Key points to remember:
- Financial data dominates earnings picture again, but the sun appears to be shining on solar power
- Semiconductors Trying to Bring Chips Despite Declining Supply Chain
- How Semiconductors Influence Much of the Economy
The big financial companies always monopolize the news of the results. Bank of America (BAC), Wells Fargo (WFC), Morgan Stanley (MS), Citigroup (C) and US Bancorp (USB) all exceeded expectations for both earnings and revenue. The financial sector benefited from the rise in interest rates. Despite the 10-year Treasury yield (TNX) trading slightly lower before the open, rates may continue to rise as the Fed moves closer to cut.
Wells Fargo, Morgan Stanley and Bank of America also announced that they are releasing reserved cash that had been set aside for pandemic-related defaults. These actions suggest a vote of confidence that the United States is returning to normal. The positive gesture helps to push stocks higher before they open and close. Volatility index (VIX) The AKA Fear Index fell 8% before the open.
A few healthcare stocks were also reported Thursday morning. Despite the fallout around the COVID-19 delta wave, UnitedHealth (UNH) was trading up 2.74% ahead of the opening in reaction to the company reporting better-than-expected earnings and earnings. In addition, UnitedHealth has raised its forecast.
Walgreens Boots (WBA) also beat EPS and revenue expectations, causing a pre-market rally of 1.35%. Pharmacies sales increased 8.1% in its US operations and 11.4% in its UK operations. In addition to drugstore sales, the company increased its retail sales by 8.9% in the United States and 15% in the United Kingdom.
With the global supply chain suffering from congestion, the shortage of microchips has been a major bottleneck. Therefore, Taiwan Semiconductor (TSM) profits are also attracting attention. The company reported higher than expected profits despite lower than expected revenues. The stock was trading over 3.8% higher in pre-market trading. Taiwan Semi increased its gross margin from 51% to 53% following strong demand to keep CFO Wendell Huang’s plans high.
The global supply chain has been one of the causes of the rise in inflation. The Producer Price Index (PPI) measures inflation at the wholesale level. However, the PPI has been lower than expected, meaning that inflation at this level is not rising as fast as analysts had expected.
Gold Futures (/ GC) climbed nearly 2% on Wednesday in reaction to the Consumer Price Index (CPI) measuring the growth of consumer inflation in line with projections. Precious metals like gold are often seen as a hedge against inflation, but gold has been on a downtrend since August 2020. On Thursday, traders appeared to continue Wednesday’s rally. Gold insects may look for more signs of inflation in today’s crude oil inventories. Crude oil (/ CL) was trading more than 1.25% higher before the open.
Rising energy prices appear to be helping solar stocks. This week, SolarEdge (SEDG), SunRun (RUN), SunPower (SPWR) and Daqo (DQ) all rose 15%, 13%, 17% and 15% respectively after Wednesday’s close. In the past, these companies have also benefited from green legislation. With the debt ceiling pushed back to December, some investors may be looking for President Biden’s infrastructure bill to finally gain momentum.
Some light has also been shed on what Fed members think. The minutes of the FOMC meeting were released on Wednesday afternoon and confirmed what most already suspected: that the Fed could start cutting back as early as November. The discussion focused on the current pace of purchasing securities. The plan appears to reduce the amount of purchases of $ 15 billion per month of treasury bills and mortgage-backed securities.
Chips and dip
Earlier, I explained how Taiwan Semi predicts higher demand in the future due to the semiconductor shortage. The shortage has hurt many industries including electronics, computers, phones, cars and more. Semiconductors can be divided into microprocessors, memory chips, basic integrated circuits, and complex circuits. Although consumers are used to buying the finished products, they may not be familiar with the various companies involved in making these chips.
So what are these chipmakers? They include Intel (INTC), Taiwan Semiconductor (TSM), Qualcomm (QCOM), Broadcom (AVGO), Micron (MU) and Texas Instruments (TXN). Some of these companies offer more than one type of semiconductor, while others may specialize. When these companies cannot deliver, it can hurt other companies. Recently, Apple (APPL) lowered its iPhone 13 production forecast because its semiconductor suppliers Skyworks (SWKS) and Qurvo (QRVO) were unable to meet demand due to pandemic issues.
Some companies are tangential to the production of semiconductors but help bring them to market. For example, ASE Technology (ASX) performs the testing, assembly and packaging of semiconductors.
Sox on the south side: While my Chicago White Sox have reached a division title to be eliminated in the first round of the playoffs, the SOX or PHLX Semiconductor index seems to be finding support near the 3160 level. times on this level, what my Chartist friends tell me suggests that there is a demand for the industrial group.
Because SOX has moved well with its sector and with the S&P 500 (SPX) since May, the question is: “Can the group break up?” The answer to this question lies in the group’s ability to meet the high demand.
Participation: Cellphone semiconductor maker Qualcomm (QCOM) has seen its board of directors approve a $ 10 billion share buyback plan. A share buyback plan, or share buyback plan, is when a company uses its cash to buy its own shares in the open market. The buyback plan usually defines how much will be spent and over what period. Qualcomm’s plan begins immediately with no expiration date.
Share buybacks are popular. In the past month, some companies like Keurig Dr Pepper (KDP), Dollar Tree (DLTR), Lockheed Martin (LMT), Accenture (ACN), Cracker Barrel (CBRL), Microsoft (MSFT) and Campbell Soup (CPB) have redemptions announced.
Chips or wafers: There are several materials that are used to make semiconductor chips, but the one that is commonly associated with semiconductors is silicon carbide. Indeed, it is used to create silicon wafers which are then used in semiconductor circuits. Higher demand for wafers means higher demand for silicon. Major silicon miners include US Silica (SLCA), Ferroglobe (GSM), and US Steel (X). Once the silicon is harvested, it goes to wafer makers like Applied Materials (AMAT).
By plotting the division of labor, we can see that the demand for one product can influence the demand for other products.
TD Ameritrade® commentary for educational purposes only. SIPC member.