Online brokerage stocks could be signaling trouble ahead for broader market, economy

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A sell-off in online brokerage stocks such as Charles Schwab and TD Ameritrade could be signaling trouble is ahead for the market and the economy. At the very least, they are indicating the Federal Reserve could be set to pause its interest rate increases, given the industry’s sensitivity to the central bank’s moves.

“They are early movers when it comes to a bear market or a recession,” said Richard Repetto, an analyst at Sandler O’Neill, in an interview.

“E-broker stocks generally price in Fed rate changes about 18 months in advance,” he added.

Charles Schwab shares are down 27 percent in the last six months, while TD Ameritrade and E*TRADE stocks are off by 18 percent and 31 percent respectively. Online broker stocks have dropped by 9 percent on average in December so far, compared to the 4 percent selloff in S&P 500.

If their moves are any guide to the direction of of the fed funds rate, they are predicting fewer rate hikes in the coming year, according to Repetto, who showed the correlation in a research note to clients. Since the Fed would reverse course in an economic slowdown, the group could be signaling more than just a pause in rate hikes.

Online brokers’ stock performance responds to rate changes because brokers usually profit directly form higher interest rates.

“Now all these guys have banks or bank-like structures. They earn a spread on the cash people leave on their account. When the fed funds rate goes up by 25 basis points, they only pay clients an extra 10 basis points and earn incrementally the extra 15 basis points,” Repetto explained.

Additionally, the margin loan rate investors pay to borrow from the brokerage also generally go up in line with the rising interest rates, he said.

To be sure, although markets have slashed their expectations following the stock market turmoil over the past two months, they are still foreseeing a 78 percent chance of a hike next week and a 38 percent probability of a rate increase in 2019, according to the CME’s tracker.

[“source=forbes]

Cloud stocks Okta and Cloudera surge on better-than-expected quarterly results

Todd McKinnon

Anjali Sundaram | CNBC
Todd McKinnon

Cloud stocks continue to be a bright spot on the Nasdaq as two more surged on earnings beats.

Okta shares spiked 10.4 percent on Thursday after the cloud software company reported a narrower loss than analysts’ expected and raised its revenue guidance for the year. Cloudera, a machine learning and analytics platform for the cloud, finished the day up 12.3 percent after reporting a 25 percent revenue increase compared to last year, at $118.2 million.

Okta’s stock ended the day at $66.95, bringing its gains for the year to 161 percent. Since going public in April 2017, Okta has been one of the best performers among a growing number of cloud-based software providers that are almost all outperforming the broader market. Cloudera, on the other hand, is still down more than 21 percent for the year.

Okta’s earnings report follows better-than-expected results last week from cloud companies Salesforce and Workday. Okta, which sells identity management software, also said it was cash flow positive for the first time.

Okta lost 4 cents per share in the quarter, excluding some items, compared to the 11-cent average analyst estimate, according to Refinitiv. Revenue climbed 58 percent to $105.6 million, also topping estimates and the company’s own guidance.

For the full year of fiscal 2019, Okta said it now expects revenue of $391 million to $392 million, an increase over its prior expectation for sales for $372 million to $375 million.

[“source=cnbc”]

Cloud stocks Okta and Cloudera surge on better-than-expected quarterly results

Todd McKinnon

Anjali Sundaram | CNBC
Todd McKinnon

Cloud stocks continue to be a bright spot on the Nasdaq as two more surged on earnings beats.

Okta shares spiked 10.4 percent on Thursday after the cloud software company reported a narrower loss than analysts’ expected and raised its revenue guidance for the year. Cloudera, a machine learning and analytics platform for the cloud, finished the day up 12.3 percent after reporting a 25 percent revenue increase compared to last year, at $118.2 million.

Okta’s stock ended the day at $66.95, bringing its gains for the year to 161 percent. Since going public in April 2017, Okta has been one of the best performers among a growing number of cloud-based software providers that are almost all outperforming the broader market. Cloudera, on the other hand, is still down more than 21 percent for the year.

Okta’s earnings report follows better-than-expected results last week from cloud companies Salesforce and Workday. Okta, which sells identity management software, also said it was cash flow positive for the first time.

Okta lost 4 cents per share in the quarter, excluding some items, compared to the 11-cent average analyst estimate, according to Refinitiv. Revenue climbed 58 percent to $105.6 million, also topping estimates and the company’s own guidance.

For the full year of fiscal 2019, Okta said it now expects revenue of $391 million to $392 million, an increase over its prior expectation for sales for $372 million to $375 million.

[“source=cnbc”]

Utility stocks soar to highest levels in a year

Elon Musk, CEO of Tesla

Beck Diefenbach | Reuters
Elon Musk, CEO of Tesla

CFRA just raised its price forecast on Tesla to $420 a share — the same as the now-infamous price target CEO Elon Musk told investors they would get if he tookthe company private earlier this year.

The electric car market is about to get more competitive in 2019, but CFRA analyst Garrett Nelson said he expects Tesla to roll out lower-priced versions of the Model 3 that will undercut rivals and limit any impact on sales. He also said the car’s cost should fall as Tesla becomes more efficient. Nelson reiterated a buy rating on the stock and raised the price target from his previous forecast of $375 a share.

Shares of Tesla were trading around $361 a share Tuesday afternoon.

Tesla did not respond to a request for comment.

[“source=cnbc”]

Utility stocks soar to highest levels in a year as investors rush to safe havens

Elon Musk, CEO of Tesla

Beck Diefenbach | Reuters
Elon Musk, CEO of Tesla

CFRA just raised its price forecast on Tesla to $420 a share — the same as the now-infamous price target CEO Elon Musk told investors they would get if he tookthe company private earlier this year.

The electric car market is about to get more competitive in 2019, but CFRA analyst Garrett Nelson said he expects Tesla to roll out lower-priced versions of the Model 3 that will undercut rivals and limit any impact on sales. He also said the car’s cost should fall as Tesla becomes more efficient. Nelson reiterated a buy rating on the stock and raised the price target from his previous forecast of $375 a share.

Shares of Tesla were trading around $361 a share Tuesday afternoon.

Tesla did not respond to a request for comment.

[“source=cnbc”]

The FAANG stocks shed $140 billion in Tuesday’s market rout

Jeff Bezos

April Greer | The Washington Post | Getty Images
Jeff Bezos

Tech stocks are back in correction territory after a painful day for public exchanges.

The tech-heavy Nasdaq Composite index fell nearly 4 percent, with tech stocks like Apple, Amazon, Alphabet and Facebook weighing most heavily.

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In total, the so-called FAANG stocks — Facebook, Amazon, Apple, Netflix and Alphabet-owned Google — shed more than $140 billion in market value by the end of the trading Tuesday.

Here’s how it shook out:

  • Facebook fell 2.2 percent, losing $7.6 billion in implied market value
  • Amazon fell 5.9 percent, losing $50.8 billion in implied market value
  • Apple fell 4.4 percent, losing $38.5 billion in implied market value
  • Netflix fell 5.2 percent, losing $6.5 billion in implied market value
  • Alphabet fell 4.8 percent, losing $37.5 billion in implied market value

The losses extend pain periods for Apple, which has seen downturn in recent weeks, and Facebook, which is suffering a down year on the heels of several scandals. Amazon and Netflix, though, are each up more than 40 percent year-to-date despite getting caught in the rout.

With Tuesday’s losses, Alphabet is hanging onto modest year-to-date gains, up just 0.8 percent in 2018.

[“source=cnbc”]