Dow futures fell slightly after hours, along with S&P 500 futures and Nasdaq futures. Tesla (TSLA) fell strongly late Wednesday as earnings fell hard on deep price cuts, with gross margins lower and free cash flow much more than expected. CEO Elon Musk said he’s willing to see profits drop to zero in the short term.
X
L Research (LRCX) And Las Vegas Sands (LVS) Also on Wednesday evening, with LRCX slightly higher, LVS stock pointed to a breakout. Taiwan Semiconductor (TSM), Dr. Horton (DHI) and several financial releases early Thursday.
The stock market rally remained subdued on the surface Wednesday, with the major indexes’ tightness mixed. This is despite hardware technology stocks falling due to IT spending concerns in the meantime Netflix (NFLX) fell due to disappointing subscriber growth.
Megacap Technologies has held up well. apple (AAPL) rose 0.7% to 167.63, hitting an eight-month high. Apple shares cleared a narrow entry for three weeks at 166.94. Microsoft (MSFT) Added a few cents, still in the buy and parent area of Google the alphabet (Google) fell just below the purchase point. Amazon.com (AMZNIt rose nearly 2% to a two-month high, but it is still below the 200-day line. Meta platforms (meta) fell by 1%, but is still near 11-month highs.
META stock is running IBD Leaderboard and SwingTrader. MSFT stock is at IBD Long-Term Leaders. LRCX stock is located at IBD Big Cap 20.
Dow jones futures today
Dow futures fell 0.1% against fair value. S&P 500 futures were down 0.3% and Nasdaq 100 futures were down 0.35%. Tesla stock is a major component of the S&P 500 and Nasdaq 100.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Tesla earnings
Tesla’s earnings are down 21% year-over-year, in line with opinions. Revenue jumped 24% to $23.31, just short of FactSet’s $23.73 billion in views. That was sequentially lower than the $24.3 billion in the fourth quarter.
Substantial price cuts boosted demand, but at the expense of profits and profit margins.
Gross margins fell to 19.3%, compared to 23.8% in the fourth quarter and 29.1% a year earlier. Gross profit margins for automobiles, excluding regulatory approvals and lease contracts, fell to 18.3% from 23.8% in the fourth quarter.
Tesla said that 20% would be a “floor” for gross margins for cars excluding loans and leasing.
Free cash flow was down 80% year-over-year to $441 million versus expectations of $3.2 billion. Tesla had negative cash flow except for $467 million in auto regulation credits.
Continuous price cuts are likely to continue to put pressure on gross margins going forward.
Tesla cut prices in the United States for the second time this month late Tuesday. Prices for the Model Y have been reduced by $3,000, starting at $46,990. The base price of the Model 3 has been reduced by $2,000 to $39,990. Most Model 3 and Y variants qualify for $7,500 in tax credits, but starting April 18, the base Model 3 gets just $3,750.
Tesla also cut prices in Europe and some other major markets in April.
Elon Musk points to more fringe pain
On Tesla’s earnings call, CEO Elon Musk said he would emphasize an increase in production, which indicates more price cuts could be in the future. It’s better, he said, to ship a lot of cars at a lower margin now, perhaps even without a profit, and then take in higher margins when Tesla achieves a full sale lead. Musk said he expects Tesla to achieve full autonomy in 2023. He expects full autonomy for several years.
Musk also said that there will be a “delivery event” for the e-truck in the third quarter. It is not clear when mass production of the Cybertruck will begin.
Tesla bulls also have high hopes for the company’s energy storage business. Power generation and storage revenue jumped 148% to $1.53 billion in the first quarter.
Tesla stock
TSLA stock fell 6% in extended trade. Shares fell 2% to 180.59 on Wednesday, trading below the 50-day moving average. Tesla stock has 207.89 points long from a cup-handle base that formed just below the 200-day moving average. Investors may prefer to use a decisive break of the 200-day line, currently around 213, as the entry for TSLA stock. The third potential buy point for Tesla stock would be a strong move above the 50-day line.
other earnings
LRCX stock reversed slightly higher in late trading. Lam Research’s earnings beat financial views for the second quarter of the year, but the chip giant slipped in the third quarter. Shares fell 0.9 percent to 491.02 on Wednesday. LRCX stock has 548.95 Fixed-Based Buy points.
LVS stock rose strongly overnight above 62 after Las Vegas Sands earnings topped the number of views, kicking off results from Macau-focused casinos. Shares rose 2 cents to 59.36 on Wednesday. MarketSmith’s analysis shows that Las Vegas Sands stock has a 60.40 buy handle bottom cup.
TSM stock fell 1% to 87.23 on Wednesday, ahead of Thursday’s results. The big question is whether Taiwan Semi cuts its capital spending plans. TSM stock has a 99.09 buy point in consolidation with possible early entries, but it needs to clear the 50-day line.
DHI fell 0.3% to 101.86 on Wednesday but is still up about 4% for the week, settling in buy territory above 99.09 cups with entry handle. Dr. Horton’s earnings are expected to decline by 52%.
The stock market rose on Wednesday
The stock market rally opened lower and improved steadily to mix narrowly in the major indices
The Dow Jones Industrial Average fell 0.2% in stock market trading Wednesday. The S&P 500 fell less than 1 point. The Nasdaq Composite rose slightly. Small Capital Russell 2000 rose 0.1%.
US crude oil prices fell 2.1 percent to $79.16 a barrel.
The 10-year Treasury yield rose 3 basis points to 3.6%. UK inflation slowed slightly in March, but only to 10.1% against the views. To read less than 10%. Markets are closing in on a quarter-point rate hike on May 3, with a good chance of another move in late June. This partly reflects the easing of bank concerns.
Exchange Traded Funds
Among the ETFs, the Innovator IBD 50 ETF (fifty(down 1.2%, while the Innovator IBD Breakout Opportunities ETF)fit) slipped 0.7%. iShares Expanded Technology and Software ETF (IGV) was down 0.25%. MSFT stock was a major holding. VanEck Vectors Semiconductor Corporation (SMH) gave up nearly 1%. TSM stocks and Lam Research are big SMH components.
Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(down 0.1% and ARK Genomics ETF)ARKG) by 1.2%. Tesla stock is the highest-grossing ETF on Ark Invest.
SPDR S&P Metals & Mining ETFs (XME(down 1.4% and US X Global Infrastructure Development Fund (ETF) )cradle) decreased by 0.4%. US Global Gates Foundation ETF (Planes) rose 1.6%. SPDR S&P Homebuilders ETF (XHB) added 0.3%. Energy Defined Fund SPDR ETF (xle(down 0.35% and SPDR Healthcare Fund)XLV) gained 0.3%.
SPDR Financial Selection Fund (XLF) increased by 0.2%. SPDR S&P Regional Banking ETF (KRE) jumped 3.9% on some strong earnings reports.
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Market rally analysis
The stock market rally continues to hold in the recent range but not far from the highs in 2023. Major indices continue to trade tightly, but with an icy uptrend.
The losers slightly outperformed the winners on the NYSE and Nasdaq. Market breadth has improved over the past two weeks, but it is not good. Fresh highs were surpassed by fresh lows on Wednesday, but they lagged overall, especially on the Nasdaq.
Many growth stocks struggled, with tech hardware taking a hit on demand concerns. Technical provider CDW (CDW) warned of weak spending on information technology. Giant Chip Gear ASML (ASML) beat first-quarter views, but indicated customer concerns. Extreme Networks (additional) fell, hitting other plays in the networks, on an analyst downgrade related to IT spending. Warehousing companies have also suffered.
Chipmakers are struggling, with SMH testing the 50-day streak again as ASML has thrown its weight on the sector. That’s even with nvidia (NVDA) Lifts.
Medicinal products continued to lead Wednesday. Intuitive surgery (ISRG) exited from base on gains. Edwards Live Science (EW) from the fundus base during dexcom (DXCM) early entries are also flashed. But both of them will get their earnings next week.
Homebuilders and related stocks remain strong, with mostly internal moves. DR Horton’s earnings will be a heat test for the sector.
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What are you doing now
The market is moving sideways. Not many stocks flash buy signals, and some quickly erase gains or even reverse lower. So investors should be careful about adding new purchases for now, and be prepared to cut losses.
Earnings season adds uncertainty to the market, various sectors, and individual stocks. Amazon, Google, Microsoft, and Meta Platforms all release next week, with Apple the week after. Hundreds of other companies will report as well.
So stay connected and flexible.
If the market is rallying, on both major indices and blue-chip stocks, buying opportunities should be numerous, and it is likely to remain flat. This is the time to capture exposure. Now is the time to prepare, build your watchlists, and research settings across sectors.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
Please follow Ed Carson on Twitter at @employee For stock market updates and more.
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