Dow dropped 107, decliners over advancers about 2-1 & NAZ was off 64. The MLP index pulled back 1+ to the 223s & the REIT index retreated 4+ to the 369s. Junk bond funds hardly budged & Treasuries were purchased which lowered yields (more below). Oil gave back another 2+ to 77 on recession fears & gold added 6 to 2014.
AMJ (Alerian MLP Index tracking fund)
Shares in electric vehicle maker Tesla (TSLA) dropped after the
company reported Q1 earnings after the bell. Here are the
results. EPS was 85¢ adj vs 85¢ expected & revenue was $23.3B vs $23.2B expected. GAAP EPS was came in at 73¢, down 23% from the year-ago qtr. TSLA specified that “underutilization of new
factories” stressed margins, along with higher raw material, commodity,
logistics & warranty costs, & lower revenue from environmental
credits, all contributing to the drop in earnings from last year. Automotive
revenue, TSLA's core segment, reached $19.9B in the qtr,
up 18% from last year. Total revenue was up 24%. Revenue from automotive
regulatory credits during Q1 amounted to
$521M, down from $679M Q1 last year. CEO Elon Musk emphasized an “uncertain” marcoeconomic
environment that could impact people's car shopping plans. During a
question-&-answer period, Musk said that he expected 12 months
of “stormy weather” in the economy. He cautioned that, “Every time that
the Fed raises interest rates, that’s the equivalent to an increase in
the price of a car.” He also said, whenever there’s uncertainty in the
economy, people will generally postpone “big new capital purchases like a
new car.” He added, “We’ve taken a view that pushing for higher
volumes and a larger fleet is the right choice here, versus a lower
volume and higher margin,” but noted he expects TSLA vehicles “over
time will be able to generate significant profit through autonomy.” In 2023, Tesla expects to produce 1.8M vehicles, Musk
reiterated, or possibly an “upside” volume of 2M vehicles this
year. In early Apr, TSLA reported vehicle deliveries of
422K vehicles in Q1, the closest approximation of
sales disclosed by the company. Production was slightly higher than
deliveries in Q1 at 441K vehicles. The stock sank 15+ (9%).
If you would like to learn more about TSLA, click on this link:
club.ino.com/trend/analysis/stock/TSLA_aid=CD3289&a_bid=6aeoso5b6f7
Tesla net income and earnings drop more than 20% from last year
Treasury yields fell sharply as a new round of poor economic data pointed to a contracting economy. The yield on the 10-year Treasury note dropped 7 basis points to 3.534% & the 2-year Treasury yield, the most sensitive to the Federal Reserve's monetary policy, was last trading at around 4.166% after falling by more than 9 basis points. Yields & prices move in opposite directions & one basis point is equivalent to 0.01%. Yields declined sharply as a new round of economic reports signaled a potentially greater-than-expected economic slowdown. The Philadelphia Fed manufacturing index released today showed a much larger contraction than forecast this month, while jobless claims rose over the previous week (245K, up from 240K). Elsewhere, investors contemplated what could be next for Fed interest rate policy. Most are expecting the central bank to announce another 25 basis-point interest rate hike after its next 2-day meeting winds up on May 3. The Fed indicated at its last meeting in Mar that a pause in rate increases could be on the horizon, depending on the pace of economic data. Since then, the latest consumer & producer price index reports in the US have indicated that inflation is easing while remaining far above the Fed’s 2% target. Globally, however, the picture has been less clear, with the UK's latest inflation reading, yesterday, remaining stubbornly high.
2-year Treasury yield tumbles as economic data points to contracting economy
The Labor Dept reported initial unemployment claims for last week rose by 5K to 245K. That is above the 2019 pre-pandemic average of 218K claims. Continuing claims, filed by Americans who are consecutively receiving unemployment benefits, also rose to 1.86M, an increase of 61K from the previous week. The labor market has remained historically tight over the past year, but there are growing signs of a slowdown. The economy added just 236K jobs in Mar, the lowest monthly gain since Dec 2020. A separate report released earlier this month showed there were about 9.9M job openings in Feb, the first time since May 2021 that the number of available jobs dipped below 10M. There has also been a wave of notable layoffs over the past few months & the list grows longer by the day. Central bank officials have made it clear that they expect unemployment to climb as a result of higher rates, which could force consumers & businesses to pull back on spending. Job losses are "very likely," Fed Chair Jerome Powell told lawmakers in Mar. Projections from the central bank's Mar meeting show that officials expect unemployment to rise to 4.6% by the end of next year, up from the current rate of 3.5%. That could mean more than 1M Americans lose their jobs between now & the end of 2023.
Jobless claims rise higher than expected as layoffs continue to mount
Powell's comments that pain will result from higher interest rates are haunting the stock market. Pain is another word for recession. Of course, the earnings report from TSLA (above) only makes matters worse.
Dow Jones Industrials
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