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XTB TRADEBEAT

US stocks to open lower; Tesla plunges after earnings call debacle 

Summary:

  • US indices in the red ahead of cash open
  • US500 at lowest level in over a week
  • Tesla expected to open sharply lower after earnings update

There’s been some further weakness seen in US indices today after a rally shortly after the Fed decision last night failed and the US500 ended the day with notable declines.  The initial reaction to the announcement that the US central bank would keep rates on hold was positive with the market moving up near its highest level of the day at 2658, but this swiftly reversed and price dropped 30 points in the space of a few hours. 

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 The US500 has seen some pretty strong selling in the past 24 hours and may be threatening to break lower. Source: xStation

This morning has seen the index trade sideways by and large although the last couple of hours there’s been further downside. The recent low of 2617 is the lowest level in over a week and should there be a sustained push below here then the price action could get a little ugly.

 

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A recurring theme in recent months has been the US500 toying with its 200 day SMA and once more the market finds itself at this potentially key level. Source: xStation

 Looking at individual stocks, Tesla is in the spotlight for all the wrong reasons today after the automaker released its latest results. The firm reported that losses on the Model 3 and capital spending consumed $1.1B in the first quarter, a slightly higher rate of cash burn than the street had expected. The company’s cash balances fell by $700m in the period to leave $2.7B remaining. The top and bottom line metrics showed:

  • Revenue: $3.41B vs $3.22B expected 
  • Earnings per share (pro forma): - $3.35 vs -$3.58 exp (on a formal accounting basis the company’s loss per share rose to $4.19 from $2.04 a year ago)  

However, the biggest takeaway from the results came during an earnings call when CEO and founder Elon Musk refused to delve deeper into his company’s potential funding needs by saying "Excuse me. Next. next. Next. Boring bonehead questions are not cool. Next."

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 Tesla looks to have respected prior resistance around 309 once more and remains well below the 200 day SMA which has now clearly turned lower. Source: xStation

The stock is called to open sharply lower this afternoon with somewhere in the region of 6-7% of market value expected to be lost on the open. The market ended yesterday not far form the prior resistance at 309.40 but it is expected to begin today far lower. After oscillating around its 200 day SMA for several months at the end of last year and the beginning of this, price has made a decisive break lower. The 200 SMA has also turned lower in the past month and now is quite clearly pointing lower. 

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