Tesla Joins The Trillion Dollar Club

The market rose alongside Tesla as investors anxiously await a plethora of earnings announcements coming in the days ahead. Almost one-third of the S&P 500 is reporting earnings this week. Given the large contribution of the FANGM stocks to the major stock indexes, we suspect this week’s earnings reports from those stocks have the potential to move markets.

What To Watch Today/h2 h4 Economy/h4

• 9:00 a.m. ET: FHFA House Price Index, month-over-month, August (1.5% expected, 1.4% in July)
• 9:00 a.m. ET: S&P CoreLogic Case-Shiller 20-City Composite, month-over-month, August (1.5% expected, 1.55% in July)
• 9:00 a.m. ET: S&P CoreLogic Case-Shiller 20-City Composite, year-over-year, August (20.00% expected, 19.95% in July)
• 10:00 a.m. ET: New Home Sales, month-over-month, September (758,000 expected, 740,000 in August)
• 10:00 a.m. ET: Conference Board Consumer Confidence, October (108.2 expected, 109.2 in September)

h4 Earnings/h4 h4 Pre-market/h4

• 6:00 a.m. ET: Centene (NYSE:CNC) to report adjusted earnings of $1.25 per share on revenue of $31.52 billion
• 6:00 a.m. ET: United Parcel Service (NYSE:UPS) to report adjusted earnings of $2.54 per share on revenue of $22.59 billion
• 6:15 a.m. ET: General Electric (NYSE:GE)to report adjusted earnings of 43 cents per share on revenue of $19.30 billion
• 6:30 a.m. ET: 3M (NYSE:MMM) to report adjusted earnings of $2.22 per share on revenue of $8.68 billion
• 6:25 a.m. ET: Eli Lilly (NYSE:LLY) to report adjusted earnings of $1.95 per share on revenue of $6.63 billion
• 6:30 a.m. ET:Hasbro (NASDAQ:HAS) to report adjusted earnings of $1.63 per share on revenue of $1.97 billion
• 6:55 a.m. ET: Raytheon Technologies (NYSE:RTX) to report adjusted earnings of $1.09 per share on revenue of $16.39 billion
• 7:00 a.m. ET: Invesco (NYSE:IVZ) to report adjusted earnings of 73 cents per share on revenue of $1.78 billion
• 7:00 a.m. ET: The Sherwin-Williams Co (NYSE:SHW) to report adjusted earnings of $2.04 per share on revenue of $5.09 billion
• 7:10 a.m. ET: Waste Management (NYSE:WM) to report adjusted earnings of $1.36 per share on revenue of $4.56 billion
• 7:15 a.m. ET: S&P Global (NYSE:SPGI) to report adjusted earnings of $3.16 per share on revenue of $1.99 billion
• 7:30 a.m. ET: Lockheed Martin (NYSE:LMT) to report adjusted earnings of $3.85 per share on revenue of $17.14 billion

h4 Post-market/h4

• 4:00 p.m. ET: Microsoft (NASDAQ:MSFT) to report adjusted earnings of $2.07 per share on revenue of $43.94 billion
• 4:00 p.m. ET: Alphabet (NASDAQ:GOOGL) to report adjusted earnings of $27.07 per share on revenue of $52.32 billion
• 4:00 p.m. ET: Texas Instruments (NASDAQ:TXN) to report adjusted earnings of $2.11 per share on revenue of $4.66 billion
• 4:05 p.m. ET: Capital One Financial Corp (NYSE:COF) to report adjusted earnings of $5.38 per share on revenue of $7.44 billion
• 4:05 p.m. ET: Twitter (NYSE:TWTR) to report adjusted earnings of 18 cents per share on revenue of $1.29 billion
• 4:15 p.m. ET: Juniper Networks (NYSE:JNPR) to report adjusted earnings of 46 cents per share on revenue of $1.21 billion
• 4:15 p.m. ET: Advanced Micro Devices (NASDAQ:AMD) to report adjusted earnings of 67 cents per share on revenue of $4.12 billion
• 4:40 p.m. ET: Visa (NYSE:V) to report adjusted earnings of $1.54 per share on revenue of $6.52 billion

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Courtesy Of Yahoo

h2 Earnings Rolling Over/h2

We have discussed many times previously that due to annual comparisons, weaker economic growth, and higher inflation that earnings would weaken.

The S&P 500 may remain well bid near-term as seasonal strength and strong inflows from retail and other passive investors support the market. However, with the Fed now tightening policy and deteriorating earnings outlooks, odds are increasing that growth will continue to slow well into 2022, with supply issues the main risk to earnings.

“Are you not entertained?” – Gladiator

h2 Three Minutes On Markets & Money/h2

*** There will be no Three Minutes on Markets Videos this week as we are refurbishing our recording studio. We expect to be back next Monday.

h2 Tesla Surpassing Facebook /h2

Tesla, rising over 10% this morning, overtook Facebook (NASDAQ:FB), becoming the ninth-largest company by market cap. The news propelling it to a market cap of $1 trillion is that Hertz will buy 100k of Tesla’s cars. The order is worth over $4 billion. Tesla’s market cap is up approximately $60 billion on the order. To put that in context, Ford Motor Company (NYSE:F)'s market cap is $63 billion.

The valuation of Tesla makes it equivalent to the entire GDP of Indonesia, the 16th largest country in the world. Below is a detailed analysis of TSLA from Refinitv.

Of course, given that Tesla is roughly 15x the size of Ford, as @TheMarketEar notes:

“Is the valuation difference actually a function of fundamentals, a great inflation hedge, gamma ‘traps,’ or pure speculation? You decide.”

h2 What If Inflation Isn’t Transitory?/h2

It seems over the past few weeks more and more in the media are asking what happens if inflation isn’t transitory. What if it is persistent. Mohamed El-Erian has been among the most outspoken on the topic. This morning he writes a concerning editorial in Bloomberg warning that underestimating inflation carries dire risks. To wit:

“The longer this persists, the greater the risk of a historic policy error whose negative implications could last for years and extend well beyond the U.S.”

Bank of America launched two trackers—a transitory and a non-transitory inflation meter. So consistent with the move in rents, the BofA US persistent inflation meter finally gave up all hope that inflation is coming down any time soon, and surged to 96 in September from 80 previously “suggesting historically elevated cyclical price pressures.” Meanwhile, even though transitory inflation cooled somewhat on a % YoY basis in September, it remained historically elevated. As such, the BofA US transitory inflation meter printed 100 for the sixth straight month.

h2 Oil In Backwardation/h2

The table below shows the CME futures prices for crude oil. Typically the future contract prices of oil increase over time. Such a price curve is called contango. Currently, the front contract December is trading at $84.81 and the prices decline through next year.

This somewhat unique circumstance for oil is called backwardation. It is a signal that there is strong demand for crude oil today but traders do not expect demand to be as heavy in the future. This indicator portends the supply/demand imbalance for crude oil will normalize over the next six to nine months.

h2 The Week Ahead/h2

A host of regional manufacturing indexes this week provide a first look at economic activity in October. Also of interest will be Thursday’s GDP report. Current estimates are for 2.5% growth in the third quarter. As we noted earlier this week, the Atlanta Fed forecasts 0.5% growth. Also on Thursday will be PCE prices, the Fed’s favorite gauge of inflation expectations.

The Fed meets on Tuesday and Wednesday of next week. Accordingly, they should be relatively quiet this week as they enter their self-imposed media blackout period.

Earnings will continue to dominate the news wires. As the first table below, from RIAPro, shows, ten of the companies we hold in the Equity model report earnings this week.

h2 Less Stimulus, More Borrowing/h2

The graph below, courtesy of Arbor Research, shows that consumer interest in borrowing is increasing. Some of the interest is likely from borrowers needing extra funds to replace the multiple stimulus programs from the last year and a half. It is also worth noting that consumers are also likely being pinched by higher prices and some are needing to borrow to make ends meet.

Written By: Michael Lebowitz