Wednesday,
October 28, 2020

Market recap

Dow Jones

27463.19

-222.19 (-0.80%)

S&P 500

3390.68

-10.29 (-0.30%)

Nasdaq

11431.35

72.41 (0.64%)

Las Vegas Sands

$48.29

-$0.84 (-1.71%)

Caterpillar

$157.91

-$5.29 (-3.24%)

3M

$161.03

-$5.13 (-3.09%)

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Bitcoin Prices Driven Higher by Private Companies and Central Banks

A Brief History of Bitcoin

Bitcoin prices have climbed by about 25% in October and by over 80% this year. The price of the cryptocurrency has not been this high in almost three years. Both central banks and private companies have shown interest in digital currencies recently, which has contributed to the bitcoin price surge. On Tuesday, Bitcoin climbed by about 4% to reach $13,690.

Bitcoin, the largest digital token by market value, was created in 2009. The currency traded for almost nothing at first. Bitcoin then hit an all-time high in late-2017, trading for $20,000 per coin. Shortly after hitting this peak, Bitcoin prices tumbled to $7,000 in April 2018 and then below $3,500 in November 2018. Now, the price of the cryptocurrency is on the rise again.

Interest in Cryptocurrency from Private Companies

Last week, PayPal (PYPL) announced plans to allow users to store, buy, and sell various cryptocurrencies on the platform and on mobile payment app Venmo, which is owned by PayPal. PayPal shares climbed 5.5% on the news.

Square (SQ), a PayPal competitor founded by Jack Dorsey, has been accepting some transfers of Bitcoin for the past three years. Bitcoin-related transactions have recently become much more popular on the platform. Square has seen a 600% surge in Bitcoin related revenue during the pandemic.

Fidelity Investments also created its first Bitcoin fund, which will be available to family offices, registered investment advisers, and other institutions. The minimum investment will be $100,000. Large, established companies like PayPal, Square, and Fidelity becoming involved with Bitcoin are giving the cryptocurrency more legitimacy.

Central Banks Discuss the Future of Cryptocurrency

A number of central banks around the world have also expressed interest in creating digital currencies. The European Central Bank announced that it will begin exploring the possibilities for a digital euro.

Jerome Powell, Chairman of the Federal Reserve, discussed the potential benefits of a digital US dollar while speaking at an IMF event recently. The People’s Bank of China is already testing a digital version of the yuan.

Bitcoin has had a volatile trading history and its price will likely continue to see ups and downs, but recent developments in both the private and public sector have some investors buzzing about what lies ahead for the cryptocurrency.

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Las Vegas Sands Explores a Sale of its Flagship Properties

Early Discussions of a Sale

Las Vegas Sands Corp. (LVS), the world’s largest casino company, is in early discussions about the possibility of selling its Las Vegas properties. The company, owned by 87-year-old billionaire Sheldon Adelson, is working with an adviser to gauge interest in Venetian Resort Las Vegas, the Palazzo, and the Sands Expo Convention Center, which are all located along the famous Las Vegas Strip.

Together the properties could sell for $6 billion or more. Las Vegas Sands has a market value of $37.5 billion, but the company reported third-quarter losses of $565 million last week as COVID-19 continues to batter the casino industry.

Focusing on Singapore and Macau

If Sands were to sell its casinos in Las Vegas, the company’s casino portfolio would be concentrated in Macau and Singapore. US casinos are already a small part of the company’s business, generating only 15% of Sands’ $13.7 billion in revenue last year.

Macau, the world’s largest gambling hub, accounted for 63% of Sands’ revenue, and Singapore generated 22%. Sands is looking to grow its presence in both Macau and Singapore, and has plans to invest $2.2 billion just in Macau. The Las Vegas sale would give the company the funds it needs to expand in Asia.

The Impact of COVID-19

Casino companies around the world are reeling from the impact of the casino closures, travel restrictions, and consumers feeling uncomfortable returning to gambling in-person. Las Vegas Sands President and COO Rob Goldstein said , ”We're in a world of hurt here in terms of Las Vegas," describing how the city has gone from a global gambling hub to mainly a “drive-in” destination.

In Macau, gambling revenue has also fallen sharply. During China’s Golden Week holiday in early October, traffic at the gambling hub was down 84% compared to last year. However, Las Vegas Sands’ leadership is more optimistic about recovery in Macau than in Las Vegas, one of several reasons why the company is exploring a sale of its Las Vegas properties.

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Earnings Reports: Caterpillar, 3M, and Microsoft

Caterpillar Consumers Appear Reluctant to Make Large Purchases

Earnings season continues and investors are eagerly parsing through reports to see how companies and industries performed during the summer and early fall.

The heavy machinery maker, Caterpillar (CAT) handed in its report card on Tuesday. Revenue for the company’s three main global segments fell. Construction machinery sales declined by 23%, mining equipment revenue dropped by 21%, and energy and transportation product revenue sank by 24%.

Most of Caterpillar’s products are big-ticket items sold to businesses rather than to individual consumers. The COVID-19 pandemic has impacted many industries that rely on Caterpillar’s equipment, and it seems that companies are wary of making large investments during such an uncertain time. Caterpillar’s earnings report contrasts with those of companies that sell construction supplies directly to consumers. The DIY home improvement boom has given companies like Home Depot (HD) a boost.

3M Ramps Up N95 Mask Production

Meanwhile, 3M (MMM), the conglomerate specializing in worker safety, healthcare, and consumer goods, beat expectations with its latest report. The Minnesota-based company posted a profit of $1.41 billion—which was lower than its $1.58 billion profit during the same period last year, but higher than analysts predictions.

3M reported weak sales of office supplies and equipment used for non-emergency medical procedures such as teeth cleaning systems. However, sales of face masks rose by $235 million compared to levels a year ago. 3M has sold 1.4 billion N95 masks so far in 2020 and expects to sell 2 billion by the end of the year. By the beginning of 2021, the company will have more than tripled its N95 production capabilities.

Microsoft Beats Expectations as Remote Work Continues

Microsoft (MSFT) reported its fiscal first quarter earnings after the bell yesterday. The company’s revenue clocked in at $37.2 billion, which handily beat analysts’ expectations of $35.76 billion. Although the tech giant’s sales climbed 12% on an annualized basis, this was down slightly from 13% growth during the previous quarter. Revenue from Microsoft’s Azure public cloud rose 48%.

As many companies continue to work remotely, demand for Microsoft’s cloud services has stayed strong. Analysts expect this arm of Microsoft’s business to continue to see growth next quarter. Microsoft will also launch its newest Xbox Series X game console next month, which could give the company’s hardware sales and revenue a boost.

Not-So-Breaking News

  • Semiconductor designer Advanced Micro Devices (ADM) announced yesterday that it will acquire Xilinx (XLNX) for $35 billion in an all-stock transaction. This purchase will help AMD compete with Intel (INTC) in the data center chip sphere.
  • As COVID-19 continues to hamper traditional hotel businesses, Marriott (MAR) is launching three new packages called Day Pass, Stay Pass, and Play Pass. The three options give people the opportunity to work in select hotel locations for a day, stay over for a night, or go on a “staycation” with their families.
  • AMC Entertainment Holdings (AMC), the largest movie theater chain in the world, is planning to reopen eight theaters in California, a key market for the industry. AMC’s shares climbed 4.3% on the news. So far this year they have tumbled 62%.
  • American International Group (AIG), the insurance company, has named Peter Zaffino as its new CEO. AIG’s board also approved plans to spin off the company’s life and retirement units. The separation will likely take several years to complete.
  • Harley-Davidson (HOG) reported better-than-expected quarterly results which caused its shares to surge by more than 25%. The company has been working to streamline its operations recently. Earlier this year it slashed about 10% of its workforce and it is in the process of cutting 30% of its motorcycle models.
  • What is autopay? Here’s how to automatically pay your bills with autopay, along with some pros and cons.

Financial Planner Tip of the Day

“One great thing about automating your finances might be the chance to truly live the ‘pay yourself first’ principle. Whether through contributions directly into your 401(k) that never even make it to your checking account, or a $5-per-paycheck automatic transfer to your automated investing account, it’s unlikely you’ll have the chance to forget—or forgo—that deposit.”

Brian Walsh, CFP® at SoFi

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