From Wall Street to Main Street
Highlights from the past week
Market / Macro Economic Summary Markets reversed the trend from last week and marched higher. All three indexes were higher as the tech-heavy Nasdaq led the way with a 1.5% gain while the S&P 500 notched a rise of 1.04% and the Dow Jones rose 0.77%. Although the monthly inflation reading for January came in slightly hotter than expected, most investors are questioning whether the inflation spike is real or a result of seasonal adjustments. Housing, auto insurance, and used cars accounted for 0.37% of the 0.45% increase, suggesting the rise may not be sustainable. Despite the report, Fed Chair Jerome Powel spoke in Washington and said while inflation remains slightly above the desire 2% target…it is low enough that it is preventing the central bank from feeling like they have to make imminent moves. Bond yields fell as provided the stock market with the opportunity to increase. One more point of emphasis for the week, 386 of the S&P 500 companies (77%) that have reported, 78% are beating estimates by an average of 5%. While President Trump might make headlines with tariffs, keep in mind the real story to the market is the fact that the underlying economy is strong and should continue to perform well. Company Specific / Micro Economic Summary McDonald’s (MCD) Shares rose 4% as the company reported a rather rough quarter. Revenue of $6.39 billion was short of the estimates of $6.48 billion. Earnings per share of $2.83 were also three cents shy of the Wall Street estimates. CEO Chris Kempczinski said the company is focused on customers with outstanding value, exciting menu innovations and culturally relevant marketing, Robinhood (HOOD) Shares rose 12% as the fintech name beat on the top and bottom-line. Earnings per share of $1.04 far exceeded the analyst estimates of $0.52 cents. Revenue of $1.01 billion also beat the forecasts of $952 million by 6.5%. CEO Vlad Tenev said he sees a huge opportunity towards enabling clients to buy, sell or hold any financial assets through Robinhood. Cisco Systems (CSCO) Shares rose 2% as the networking giant beat on the top and bottom lines. Earnings per share of $0.94 beat the Wall Street estimates of $0.91. Revenue of $14.0 billion also beat estimates of $13.9 billion. CEO Chuck Robbins said results were accelerated by strong customer demand for technology, network infrastructure and best-in -class AI security. He also highlighted mentioned the Splunk acquisition which continues to exceed expectations and remained accretive to Q2 earnings. Palo Alto Networks (PANW) Shares of the cyber security giant fell 2% as guidance was a bit light despite a strong quarter. Earnings per share of $0.81 came in three cents ahead of the calls of $0.78. Revenue of $2.26 billion was $200 million ahead of the Wall Street analyst estimates of $2.24 billion. CEO Nikesh Arora said growth across regions and demand for their platforms remains strong and he believes the company is on pace towards its goals of $15 billion annual recurring revenue in 2030. Moderna (MRNA) Stock rose 3.35% as the stock reported a mixed quarter. One thing I’d like to make note of here is that while I prefer top and bottom line beat quarters, if I were to tolerate a mixed quarter, I prefer my company beat on the revenue line and miss on the earnings per share. My reasoning is simple, revenue cannot be manipulated…sales are sales. Earnings per share however, a CEO could direct to delay some payments, accelerate collections or “work” the earnings per share to reach a desired outcome. Moderna beat expectations on the top line, as revenue came in at $966 million despite Wall Street looking for $941 million. On the earnings per share though, a loss of $2.91 was wider than the expected loss of $2.71. CEO Stephan Bancel said the company filed three new patents in biologics and reduced company wide expenses by 27% as compared to 2023. He also mentioned the firm is driving to 10 new product approvals by 2027, aim to reduce costs by another $1 billion and expect several FDA approvals this year. Parting Thoughts We welcome an opportunity to discuss the above detail and wish you much success in the rest of your week! Regards, Erick J. Palacios, MBA Wealth/Fiduciary Advisor