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Sunday May 1, 2016



Apple Earnings Fall For First Time in Decade

Apple, Inc. (AAPL) released its quarterly earnings report on Tuesday, April 26. The technology giant reported a decline in revenue for the first time in over a decade.

The company reported revenue of $50.56 billion, down from $58.01 billion during the same quarter last year. Analysts had expected revenue of nearly $52 billion.

"Our team executed extremely well in the face of strong macroeconomic headwinds," said Apple CEO Tim Cook. "We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices."

Net income for the quarter was $10.52 billion, or $1.90 per share. This is down from $14.57 billion, or $2.33 per share, during the prior year.

Apple has grown tremendously since it introduced the iPod in 2001. By introducing new products such as the iPhone and iPad in 2007 and 2010, respectively, Apple was able to produce consistent quarterly growth each year since 2003. The dip in sales is largely attributed to a slowing market for iPhones, which some believe are running out of room for innovation. Apple's latest iPhone, the SE, is a throwback to the size and shape of its earlier 5s model. Sales numbers for the SE weren't included in Tuesday's report, so it remains to be seen whether this latest offering will help put the company back on track.

Apple, Inc. (AAPL) shares ended the week at $93.74, down 10% for the week.

Twitter's Earnings Disappoint

Twitter, Inc. (TWTR) released its quarterly earnings on Tuesday, April 26. The company reported earnings weaker than analysts expected.

The company reported revenue of $595 million. This is up 36% from $436 million during the same period last year.

"I want to make sure that Twitter is the place that you check first thing to start your day," said Twitter CEO Jack Dorsey in an interview with CNBC this week. "It will tell you exactly what's happening in the world, what's most important, what matters. And that's what we're driving towards, what we're focused on."

Twitter reported a loss of $79.7 million. This is roughly half of the $162.4 million loss reported in the same quarter last year.

The social media platform has been making incremental changes to its service lately in order to improve the user experience. Many users balked at rumors that the company would be rearranging timelines to show tweets out of chronological order. Twitter instead introduced a new feature that shows potentially interesting tweets first, followed by the traditional chronological timeline. Despite these innovations, the company continues its search for profitability.

Twitter, Inc. (TWTR) shares ended the week at $14.61, down 15% for the week.

AT&T's Revenue Climbs

AT&T Inc. (T) reported its quarterly earnings on Tuesday, April 26. The company reported strong revenues and earnings.

The telecommunications company reported revenue of $40.5 billion for the quarter. This was up 24% from the same quarter the previous year.

"It was a good start to the year. We had solid financial results and executed well on our strategy to be the premier integrated communications provider for businesses and consumers," said AT&T CEO Randall Stephenson. "We're seeing good momentum with our initial integrated wireless, video and broadband offers. And we'll expand the integrated choices for customers in the fourth quarter when we launch our new video streaming services."

AT&T reported net income of $3.8 billion, or $0.61 per share. During the same quarter last year, net income was $3.3 billion, or $0.63 per share.

AT&T, one of the world's leading communications companies, provides mobile phone service, high-speed internet and paid TV services. The company credits its 24% jump in revenue for the year to its mid-2015 acquisition of DIRECTV. The company hopes to expand its entertainment footprint with new video streaming services that it hopes will rival industry leaders Netflix and Hulu.

AT&T Inc. (T) shares ended the week at $38.83, up 2% for the week.

The Dow started the week of 4/25 at 17,991 and closed at 17,774 on 4/29. The S&P 500 started the week at 2,089 and closed at 2,065. The NASDAQ started the week at 4,891 and closed at 4,775.

Fed's Rate Hike Hesitation Sends Yields Lower

Yields rebounded slightly on Friday after reaching one-week lows on Thursday following the release of sluggish U.S. domestic growth data and dreary interest rate forecasts by investors. The news pushed investors toward safe-haven Treasury bonds, causing prices to increase and yields to fall.

Information released on Thursday indicated that the U.S. gross domestic product grew 0.5% in the first quarter, its slowest pace in two years and below economists' expected 0.7% growth. Growth was slowed by numerous forces, including slower consumer spending and a drop in capital spending due to the ongoing struggles in the oil and gas industry.

"The negatives of this drop in oil prices in terms of corporate earnings and capital investing is very much an upfront hit," said Steve Wood, chief market strategist for North America at Russell Investments. "But the benefits from spending, disposable income — it takes a longer time to roll out and to feel those benefits."

Wednesday's interest rate statement from the Fed contributed to the drop in yields as investors generally interpreted the statement to mean that the Fed will not be raising interest rates in June. U.S. central bank officials noted that "growth in economic activity appears to have slowed" and that "household spending has moderated."

"Fed officials, including Chair Janet Yellen, have expressed worries about a softening of economic growth so far this year, anemic and fragile global economic growth, a strong dollar and financial market volatility," said Chris Williamson, Chief Economist at Markit. "Unless there's a robust pick up in the data for May, Fed policymakers are likely to be looking at some gloomy economic trends at the June meeting, making a rate hike hard to justify."

On Friday, Treasury yields rose modestly as data released overseas indicated that the Eurozone gross domestic product grew beyond analysts' expectations in the first quarter. The news eased demands on U.S. bonds and helped yields rebound slightly as European investors sold off government bonds overnight.

The 10-year Treasury note yield finished the week of 4/25 at 1.82% while the 30-year Treasury note yield was 2.67%.

Interest Rates Rise

Freddie Mac released the latest Primary Mortgage Market Survey (PMMS) on Thursday, April 28, 2016. Mortgage interest rates crept upward this week as the spring home buying season enters full swing.

The 30-year fixed rate mortgage averaged 3.66% for the week. This is up from last week's average of 3.59% This time last year, the 30-year fixed rate mortgage averaged 3.68%.

The 15-year fixed rate mortgage averaged 2.89%. This represents decrease from last week when it averaged 2.85%. The 15-year fixed rate mortgage averaged 2.94% one year ago.

"Treasury yields marched higher this week," said Sean Becketti, Chief Economist at Freddie Mac. "As a result, the 30-year mortgage rate jumped 7 basis points to 3.66%. The Federal Reserve's decision to leave the Federal funds rate unchanged triggered a 9 basis point drop in the 10-year Treasury yield on Wednesday, however the drop occurred too late to impact this week's survey."

The money market fund finished the week of 4/25 at 0.3%. The 1-year CD finished at 0.5%.

Published April 29, 2016
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