The Rundown - Amazon Jumps After Reporting Record Profits, Apple Slips Despite 6% Sales Growth

Episode Date: November 1, 2024

Stock market update for November 1, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zaid Admani, and today is Friday, November 1st. In today's episode, we'll tell you about what spooked investors on Halloween yesterday and why it has to do with AI. We also dive into the latest jobs data and recap earnings from Apple, Amazon, and Intel. Then stick around to the end of the show to find out why the Dodgers winning the World Series might be good for your portfolio. All right, let's go.

Well, for anyone that was looking for a good scare on Halloween yesterday, you should have just opened up your stock app because it was a bloodbath. The S&P dropped by 1.9%. The NASDAQ lost 2.8%. Both of these indices having their worst days since early September. And this drop came at the worst time because the S&P had gone up for five straight months in a row. And as of yesterday, the S&P was green for October. But this massive sell-off wiped out all the gains from October, pushing the index in the red, the month snapping the monthly win streak. Okay, so what was the reason for the big market sell off yesterday? Well, it could be that investors are spooked by the big tech earnings that we got this week. All this heavy Kappex spending is impacting the bottom line. And it's possible that investors are trying to get a little impatient on when all this AI spending is going to pay

off. I feel like the markets keep flip-flopping on the AI story. One week, the markets are super hyped about AI and how it's going to change the economy and lead to all these efficiencies. And then they see how much it's costing to develop all this AI. And it's like, yeah. The doubt creeps in. It's like, is it all worth it? Is all this AI spending worth it? And beyond the big tech earnings and all the AI spending, the markets just might be having some pre-election jitters, you know? We're less than five days away from election day. And we just got some jobs data that might add to the market jitters. According to the latest jobs data from the Department of Labor, the U.S. economy added just 12,000 jobs in October. That is way under the

100,000 jobs that was expected. Now, the reason for this week jobs report could be because of the two hurricanes, the lean and Milton, that devastated. parts of the southeast. There's also a union strike happening at Boeing that is affecting the data as well. But yeah, man, this number is a bit of a shocker. It might just be a one-off bad jobs report, or it might be a sign of weakening in the labor market. I guess we'll have to wait for the next month's jobs report to find out. By the way, next week, beyond just the election, we also have a Fed meeting on Wednesday. Right now it's expected for Jerome Powell and the Fed to cut interest rates by 25 basis points. So pretty hectic times right now. Let's run through some headlines.

We should start with Apple, the most valuable company in the world. They reported earnings last night. And just like the other big tech giants, the numbers were pretty solid. Apple's overall revenues were up 6% to a record high of $94.9 billion. This is thanks to strong sales of the iPhone 16. And Tim Cook was quick to hype up the iPhone 16 sales, saying that sales for the 16 were stronger at launch and the sales for the 15 were at launch. So I guess that's encouraging. Interestingly enough, I don't think I heard Tim Cook or any executives talk about the Apple Vision Pro. So that must not be doing so good. The iPhone accounts for nearly half of Apple's

revenues bringing in more than $46 billion. But Apple continues to see a big jump in their services revenue. Services jump 12% to $25 billion. That's all the money that Apple makes from the App Store, the iCloud storage, which I bet is a lot. Apple TV Plus, which is probably a rounding error at this point. So I'd say overall, it was a decent quarter for Apple. I think some people are worried that the iPhone 16 sales might not be very strong because, you know, it's the same phone as last year besides the camera control button. And Apple's slow rollout of Apple intelligence might not give people a reason to upgrade. But that doesn't seem to be the case, though. And for the December quarter, Apple expects sales to grow in the low to mid single digits. Now, Apple did see a hit in their

net profit. This is because they had to pay the EU $10.2 billion in taxes after losing a court case. But even after paying that tax, Apple made $14.7 billion in profit. And they have over $156 billion in cash. But despite the strong earnings from Apple, it wasn't good enough to hype up investors, and Apple's shares are down around 2% in reaction to the earnings. Now, investors do seem to be hyped about Amazon's earnings. They reported earnings last night as well, and their stock is soaring. The company beat earnings estimates for the quarter reporting a revenue jump of 11%. And there was strong growth in their cloud division, which jumped 19%.

And I think what's making investors super hyped about Amazon is their improvement in their profit margins. The cloud division continues to be the profit engine of the company, making up 60% of the company's operating profit. Overall, operating income grew by 19% in the quarter, and margins are expected to reach over 10% this year, according to the current forecast. Compared that to last year when it was only 6%. AWS and the International Retail Division both posted record high operating margins, and the North American Retail Division reached their second highest profit margin in five years. And Amazon continues to make moves in the other business categories, including advancing their AI offerings for its cloud products and offering more advertising space with an Amazon Prime Video.

Amazon's advertising business grew by 19% in the last quarter. Now, I expect that number to keep growing. So if you're wondering why you're seeing more ads on Prime Video while you're watching Fallout or the new Lord of the Rings show, yeah, now you know why. And as for Amazon's investments in AI, their capital expenditure jumped by 81% last quarter to more than $22 billion. And just like the other big tech companies, Amazon is not slowing down. They plan to spend $75 billion in CapEx next year. Overall, though, investors were loving Amazon's earnings, and as a result, Amazon stock is up more than 6% today.

Let's talk about some stocks making moves today. Well, we got some good news for Intel investors. Finally, their shares are rising after the company beat earnings estimates and provided a pretty solid Q4 outlook. Now, the company still reported a 6% decline in revenue and reported a pretty significant loss. But hey, both those numbers were better than expected, and sometimes that's all that matters. The company is in the middle of a huge restructuring plan that includes spinning off its chip manufacturing

business. They're also cutting more than 16,000 jobs. They're selling real estate. They're doing a lot to turn the company around. According to the earnings report, the restructuring costs were around $2.8 billion in the quarter. You know, investors have not been very happy with Intel this year. The stock has lost more than half its value so far. So hopefully this turnaround plan can get them back on the right track. The restructuring plan is expected to be finished around this time next year. Intel shares are up more than 7% on this news. Now, on the flip side, shares of Trump media are dropping this morning because, yeah, I'm sure it has to do with the presidential election coming up. I mean, this stock has been insanely volatile over the last few weeks. The stock was rallying for most of October up more than 300% from its September lows, but is now dropped by more than 30% over the last few days.

So yeah, I think this has turned into a full-on meme stock related to the election. Shares are down more than 2% this morning, and I can't imagine what's going to happen to this stock next week. Let's wrap the show with a fun fact. Congratulations to the Los Angeles Dodgers for beating the Yankees in the World Series this week. And this was a pretty big series for the TV network. The series attracted around 16 million viewers across the five games, which is the best viewership numbers for the World Series since 2017, when my hometown Houston Astros beat the Dodgers.

By the way, this could be a positive sign for our stock portfolios. Because the S&P 500 has had a pretty great year following the years that the Dodgers win the World Series. Like the Dodgers won the World Series back in 2020, the S&P was up 28% in 2021. Before that, the Dodgers won the World Series in 1988. The S&P jumped 31% in 1989. And then the Dodgers won the World Series in 1981. The S&P was up 21% in 1982.

I know the whole saying about past performance, future results, but maybe this means that 2025 will be a big year for the S&P. And if you're a Yankee fan, well, at least now you know that, hey, maybe you might be partially responsible for a big stock market rally next year. Like, what would you rather have? The S&P 500 go up 20% next year? or win the World Series. Well, all right, guys, that's the rundown for today.

That's the rundown for this week. We made it to the end of the week. A lot of drama this week. Got consumed a lot of caffeine. Still getting the final tally on that. And next week might be just as crazy. So if you guys want to stay in the loop of how the markets are reacting

to the election, to the Fed meeting, and the ton more earnings. Make sure you guys are subscribed to the podcast and tune into the rundown every day. And if you guys enjoyed the show, consider giving us a five-star rating on Apple and Spotify. We're also on YouTube now, so check us out there.

leave a comment on Spotify, leave a comment on YouTube, vote in the Spotify polls. All that engagement really does help us out. Thank you guys so much for listening. Shout out to Mike and Connor for all the help behind the scenes. Have a great weekend, everybody, and we'll see you guys back here on Monday. This is the rundown, your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests.

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