EV Giant Tesla Reports After Close as Market Tries to Continue its Winning Ways

(Wednesday market open) Major indexes ride into Tesla’s (TSLA) earnings later today on a long winning streak that carried stocks to new 15-month highs yesterday. Hopes for an economic “soft landing” based on recent positive data drove gains.

Investors appear to expect more positive news after the close from Tesla (NASDAQ:TSLA). Its stock climbed the past eight trading sessions and is up more than 160% year to date. The EV company lost nearly 70% in stock value in 2022 due to economic and management headwinds. See more on Tesla below.

Besides Tesla, a host of major companies report today, including Netflix (NASDAQ:NFLX), Haliburton (HAL), and U.S. Bancorp (USB). This morning’s earnings from Goldman Sachs (NYSE:GS) wrap up reporting from the nation’s largest banks, but smaller ones like First Horizon (NYSE:FHN) today and Regions Financial (NYSE:RF) later this week could provide more color on the credit market and deposits after several small banks failed earlier this year. There’ve been some struggles for regional banks given deposit slippage and higher funding costs, but regional bank shares rose again in premarket trading after climbing yesterday.

Don’t overlook Treasuries’ role in the recent stock market upswing. A 20-basis-point plunge in yields since their recent highs on July 5 early this month provided some breathing room. Reports like yesterday’s June Retail Sales, which showed moderating consumer spending, might have played into ideas that the Federal Reserve could be nearing the end of its rate-increase cycle. The bond market prices in one more rate hike this year and cuts next year, but quantitative tightening is likely to continue, says Kathy Jones, Schwab’s chief fixed income strategist.

• The 10-year Treasury note yield (TNX) fell 4 basis points to 3.74%.
• The U.S. Dollar Index ($DXY) climbed to 100.20 amid strength versus the Japanese yen.
• Cboe Volatility Index® (VIX) futures were steady at 13.33.
• WTI Crude Oil (/CL) jumped to $76.23 per barrel.

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This morning’s June Housing Starts and Building Permits data failed to meet analysts’ lofty expectations. Starts of 1.434 million were short of the 1.475 million consensus estimate, while permits of 1.44 million missed analysts’ forecast of 1.472 million. Additionally, May’s surprisingly strong starts figure was downwardly revised, though it remains above the long-term trend that’s been roughly steady.

Building permits is a component of The Conference Board’s Leading Economic Index (LEI), the June update of which is due tomorrow morning. Analysts expect a 0.6% slip in LEI, according to Briefing.com. The Leading Index has declined in each of the last 14 months.

D.R. Horton (DHI), the largest U.S. home builder by volume, reports Thursday morning.

Center stage: Tesla faces high expectations charging into this afternoon’s earnings report, having previously announced blockbuster deliveries for Q2. Lower prices, incentives, and more models helped drive quarterly sales across the industry, but Tesla appears to have lost some market share to competitors, according to research firm Cox Automotive. Even so, Tesla delivered 466,000 vehicles last quarter—well above market expectations of 448,000.

The company may face questions on its call regarding inventory and pricing, as well as it plans to keep those strong deliveries flowing. Tesla lowered prices earlier this year but also saw its gross margin fall in Q1 to 19.3%. Another thing to listen for is demand from China, where competition is heavy and economic growth continues to struggle. Tesla could also discuss new products after its first, long-awaited Cybertruck pickup model finally rolled off the assembly line this week.

Consensus estimate on Wall Street is for earnings per share of $0.82 on revenue of $24.48 billion. The results are expected shortly after today’s closing bell.

Slight stumble: Shares of Goldman Sachs lost ground early Thursday after the bank came up short of Wall Street’s average expectations on earnings per share (EPS). Revenues did surpass analysts’ estimates, and the company raised its dividend—two factors that might have prevented worse initial losses for its shares. The company’s Investment Banking business hit speed bumps during the latest quarter amid a lack of corporate merger and acquisition activity, hurting revenue in that segment. Trading activity was also a drag, as were the company’s commercial real estate holdings.

Screen share: Netflix also reports after the close today. Shares rallied Tuesday in what might have been anticipation of stronger revenue and subscriber growth. Last quarter, Netflix projected June quarterly revenue of $8.2 billion and earnings per share of $2.84, with subscriber growth near the 1.75 million level from Q1.

Futures trading indicates a 99.8% probability that the Federal Open Market Committee (FOMC) will raise interest rates by 25 basis points at its meeting next week, according to the CME FedWatch Tool.

There’s a growing sense that the expected rate hike next week could be the final one of this cycle, says Collin Martin, a director of fixed income strategy at the Schwab Center for Financial Research. Although inflation is still elevated, “it’s moving down in the right direction,” he adds.

Tomorrow’s key data is June Existing Home Sales. The report, due out shortly after Thursday’s open, is expected to show sales at a seasonally adjusted annual rate of 4.25 million, down from 4.3 million in May, according to analyst consensus from Briefing.com. Existing home sales are down sharply from a year ago, partly because many people are reluctant to sell homes bought with affordable mortgage rates.

Tomorrow morning also brings the government’s weekly initial jobless claims report. Consensus from Briefing.com is 240,000, up from 237,000 the prior week and near the middle of the recent range.

Talking technicals: The S&P 500® Index’s (SPX) climb above 4,500 this week puts it in shouting distance of a possible resistance area near 4,600, where the index ran into selling back in early 2022.

Targeting inflation: How much more does the Fed need to do to bring inflation down to its 2% long-term target? Check out the analysis from Schwab’s experts in the latest Schwab Market Perspective.