Nasdaq futures fall nearly 1% as Tesla earnings disappoint
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[April 20, 2023] By
Sruthi Shankar and Ankika Biswas
(Reuters) -Nasdaq futures fell nearly 1% on Thursday as Tesla shares
tumbled after the electric-vehicle maker posted its lowest quarterly
gross margin in two years, while prospects of U.S. interest rates
staying higher for a longer kept investors jittery.
Wall Street's main indexes have remained steady this week as mixed
earnings from U.S. banks allayed concerns of a contagion from the March
banking crisis, but rapidly rising rates and recession worries have
dimmed their outlook.
Tesla Inc slid 6.7% in premarket trading after its first-quarter gross
margin missed expectations on aggressive price cuts for its vehicles and
CEO Elon Musk said the company would put sales growth ahead of profit.
Other megacap stocks such as Apple Inc, Amazon.com Inc and Microsoft
Corp fell 1% each.
"A lot of companies are keeping their heads above water but there remain
plenty of headwinds to cloud the outlook," said Russ Mould, investment
director at AJ Bell.
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"The prospect of another round of interest-rate hikes in the U.S. and
Europe will further increase cost of borrowing, coinciding with fears
that banks are going to have stricter lending policies following the
recent Silicon Valley Crisis."
Traders are reassessing the outlook for interest rates after data
indicated that the slowdown in U.S. economy was not enough to push the
Federal Reserve to start cutting rates as early as this year.
Comments from Fed policymakers this week have also supported bets on
further policy tightening.
The Fed will deliver a final 25-basis-point rate hike in May and then
hold rates steady for the rest of the year, according to economists in a
Reuters poll, which also showed a likely short and shallow recession in
2023.
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Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., April 19, 2023.
REUTERS/Brendan McDermid
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Fed funds futures traders are pricing in a 78% probability of a
25-bps rate hike next month, according to CME Group's Fedwatch tool.
The two-year Treasury yield, which typically moves in step with
near-term rate expectations, traded below the one-month high it hit
on Wednesday. [US/]
Meanwhile, the cost of insuring exposure to U.S. sovereign debt rose
to the highest level since 2011, over market jitters that the
government could hit its debt ceiling sooner than expected.
At 6:56 a.m. ET, Dow e-minis were down 138 points, or 0.41%, S&P 500
e-minis were down 28.25 points, or 0.68%, and Nasdaq 100 e-minis
were down 123.25 points, or 0.93%.
The day ahead includes weekly jobless claims data and Philadelphia
Fed's business index reading. Several Fed policymakers are also
expected to speak later in the day.
Among other stocks, IBM Corp gained 1.3% after the software company
beat estimates for first-quarter profit and signaled demand for IT
services was better than feared.
Las Vegas Sands Corp climbed 4.4% after the casino operator reported
better-than-expected quarterly revenue, while Alaska Air Group Inc
fell 1.2% on wider-than-expected first-quarter loss.
Among regional banks, Zions Bancorp, Truist Financial Corp and
KeyCorp dropped between 0.6% and 5.3% after their quarterly profits
missed estimates.
Chip companies Qualcomm Inc, Nvidia Corp and Micron Technology fell
1% each following major Apple supplier TSMC's weak sales forecast.
(Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Editing
by Arun Koyyur and Vinay Dwivedi)
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