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Friday July 19, 2019



Apple Reaches $1 Trillion in Market Capitalization

Apple Inc. (AAPL) released its third quarter earnings on Tuesday, July 31. The tech giant beat expectations for both sales and profits on its way to record-setting market value.

Apple reported revenue of $53.3 billion for the quarter. This is up 17% from $45.4 billion in revenue during the same quarter last year.

"We're thrilled to report Apple's best June quarter ever, and our fourth consecutive quarter of double-digit revenue growth," said Apple's CEO, Tim Cook. "Our Q3 results were driven by continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline."

Net income for the quarter came in at $11.5 billion, or $2.34 per share. At this time last year, the company reported net income of $8.7 billion, or $1.67 per share.

On Thursday, Apple became the first company to reach $1 trillion in market capitalization as shares rose nearly 9% between Tuesday's earnings report and Thursday's closing bell. The company sold 41.3 million iPhones during the third quarter, an increase of 1% from the prior year's quarter. Revenue from iPhone sales was up 20% from the prior year, reflecting increased unit pricing for the latest iPhone models.

Apple Inc. (AAPL) shares ended the week at $207.99, up 8.4% for the week.

Cheesecake Factory's Earnings Miss Expectations

The Cheesecake Factory Incorporated (CAKE) released its latest quarterly earnings report on Tuesday, July 31. The company's revenue beat expectations for the quarter while profits were hampered by insurance costs and legal fees.

The restaurant chain reported $593.2 million in revenue for the second quarter, up from $569.9 million during the same time last year. This beat analysts' expected $589.9 million in revenue.

"Comparable sales at The Cheesecake Factory and core restaurant operating performance were in line with our expectations during the second quarter," said Cheesecake Factory Chairman and CEO David Overton. "However, $4.6 million in higher medical insurance costs year-over-year and $4.5 million in increased legal expenses impacted our bottom line results this quarter."

The Cheesecake Factory reported quarterly net income of $28.4 million, or $0.61 per share. This was down from $38.2 million, or $0.78 per share at this time last year and fell short of analysts' expectation of $0.81 per share.

The Calabasas, California-based company's stock fell 13% on Wednesday following the earnings release. In addition to increased medical insurance fees and legal costs, the company cited increased labor costs as a factor for its lower-than-expected profits for the quarter. Despite its disappointing earnings, the company posted a 1.4% increase in comparable restaurant sales during the second quarter.

The Cheesecake Factory Incorporated (CAKE) shares ended the week at $49.69, down 16.3% for the week.

Square Releases Earnings Report

Square, Inc. (SQ) reported its latest quarterly earnings on Wednesday, August 1. The digital payment company reported increased revenue for the quarter.

The company reported total net revenue of $814.9 million for the quarter. This is up from $551.5 million in net revenue during the same quarter last year.

"In the second quarter of 2018, we accelerated revenue growth for the fifth consecutive quarter," said Square CEO Jack Dorsey and CFO Sarah Friar in a letter to shareholders. "Total net revenue was $815 million, up 48% year over year, and Adjusted Revenue was $385 million, up 60% year over year."

Square posted a net loss of $5.9 million in the third quarter. This is an improvement over the $16.0 million net loss the company reported in the same quarter last year.

Square's shares fell 1.3% following Wednesday's earnings release. The company, known for its mobile device-compatible credit card reader, adjusted its full-year guidance upward. Square expects total revenue for 2018 between $3.19 billion and $3.22 billion. Even with the recent skid, shares of Square are up nearly 160% over the last 12 months.

Square, Inc. (SQ) shares ended the week at $68.35, down 2.4% for the week.

The Dow started the week of 7/30 at 25,439 and closed at 25,463 on 8/3. The S&P 500 started the week at 2,819 and closed at 2,840. The NASDAQ started the week at 7,735 and closed at 7,812.


Treasury Yields Dip on Slow Job Growth

Treasury yields fell on Friday in response to the latest U.S. jobs report. The decrease reversed Thursday's rise following the Federal Reserve's decision not to raise interest rates.

The U.S. Department of Labor released its monthly jobs report on Friday, August 3. Nonfarm payrolls rose by 157,000 in July, falling short of the 190,000 new jobs analysts predicted. Unemployment ticked downward from 4% to 3.9% for the month.

"The headline number might have missed targets, but remember May and June were revised higher," said Ryan Detrick of LPL Financial. "We continue to see steady payroll growth, while inflation remains contained. That is a nice combination for continued equity gains."

The benchmark 10-year Treasury note fell to 2.55% during trading on Friday after reaching a high of 3.01% on Thursday. Likewise, the 30-year Treasury bond dipped to 3.10% on Friday after peaking at 3.14% the previous day.

Yields were buoyed mid-week by the results of the latest meeting of the Federal Open Market Committee (FOMC), which ended on Wednesday. The FOMC voted to maintain the federal-funds rate at its current range of 1.75% to 2% while indicating that it remains on track to raise rates again in the near future.

"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability," said the FOMC in its post-meeting press release. "The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions and inflation near the Committee's symmetric 2% objective over the medium term."

The 10-year Treasury note yield closed at 2.95% on 8/3, while the 30-year Treasury bond yield was 3.09%.


Mortgage Rates Rise

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, August 2. The report showed rising interest rates for the week.

The 30-year fixed rate mortgage averaged 4.60%, up from last week's average of 4.54%. At this time last year, the 30-year fixed rate mortgage averaged 3.93%.

This week the 15-year fixed rate mortgage averaged 4.08%, up from 4.02% last week. During the same time last year, the 15-year fixed rate mortgage averaged 3.18%.

"The higher rate environment, coupled with the ongoing lack of affordable inventory, has led to a drag on existing-home sales in the last few months," said Sam Khater, Chief Economist at Freddie Mac. "Yesterday, the Federal Reserve passed on raising short-term rates, but with the embers of a strong economy potentially stoking higher inflation, borrowing costs will likely modestly rise in coming months."

Based on published national averages, the money market account closed at 1.16% on 8/3. The 1-year CD finished at 2.44%.

Published August 3, 2018

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