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Friday October 31, 2014



Apple Reports Record iPhone Sales

Apple, Inc. (AAPL) announced its fourth quarter results on Monday, October 28. The company had a strong quarter bolstered by a 26% growth in iPhone sales.

Apple reported quarterly revenue of $37.5 billion and quarterly net profit of $7.5 billion. While Apple's revenue was slightly higher compared to the same period last year, net profit was lower than the $8.2 billion reported last year.

The company announced it sold 33.8 million iPhones, the most it has ever sold during the fourth quarter. The company sold 26.9 million iPhones during the same period last year. Apple also reported it sold 14.1 million iPads during the quarter compared to 14 million during the comparable period last year.

Tim Cook, Apple's CEO, had this to say about the quarterly results, "We're pleased to report a strong finish to an amazing year with record fourth quarter revenue, including sales of almost 34 million iPhones. We're excited to go into the holidays with our new iPhone 5c and iPhone 5s, iOS 7, the new iPad mini with Retina Display and the incredibly thin and light iPad Air, new MacBook Pros, the radical new Mac Pro, OS X Mavericks and the next generation iWork and iLife apps for OS X and iOS."

Apple's stock has fallen this year amid investor concerns that the company's product innovation is stagnant. Many analysts complain that the company is simply improving existing products instead of innovating new ones, like it did with the original iPhone and iPad. Recently, the company announced the newest incarnation of the popular iPad, the iPad Air. Reviews of the iPad Air indicate that while the product is not revolutionary, it does represent a significant improvement to an already great product.

Apple, Inc. (AAPL) shares ended the week at $520.03.

Despite Success, Facebook Is Losing Teens

Facebook, Inc. (FB) reported its third quarter results on Wednesday, October 30. The company reported significant revenue and net income gains compared to the same quarter last year.

Facebook reported revenue of $2.02 billion for the quarter, higher than analysts' estimate of $1.91 billion. This represented a 60% increase over the $1.26 billion reported during the comparable period last year.

The company's third quarter net income was $621 million, double the $311 million reported during the same period last year. On average, analysts had expected net income to be around $470 million.

Facebook CEO Mark Zuckerberg said this about the results, "For nearly ten years, Facebook has been on a mission to connect the world. The strong results we achieved this quarter show that we're prepared for the next phase of our company, as we work to bring the next five billion people online and into the knowledge economy."

Although Facebook exhibited a hugely successful quarter, the stock price has fluctuated up and down since the news. After the results, the stock price rose to $57.98 before falling down to $48.44. On Thursday, October 31, the stock price fluctuated between $41.50 and $51.40. This fluctuation was the result of a statement by Facebook Finance Chief David Ebersman that younger teenagers decreased their daily use of the site during the quarter. This raised concerns that the site could be beginning to see the signs of slower growth, or perhaps even decline, in its user base as younger teens look for other ways to satisfy their social media itch.

Facebook (FB) shares ended the week at $49.75.

3D Systems Revises Earnings Forecast

3D Systems Corp. (DDD), the largest maker of 3D printers, announced its third quarter results on Tuesday, October 29. Although the company had a better-than-expected quarter, it slashed its earnings forecast for the rest of the year.

3D Systems reported revenue of $135.7 million for the quarter. The company's 50% increase in revenue compared to the same period last year beat estimates that revenue would be $132 million.

The company reported net income during the quarter of $17.7 million, or $0.17 per share, better than the $13.5 million, or $0.16 per share, reported during the same period last year. However, analysts had estimated net income would be higher this quarter at $0.26 per share.

Avi Reichental, 3D Systems' President and CEO, said, "We are very pleased to report another record revenue quarter on unprecedented printer units demand that more than tripled last year's unit sales. Stronger materials sales, increased advanced manufacturing activities and meaningful consumer products revenue contribution fueled our growth."

3D Systems' strong quarter was somewhat overshadowed by the company's announcement that it was cutting its earnings forecast for 2013 as it increases spending on research and development and marketing. The company actually increased its revenue forecast from $500 million to $530 million, however. 3D Systems' share price is up 60% for the year, though, especially after the company entered into a retail agreement with retailer Staples in May.

3D Systems, Inc. (DDD) shares ended the week at $63.01.

The Dow started the week of 10/28 at 15,569 and closed at 15,616 on 11/1. The S&P 500 started the week at 1,759 and closed at 1,762. The NASDAQ started the week at 3,956 and closed at 3,922.

Treasury Yields Rise on Economic Reports

Treasury yields rose on Friday, November 1 after a barometer of U.S. manufacturing revealed expansion happened at a faster pace than expected. Statements from Fed policy makers indicate they are gaining confidence in the strength of the U.S. economy, perhaps spelling the eventual slowdown of quantitative easing.

The Institute for Supply Management revealed on Friday that its factory index for October rose to 56.4, the highest since April 2011, signaling expansion in the manufacturing sector. The reading for September was 56.2 and economists had expected October's reading to be 55.

Yields also rose on Thursday, October 31, when a key business barometer, the MNI Chicago Report, rose to 65.9 in October, much higher than the 55.7 reported in September. This reading indicated the fastest business expansion since March 2011.

Since October 25, yields on the benchmark 10-year note have climbed nine basis points, although it had dropped 18 basis points during the prior two weeks. As of early Friday, November 1, the yield on the 10-year note had climbed four basis points to 2.60%.

Earlier in the day on November 1, Fed Bank of St. Louis President James Bullard said the strengthening labor market could soon lead to a tapering of the Fed's bond purchasing program. "Two key labor market indicators have shown clear improvement over the last year: Unemployment and nonfarm payroll employment," said Bullard. "This provides the most powerful part of the case for tapering."

Bullard's comments followed Fed policy makers announcement on Wednesday, October 30, that the economy displayed signs of "underlying strength." As a result, experts are beginning to forecast that the tapering of bond purchases will begin in March of next year. For that to happen, however, the Fed will need to continue to see the U.S. economy show signs of "underlying strength," if not more.

The 10-year Treasury note yield finished the week of 10/28 at 2.62% while the 30-year Treasury note yield finished the week at 3.70%.

Interest Rates Continue Descent

Freddie Mac released the results of its weekly Primary Mortgage Market Survey (PMMS) on Thursday, October 31. The results showed that mortgage rates continue to decline as the housing market shows signs of slowing down.

The 15-year fixed rate mortgage averaged 3.20% this week, down from last week's average of 3.24%. Last year at this time, the 15-year fixed rate mortgage averaged 2.70%.

The 30-year fixed rate mortgage averaged 4.10% this week. This represents a decrease from last week when it averaged 4.13%. One year ago at this time, the 30-year fixed rate mortgage averaged 3.39%.

Frank Nothaft, Vice President and Chief Economist at Freddie Mac, commented on this week's rates, "Fixed mortgage rates eased further leading up to the Federal Reserve's (Fed) October 30th monetary policy announcement. The Fed saw improvement in economic activity and labor market conditions since it began its asset purchase program, but noted the recovery in the housing market slowed somewhat in recent months and unemployment remains elevated. As a result, there was no policy change which should help sustain low mortgage rates in the near future."

The money market fund finished the week of 10/28 at 0.4%. The 1-year CD finished at 0.7%.

Published November 1, 2013

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