Marketbites: Tesla Earnings Disappoint
Portfolio Manager Commentary:
Stocks dropped Thursday as investors reacted to mixed results in corporate earnings, including subpar earnings from Tesla. Investors also assessed fresh data that signaled a contracting economy.
The mounting concern over downward pressure on profit margins hurt Tesla shares after the company cut prices on some cars during the recent quarter. The company also posted more than a 20% decline in net income from a year ago after the bell Wednesday. Shares fell about 10%.
Other technology stocks also performed poorly. Nvidia, Microsoft, Meta Platforms, and Apple all finished lower. Seagate Technology shares fell more than 9% after missing estimates and issuing disappointing guidance, citing weak demand. Energy marked another area of market weakness as oil prices declined 2%. Some laggards included APA, Marathon Oil, and Phillips 66.
So far this earnings season, about 16% of companies in the S&P 500 have reported results, with about 76% beating EPS expectations, according to FactSet data as of Thursday. Many on Wall Street this season are bracing for an earnings decline. A general lack of profit forecasts, however, has begun to concern some investors.
Chart of the Day:
Wall Street banks had hoped that deal making would rev back up in early 2023, but so far it hasn’t. Morgan Stanley's investment banking revenue fell, as it did at JPMorgan Chase, Goldman Sachs, and other large banks. Trading revenue also slipped at most of the banks, including Morgan Stanley, though by a smaller amount than the decline in investment banking. Morgan Stanley's investment banking revenue fell 24% year-over-year, compared with declines of 19% at JPMorgan and 26% at Goldman.
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