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Stock Market News: Apple, Facebook Lead Earnings Charge

By Dan Caplinger - Oct 31, 2019 at 10:00AM

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Nervousness about trade pushed the broader market lower.

Thursday morning brought declines for the major benchmarks, with investors seeing trade-related fears return to the forefront. Chinese officials reportedly believe that it might be difficult to reach any kind of long-term agreement on trade with the U.S., reversing some of the apparent progress that many had thought the two nations were making. Just before 11 a.m. EDT, the Dow Jones Industrial Average (^DJI 0.00%) was down 231 points to 26,956. The S&P 500 (^GSPC -0.43%) fell 22 points to 3,025, and the Nasdaq Composite (^IXIC 0.00%) was lower by 49 points to 8,255.

Earnings reports from two of the largest and most influential companies in the tech industry helped to provide some optimism for the future. Apple (AAPL 0.03%) and Facebook (META -1.01%) both gave their shareholders good news, and although they face significant challenges, the companies believe they can find pathways to continued growth.

Apple looks strong heading into the holiday season

Shares of Apple were up more than 1% after the iPhone maker reported solid fiscal fourth-quarter financial results. Revenue climbed 2% from year-ago levels to $64 billion, setting a new sales record for this time of year. Earnings inched higher by 4% year over year, similarly setting a fiscal fourth-quarter record of $3.03 per share.

Seven iPhone 11 models in different colors.

Image source: Apple.

A closer look at the numbers shows mixed performance under the surface. Product sales were down 1.5% over the period, led by a 9% drop in the core iPhone business, and higher product costs weighed on margins. However, the increasingly important services segment saw top-line growth of 18%.

Apple executives emphasized two key points. CEO Tim Cook pointed to success in the services arena and wearable products like Apple Watch and the new noise-canceling AirPod Pro line, and iPad sales growth also accelerated. Meanwhile, CFO Luca Maestri concentrated on the company's shareholder-friendly moves, pointing to $18 billion in stock repurchase activity and $3.5 billion in dividend payments during the quarter.

Looking forward, shareholders were happy to see ambitious guidance from Apple for the holiday season. With suggestions that sales growth could accelerate in the fiscal first quarter of 2020, Apple investors have high hopes that the recent rally in the stock could continue.

Facebook puts on a happy face

Meanwhile, shares of Facebook picked up 2%. The social media giant's latest numbers for the third quarter revealed continued strength for the fast-growing company despite the ongoing controversy surrounding some of its practices.

Facebook kept seeing growth in nearly every aspect of its business. Daily active users climbed 9% year over year to 1.62 billion, and monthly active users picked up 8% to 2.45 billion. Revenue jumped 29%, and earnings of $2.12 per share were up 20% from year-ago levels. When you look beyond the core Facebook platform to include Instagram, WhatsApp, and Messenger, roughly 2.8 billion people worldwide use at least one of the company's services every month.

During the conference call, CEO Mark Zuckerberg talked about the many new products the company has launched recently. Facebook's new dating service has gotten off to a strong start, and the new Facebook News collaboration with publishers has exciting potential. Yet at the same time, Zuckerberg also pointed to efforts Facebook has taken to prevent political interference, responding to criticism from lawmakers as the 2020 U.S. presidential election approaches.

Facebook's results were a good reminder of the fundamental strength of the business. The social media giant and its CEO can expect continued grilling on Capitol Hill and ongoing criticism elsewhere for the foreseeable future, but so far, the company itself has remained solid.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Dan Caplinger owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Facebook. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple and recommends the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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Apple Inc. Stock Quote
Apple Inc.
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