Stock markets are treading water on Thursday, with earnings from the US failing to stimulate further gains in early trade.
Equities have performed extremely well recently as economic data has been more promising and the banks kicked off earnings season positively. Perhaps that’s just lifted expectations a little too much and we’re seeing some profit-taking going into the end of the week.
Prioritizing sales over margins is working for Tesla
Tesla’s share price appears to be suffering from sky-high expectations going into the earnings report in pre-market trading, with the price off more than 4% despite reporting expectation-beating earnings and revenues.
The company has been squeezing margins recently, initially to the disappointment of investors, in order to shield the company from higher interest rates and cost-of-living pressures. The prioritization of sales over margins is clearly working though and Elon Musk indicated further squeezes are likely if interest rates keep rising, something that should not go down badly given recent results but probably will.
Netflix share price dives despite much stronger subscriber growth
Netflix also failed to live up to market expectations, hitting the share price pre-market by almost 10%, despite recording strong earnings and subscriber growth that smashed analyst expectations. The company is going through an adjustment period as it cracks down on password sharing and previously announced it will eliminate its cheapest tier in order to push subscribers onto more profitable plans.
I don’t think we can read too much into the losses in pre-market trade as the stock has performed exceptionally well this year and bounced back from the poor subscriber growth numbers we were seeing previously. The transition is broadly going well and the company still appears confident that it will pay off later in the year.
Oil choppy but holding gains
Oil prices have steadied after a volatile week following the breakout from its two-month range. The break came on the back of output curbs from Saudi Arabia and Russia, initially, but then better inflation data from the US, eurozone and UK which could boost economic prospects.
Since then, the price has been volatile but importantly held above previous range highs. The inventory data from EIA on Wednesday triggered some choppiness but was no game-changer, while promises from China’s top economic planner to restore and expand consumption fell on deaf ears a little as they lacked significant detail.
We probably will see more of a rebound in the second half of the year as the first was a little disappointing but we need more than just words. A stronger rebound in China and softer landings elsewhere could be bullish for crude depending on what producers do.
Gold edging closer to $2,000
Gold prices are nudging higher again today with bulls seemingly having an eye on $2,000 which it’s now not too far from. The yellow metal is posting small gains so far today but has breached $1,980 where it was previously running into some resistance.
Gold has been buoyed by weaker inflation data from the US, eurozone and UK recently which has fuelled hope that interest rates won’t have to rise as far as feared. It’s also weighed on yields and pushed the dollar down more than 3%, aiding gold’s recovery.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
