Market Insights

The busiest part of earnings season has passed, and big technology stocks were winners again.

In particular, Apple (AAPL), Facebook (FB), Advanced Micro Devices (AMD) and Intel (INTC) all rallied on strong results. Big health-care names like Merck (MRK) and Amgen (AMGN), along with laggards like General Electric (GE) and Kraft Heinz (KHC) also surged.

AAPL’s quarter was all about new kinds of growth: wearable devices and services. iPhone volumes actually missed, but the market is starting to view the company as a provider of services like streaming content. (Did you know its Apple TV+ launches tomorrow?)

This is a potentially big deal because investors assign higher valuations to subscription-based services than to gadgets. That means that simply changing its business model can lift the share price, even if it doesn’t grow dramatically.

Regardless, AAPL’s earnings, revenue and guidance beat estimates. That’s pushing the stock toward record highs around $250.

The New Face of Facebook

Mark Zuckerberg’s social media giant didn’t break out, but it is rallying to a three-month high on strong results. The market’s opinion of FB is a less clear because most of its user growth is now in the rear-view mirror. Meanwhile’s still in the process of shifting advertisers and eyeballs to newer platforms like Stories and Instagram.

Chip makers AMD, INTC and NXP Semiconductors (NXPI) also pushed higher after beating estimates. Interestingly, INTC reported strong pricing and remains a major comeback story after struggling earlier in the year.

Other, lesser known technology stocks also exploded higher on strong results:

• Garmin (GRMN) exploded to new record highs after its aviation and fitness businesses offset continued weakness in auto navigation.
• Xerox’s (XRX) transformation from photocopies to digital services continued as earnings and revenue beat expectations.
• Spotify (SPOT) had its biggest gain ever, up 16 percent the day after surprising growth in premium subscriptions goosed profit. Monthly active users also spiked 30 percent, led by Southeast Asia and Latin America.

General Electric Surges

GE had its biggest rally of the decade after its results suggested a turnaround may be at hand. Again, the story was all about profitability and cash flow as management fixed core businesses. Revenue surpassed estimates as worst-case scenarios involving its Boeing 737 Max exposure fail to pan out.

KHC was another forgotten old stock — and former Dow Jones Industrial Average member — that blasted higher. The debt-laden food company, which entered the report down more than 30 percent on the year, showed some signs of product declines slowing.

Tupperware (TUP), another artifact of 20th-century consumerism wasn’t so lucky. Its weak quarter sent it into single digits for the first time since at least the mid-1990s.

Grubhub Gaps Lower

Food-delivery company Grubhub (GRUB) had its worst drop ever after competition from Uber (UBER) and Doordash ate away at its core business.

Anheuser Busch Inbev (BUD) fell the most this decade. The beer giant is suffering from a double-hit of weak demand and rising cost pressures.

Western Digital (WDC) also took a beating after predicting weak margins in the current quarter.

Two other former high-fliers in the technology sector also crashed:

• Twilio (TWLO) plunged more than 12 percent after the cloud-software stock missed forecasts and nudging its revenue projections downward.
• Etsy (ETSY) cratered 15 percent after its guidance raised worries about its growth story.

Finally, two major e-commerce stocks did little after their reports: Alphabet (GOOGL) and Amazon.com (AMZN). Both missed on earnings amid margin pressure, but beat on revenue.

Healthcare Feeling Better

Health care stocks have tried to turn around this month after facing a wave of negativity. The positive trend continued in the last week as Merck (MRK), Amgen (AMGN) and Pfizer (PFE) all beat estimates.

MRK rose the most as its Keytruda cancer drug continues to drive results ahead of estimates. AMGN advanced into record territory after growth of biosimilars offset weakness in its older products. PFE also raised guidance as strength in new products let management to raise guidance.

A pair of medical-device makers, Abiomed (ABMD) and Resmed (RMD), also rallied. RMD beat across the board, while ABMD bounced from longer-term lows on mixed numbers.

In conclusion, most earnings for big stocks in the last week either beat estimates or were indifferent. The largest and most-followed technology names like AAPL and FB outperformed, and health-care rebounded. Some older legacy names like GE and XRX also did better than feared.