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Saturday February 6, 2016



Apple Reports Quarterly Earnings

Apple, Inc. (AAPL) reported its full-year and quarterly results on Tuesday, January 26. The report revealed record revenue and net income for the tech giant.

Apple reported quarterly revenue of $75.9 billion. This was a 1% increase from revenue of $74.6 billion during the same period last year.

"Our team delivered Apple's biggest quarter ever, thanks to the world's most innovative products and all-time record sales of iPhone, Apple Watch and Apple TV," said Tim Cook, Apple's CEO. "The growth of our Services business accelerated during the quarter to produce record results, and our installed base recently crossed a major milestone of one billion active devices."

Apple also announced record net income for the quarter of $18.4 billion. Last year at this time the company's reported net income was $18.0 billion.

While Apple boasted its record earnings, critics focused on the expected decrease in iPhone sales. On Tuesday, Apple reported the slowest year-over-year growth ever for its leading device. Since the iPhone accounts for two-thirds of Apple's total revenue, this news caused concern among many investors. However, with iPhone 7's expected release later this year, analysts remain hopeful Apple's stock will bounce back.

Apple, Inc. (AAPL) shares ended the week at $97.34, down 4% for the week.

Facebook Earnings Surpass Expectations

Facebook, Inc. (FB) announced its full-year and fourth quarter results on Wednesday, January 28. The company beat estimates as the number of users and ad revenue continue to rise.

Facebook reported full-year revenue of $17.93 billion, an increase of 44% from last year. Facebook's quarterly revenue was $5.84 billion, up 52% from the year-earlier period and beating the consensus estimate of $5.37 billion.

"2015 was a great year for Facebook. Our community continued to grow and our business is thriving," said Mark Zuckerberg, Facebook founder and CEO. "We continue to invest in better serving our community, building our business, and connecting the world."

Facebook reported net income of $3.69 billion for the full year and $1.56 billion for the quarter. Both figures were up compared to the same period last year.

Facebook's soaring revenue report was in large part due to its growth in mobile advertising. Today, mobile advertising makes up 80% of Facebook's advertising revenue. Mobile advertising alone produced $4.51 billion in revenue for the quarter, again exceeding analysts expectations.

Facebook, Inc. (FB) shares ended the week at $112.21 up 12% for the week.

Ford's Earnings Accelerate

Ford Motor Company (F) announced its full-year and quarterly results on Thursday, January 28. The company's results exceeded expectations.

Ford reported full-year revenue of $149.6 billion, surpassing last year's annual revenue by $5.5 billion. The company's quarterly revenue was $40.3 billion—$4.4 billion higher than in the year-earlier period.

"We promised a breakthrough year in 2015, and we delivered," said Mark Fields, Ford President and CEO. "In 2016, we will continue to build on our strengths and accelerate our pace of progress even further."

Ford reported that full-year and quarterly net income were $7.4 billion and $1.9 billion, respectively. The company announced fourth-quarter earnings per share of 58 cents, 28 cents higher than the same quarter last year.

Ford's quarterly earnings were mostly derived from the North America market where vehicle sales have been fueled by falling gasoline prices. Ford's popular F-Series pickup truck rose in sales by 15% in December. The F-Series has held the title of best selling truck in the United States for 39 years.

Ford Motor Company (F) shares ended the week at $11.94, down 3% for the week.

The Dow started the week of 1/25 at 16,086 and closed at 16,466 on 1/29. The S&P 500 started the week at 1,906 and closed at 1,940. The NASDAQ started the week at 4,575 and closed at 4,614.

Treasury Yields Hit Nine-Month Low

Despite gains earlier in the week, Treasury yields began to fall midweek and hit a nine-month low on Thursday, January 29 when the 10-year note fell 4.9 basis points. Japan's introduction of negative rates, a weakening U.S. economy and a dismal report of December's durable goods orders contributed to the decline.

The Bank of Japan's surprise move to adopt a negative interest rate policy pushed up the prices of Treasuries and caused interest rates to fall. Analysts are calling Japan's move "a bold one" as Japan attempts to spur its economy and get inflation moving towards its target of 2%.

"The big news overnight was Japan going to negative rates, which quickly gave a bid to Treasuries and for that matter all of fixed income in general," said Justin Lederer, a Treasury strategist at Cantor Fitzgerald in New York. Stocks jumped worldwide as a result of Japan's shocking move.

Weak data regarding the state of the U.S. economy did not ease the pressure on yields. The U.S. gross domestic product expanded 0.7% in the fourth quarter, comparatively slower than the 2% growth in the third quarter.

Additionally, dreary durable goods data for December released on Thursday increased the demand for bonds. The December data revealed the biggest drop in 16 months for orders of U.S. manufactured goods.

"We are responding to the weaker capital shipments within the durable goods report ... it really puts downward pressure on tomorrow's GDP estimates," said Ian Lyngen, a senior government bond strategist at CRT Capital in Stamford, Connecticut.

The 10-year Treasury note yield finished the week of 1/25 at 1.93% while the 30-year Treasury note yield was 2.76%.

Interest Rates Continue to Drop

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, January 28. The report showed interest rates falling for the fourth straight week.

The 30-year fixed rate mortgage averaged 3.79% this week. This represents a decrease from last week when it averaged 3.81%. Last year at this time, the 30-year fixed rate mortgage averaged 3.66%.

This week, the 15-year fixed rate mortgage averaged 3.07%. This was down from last week when it averaged 3.10%. The 15-year fixed rate mortgage averaged 2.98% one year ago.

"The recent market turmoil has given the Fed pause; as was universally expected, the Fed stood pat this week but kept its options open for a rate increase in March," said Sean Becketti, Chief Economist at Freddie Mac. "This week's housing releases confirmed the momentum of home sales going into 2016. A hesitant Fed, sub-4% mortgage rates (at least for a little while longer), and strong housing fundamentals should generate 3% increase in home sales this year."

The money market fund finished the week of 1/25 at 0.3%. The 1-year CD finished at 0.5%.

Published January 29, 2016
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