Tesla's big margin drop is primarily the result of price cuts made this year as the EV maker tries to defend its marketshare against growing competition. The company says it's also out of necessity as demand falls and the economy slows, hinting that more price cuts could lie ahead.
Tesla's results are weighing on other automakers too, with some analysts concerned about a potential "price war" as well as overall car demand. AT&T, American Express, Goldman Sachs, and Netflix are among some of the other earnings misses this week.
Bears point out that the worse-than-expected results are up against already very low expectations and may not bode well for what's still to come. Bears have been warning for months that analyst estimates were way too optimistic. Bulls have argued that cost cutting measures implemented by many companies will boost margins and help defend profits. Bulls also believe a greater economic setback or even a recession for the US economy will go a long ways toward reducing inflation, increasing labor force productivity, and turn the Fed more dovish, all major reasons to be optimistic about the future of the stock market.
As we've all learned from past trading history, the stock market always bottoms well before the US economy hits its lows. Keep in mind, it's still early in the reporting season with the bulk of Q1 results set for release over the next three weeks, so there's still a lot to learn.
While there have been several earnings beats this week, It feels like they've been outnumbered by some of the larger disappointments, several of which have been large market cap stocks.
Some of the biggest, however, report next week so investors are nervous about the potential for increased volatility and even violent swings if companies deliver way outside of expectations.
Tech giants are the big highlight next week with results out for Alphabet and Microsoft on Tuesday; Meta on Wednesday; and Amazon on Thursday. Apple doesn't report until May 4.
Other key earnings include Coca-Cola on Monday; 3M, ADM, Biogen, Chipotle, Danaher, Dow, General Electric, General Motors, McDonald's, PepsiCo, Raytheon, Spotify, UPS, Verizon, and Visa on Tuesday; Boeing, CME Group, eBay, Edwards Lifesciences, O'Reilly Automotive, and Thermo Fisher Scientific on Wednesday; Amgen, AstraZeneca, Bristol Myers Squibb, Caterpillar, Eli Lilly, Gilead Sciences, Honeywel, Intel, Mastercard, Merck, TMobile, and Valero on Thursday; and Chevron, ColgatePalmolive, and Exxon Mobil on Friday.
Economic data next week could also fuel volatility, particularly the PCE Prices Index on Friday, which is one of the Federal Reserve's favorite inflation gauges.
Other key data includes Consumer Confidence and New Home Sales on Tuesday; Durable Goods, and advance reads on International Trade and Business Inventories on Wednesday; the first estimate of Q1 2023 GDP and Pending Home Sales on Thursday; and Consumer Sentiment on Friday.
Diesel Declines to 15-Month Low: The price of wholesale diesel dropped to its lowest level in 15 months on Thursday, continuing a steep slide that began last fall. Front month futures on ultra-low sulphur diesel delivered into New York Harbor declined 2.46% to close at $2.4949 a gallon, their lowest settlement value since Jan. 10 of last year. Diesel has declined in six successive sessions, its most sustained slide since November and one in which the trucking fuel has lost 7.7% of its value. Diesel's downturn began last autumn and continued through the winter as unseasonably warm weather suppressed demand for heating oil, which is fungible with diesel. More recently, a number of factors have weighed on diesel prices including robust exports from Russia despite Western sanctions, new refining capacity, and signs of deteriorating demand. The wholesale price of diesel is now less than half of the 52-week high of $5.1354 which it hit on April 28 of last year. Source WSJ
Top Earners Collecting Unemployment Benefits Have Surged +500% in Last Year: About 113,800 adults in households with annual incomes of at least $200,000 reported receiving unemployment insurance benefits in the last seven days, according to the Census Bureau’s latest Household Pulse Survey, conducted between March 29 and April 10. That’s up from about 18,100 a year ago. The increase may reflect the wave of layoffs that has gripped white-collar sectors like tech and finance in recent months. Since June 1, about 351,000 adults in high-income households applied for unemployment insurance, and 72% received them. That compares with a 54% rate for the broader population. The rate was higher for college graduates as well, at 64%, versus 51% for those without four-year degrees. Source Bloomberg
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Water Theft Proves Lucrative in a Dangerously Dry World: Water theft on a monumental scale has decimated national park lagoons in Spain and threatened to bankrupt farmers in Chile. Illegal water theft even ensnared a former mayor in Brazil. In California, now coming out of a years-long drought, data don’t begin to capture a glaring water theft dilemma: the illegal cannabis industry — widely estimated at $8 billion — that stubbornly persists despite voters approving recreational use in 2016. As far as blatant theft to support the underground industry — such as trucking in stolen water, taking from fire hydrants and digging illegal wells — the estimates are staggering. “We are talking millions and millions of gallons taken annually by these unlawful operations,” said John Nores, retired lieutenant and former team leader of the California Department of Fish and Wildlife Marijuana Enforcement Team. The crisis is starting to lead to action in some countries, although efforts have been mostly small-scale. Source Bloomberg
Why SpaceX Starship Explosion Was Not a Failure: SpaceX’s giant new rocket exploded minutes after blasting off on its first test flight Thursday and crashed into the Gulf of Mexico. Elon Musk’s company was aiming to send the biggest and most powerful rocket ever built on a round-the-world trip from the southern tip of Texas, near the Mexican border. The nearly 400-foot (120-meter) Starship carried no people or satellites. SpaceX later said multiple engines were not firing as the rocket ascended, causing it to lose altitude and begin to tumble. The rocket was intentionally destroyed by its self-destruct system, exploding and plummeting into the water. But the employees gathered at SpaceX headquarters in Hawthorne, California to watch the launch let out a massive cheer at Starship's demise, celebrating the gains made on its first-ever liftoff. The giant vehicle reached a maximum altitude of about 24 miles (39 kilometers), according to the data on SpaceX's launch webcast. "To get this far is amazing," SpaceX's Kate Tice said during the webcast. "Everything after clearing the tower was icing on the cake." SpaceX wasn't expecting everything to work out; new rockets often fail on their first test flight. Rather, today was all about gathering data and responding properly to whatever ended up happening, company representatives stressed. Source Space.com
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