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Market Rally Faces Inflation Spike; Tesla Sales Fall, Musk Disses Bitcoin

The stock market rally came under pressure as the major indexes tumbled amid a sharp rise in inflation. Stocks did bounce back late in the week but still had significant losses. Housing-related stocks and highly valued stocks were notable losers. Tesla (TSLA) sales plunged in China while CEO Elon Musk turned against Bitcoin for environmental reasons. Coinbase (COIN) reported booming growth in its first earnings report as a public company, but slightly missed views.




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Stock Market Rally Under Pressure

The major indexes sold off through Wednesday as inflation pressures mounted, with the Nasdaq tumbling through its 50-day line as the market rally moved to “under pressure.” The S&P 500 found support at the 50-day as the indexes rallied late in the week. But it was still a down week, with housing and highly valued growth stocks among the hardest hit. Breakouts continued to struggle.

Inflation Picks Up

The consumer price index rose a hotter-than-expected 4.2% from April 2020, the highest inflation rate since September 2008. The core CPI also surprised on the upside, rising 3% vs. a year ago. But the real surprise was the 0.9% jump in core prices vs. March, the biggest one-month jump since 1982. Economists expected just a 0.3% rise. Double-digit increases in airfares and prices for used cars and trucks led the broad-based rise.

While the Fed still expects the burst of inflation to be transitory, Wall Street is bracing for more hot readings after April’s jobs report showed a surge in wages as firms struggle to find workers despite high unemployment.

New jobless claims fell to a Covid-era low of 473,000 in the week of May 8, as the job market continued to recover. But retail sales were flat in April, following March’s outsized 10.7% gain that was fueled by $1,400 stimulus checks, the Commerce Department reported Friday. Consumers are shifting some of their spending to travel, entertainment and dining out.


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Tesla Sales Plunge In China

Tesla (TSLA) sold 25,845 EVs in April, down 27% from 35,478 in March, according to the China Passenger Car Association. But that figure represents an even larger sequential decline because it includes 14,174 cars shipped to Europe. In prior reports, CPCA sales excluded Tesla exports. That means Tesla’s China sales plunged a massive 67% month-to-month to 11,671. It’s unclear to what extent that sales decline reflects a Chinese consumer backlash or an industry chip shortage affecting production. Tesla stock fell XX% for the week, under pressure also from an Elon Musk tweet that the EV maker would halt the use of Bitcoin to purchase its vehicles.

Coinbase Sees More Competition

Cryptocurrency exchange Coinbase (COIN) reported booming Q1 earnings and revenue that slightly missed estimates — marking its first report since its IPO last month after investing in Bitcoin took off last year. The results arrived as the company faces questions about rival crypto platforms, widening its product offerings and how it might put its cash to use. Coinbase noted that “competition is increasing.” It also said it would allow the meme-based cryptocurrency Dogecoin on its platform in six to eight weeks.


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Fake Wood Specialists Beat Views

Trex (TREX), the composite materials decking company, reported a 13% EPS gain while revenue rose 22.5% to $245.52 million, both beating views but with growth slowing. Azek (AZEK) earnings leapt 108% as revenue grew 19% to $293.1 million. The polymer building company now sees 2021 sales growth of 23% to 26% year-over-year. But both stocks fell well below buy points as housing-related stocks struggled.

Vaccine Plays Report Strong Earnings

Covid vaccine stocks Maravai Lifesciences (MRVI) and BioNTech (BNTX) beat first-quarter estimates last week. On Monday, Maravai reported a 167% EPS gain sales spiked 191% to $148.2 million. The company provides a key component to make some Covid vaccines, including. Also Monday, Pfizer (PFE) partner BioNTech said first-quarter sales surged a quadruple-digit percentage to about $2.49 billion as adjusted income of $5.34 per share swung from losses in the year-earlier period. Meanwhile, Novavax (NVAX) was hammered after the company said it planned to ask for authorization of its Covid vaccine in the U.S., U.K. and Europe in the third quarter, as opposed to earlier plans for the second quarter.


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Yeti Earnings Triple

Yeti Holdings (YETI) crushed estimates, with EPS leaping 245%. Sales jumped 42% to $247.6 million, the best gain in eight quarters. The continued boom in people shopping for outdoor gear from home fueled Yeti earnings, with direct-to-consumer sales surging 59%. Yeti, which makes trendy and pricey coolers, mugs and backpacks for campers and hikers, also raised full-year outlook. The IBD 50 stock rebounded strongly off its 50-day line, a bullish signal, and is now extended past 80.99.

Airbnb Results Mixed

Airbnb reported a wider-than-expected Q1 loss but revenue edged up 5% to $886.9 million, vs. estimates of $721 million, as vacationers returned to traveling. Gross bookings jumped 52% to $10.29 billion in the quarter, crushing views of $6.93 billion. Meanwhile, Marriott (MAR) reported an 80% EPS drop but that topped views. Revenue plunged 51% to $2.32 billion, missing.


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Alibaba Earnings Fall Short

Alibaba earnings rose 21%, decelerating for a second straight quarter and missing views. Revenue jumped 64% to $28.6 billion, topping forecasts. The Chinese e-commerce giant served 1 billion active users, with mobile active users at 925 million. Meanwhile, China social media company Bilibili (BILI) reported a quarterly loss that missed estimates. BABA and BILI stock tumbled to fresh 2021 lows.

News In Brief

Asian e-commerce company Coupang reported a 74% surge in revenue to $4.2 billion, reporting its first quarterly results since becoming a newly minted company

Toyota (TM) earned $5.18 a share, smashing views for $3.45, as revenue grew 8% to $69.5 million. The world’s No. 1 automaker, which has navigated the global chip shortage better than peers, expects to return to pre-pandemic profitability this fiscal year.

Xpeng (XPEV) posted a net loss of 13 cents per ADS on revenue of $450.4 million, an overall beat. The Chinese EV startup expects Q2 deliveries to grow 18% quarter over quarter, a far more bullish view than the one given by Nio (NIO) last month.

Callaway Golf (ELY) crushed earnings with EPS up 94% with sales up 47% to $652 million, as the sport gained newcomers during the pandemic. ELY stock spiked 13% on Tuesday, hitting their best levels since 1997, but pared gains.

J2 Global (JCOM) reported Q1 EPS rose 56% from a year earlier, while revenue rose 20% to $398.2 million, topping estimates. J2 Global acquired RetailMeNot last year, boosting its digital media business.

Palantir Technologies (PLTR) met EPS views while revenue jumped 49% to $341.2 million, topping estimates. For the June quarter, Palantir forecast revenue growth of 43% to $360 million, above consensus.

Dynatrace (DT) reported fiscal Q4 EPS to rise 50% as revenue rose 30% to $196.5 million. The software maker said annual recurring revenue climbed 35%, slightly topping estimates. It added 173 new customers vs. 165 a year earlier.

Virgin Galactic (SPCE) tumbled after saying the timing of its next test flight is being evaluated. Richard Branson’s space tourism firm lost 55 cents per share in Q1, missing views, on no revenue.

Brooks Automation (BRKS) beat expectations for the March quarter and announced plans to split into two publicly traded companies. One will focus on semiconductor gear while the other will focus on life sciences equipment.

Vizio (VZIO) reported a 40% EPS drop but defied views for a loss. Revenue grew 52% to $505.7 million, also beating. But the smart TV maker’s stock tumbled.

Sonos (SONO) reported a better-than-expected fiscal Q2 profit as sales leapt 90% to $332.9 billion. The premium music speaker maker also raised its guidance for the full year.

Electronic Arts (EA) reported a 14% EPS gain in the fiscal Q4 while net bookings grew 23% to $1.49 billion, both beating. But the video game publisher’s earnings guidance for the current quarter and year ahead missed views.

Roblox (RBLX) lost 46 cents a share in Q1, vs. a year-earlier loss of 44 cents a share. However, Roblox sales surged 140% to $387 million. The online platform for young gamers also reported better-than-expected user numbers. Shares skyrocketed on earnings but slashed weekly gains.

Shockwave Medical (SWAV) reported a wider Q1 loss while revenue spiked 110% to $31.9 million. Shares soared on earnings, rising modestly for the week.

Upstart (UPST), an AI lending platform, reported first-quarter results that beat estimates. The company also raised its full fiscal year revenue forecast. Shares spiked but then gave up gains.

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