to $1.15. Revenue slipped 8% to $986.4 million. EDU stock fell.

Johnson & Johnson (JNJ) reported Q3 adjusted EPS and sales that topped analyst views and hiked full-year targets, mostly on the Q3 beat.

InMode (INMD), a maker of cosmetic-treatment technology, forecast third-quarter results that blew past expectations and hiked its sales outlook for the year. The results and forecast come as clinics begin to reopen and bring back elective surgeries with them.

Charles Schwab (SCHW) reported a 27% EPS decline to 51 cents, beating views for 47 cents. Revenue fell 10% to $2.45 billion. Results did not include the TD Ameritrade acquisition, completed in October.

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