Stock investors are growing nervous about upcoming earnings. The latest big-name disappointment was Tesla, which reported after the close on Wednesday and saw its shares lose almost -10% yesterday as traders reacted to the company’s plunging profit margins and a slew of analysts cut their price targets.
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.
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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.
Data to watch
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.
SP500 Investors Worry About Upcoming Earnings
Wishing you a great week!
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