Category: Main News

Tesla (NASDAQ:TSLA) stock has been downgraded to a Sell recommendation by Philip Securities analysts, who said there is “not much to like” about the electric vehicle (EV) giant following its latest quarterly report. The analysts set a price target of $135 on TSLA, implying nearly 40% downside risk from the current levels.

The downgrade comes amid several pressing concerns, primarily soft deliveries and pricing, pressured auto margins, and “minimal commentary” from Tesla’s management to dispel near-term concerns.

Tesla’s EV deliveries increased by 15% quarter-over-quarter, likely driven by the sixth consecutive quarter of reduced EV prices and attractive financing options. However, deliveries fell by 5% year-over-year for the second consecutive quarter, reflecting persistently weak overall demand.

“Intense competition, particularly in China, remains a key near-term headwind, while the potential reduction in IRA credits if former President Trump is elected to office could also negatively impact demand in the US. Auto revenue declined 7% YoY,” analysts noted.

Moreover, Cybertruck ramp and EU tariffs continue to weigh on Tesla’s auto margins, one of the closely watched metrics. The EV giant reported margins of 14% in the second quarter, missing consensus estimates.

“We believe these headwinds will persist and continue to weigh on near-term margins,” analysts added.

Lastly, the analysts said Tesla’s management “spent almost no time dispelling concerns over its stalling Auto business,” and rather focused on plans such as Robotaxi, its Full Self-Driving (FSD) solution, and Optimus. But this, analysts cautioned, “is still 3-5 years away from contributing meaningfully to growth.”

On the other hand, Tesla’s revenue from energy storage doubled year-over-year, representing one of the few positive highlights of the report, according to analysts.

Record energy storage deployments of 9.4GWh propelled TSLA’s energy storage business to $3 billion, “more than offsetting the dip in Auto revenue,” they said.

“This was due to increasing ramp-up in its Lathrop Megapack factory, as TSLA remained demand constrained,” the analysts added.

The Federal Reserve’s path for monetary policy likely remains unaffected by the outcome of the upcoming U.S. presidential election or the composition of Congress, Citi economists said in a Thursday note, highlighting several reasons.

Economists pointed out that former President Trump has confirmed he will leave Jerome Powell as Fed Chair until his term expires in early 2026. Furthermore, Fed officials are expected to focus on macroeconomic outcomes rather than proposed policies.

“That means any change in Fed plans would depend on actual outcomes in data,” they explained.

Also, new fiscal policies enacted by a Republican-controlled Congress would not take effect until 2026, with any significant changes likely requiring extended negotiations.

“Extending the existing individual tax cuts would only affect the budget starting in 2026 – affecting individual tax payments due in April 2027,” Citi’s team added.

Despite the rise in political volatility, the market’s reaction has been muted, economists said. Interest rates have occasionally moved higher on expectations that a Republican-controlled government would lead to higher inflation and larger deficits, but these moves have been modest and not reflected in other asset markets.

The limited election-induced market volatility may reflect the reality that structural issues leading to higher and more volatile inflation and larger deficits are likely to dominate any differences in policy in the near term.

“In short, the consensus narrative has overstated both the certainty and size of the macroeconomic effects of different election outcomes,” Citi noted. “This may partly explain why political volatility is not translating to market volatility.”

The economists also addressed potential fiscal policy changes, noting that new tariffs under a Republican administration are unlikely to lead to significant inflationary pressure. A proposed 10% across-the-board tariff, excluding Mexico and Canada, would raise an estimated $2.2 trillion in revenues over ten years if trade flows remain at current levels. This could offset revenue reductions from extending individual tax cuts.

While there is speculation about substantial tariffs on specific countries or products, such as 60% tariffs on Chinese imports or 100-200% tariffs on German autos, both Trump and his former trade representative Robert Lighthizer have repeatedly stated that these measures are meant as threats to drive negotiations to reduce bilateral trade deficits, economists noted.

The latest batch of gross domestic product (GDP) and personal consumption expenditures (PCE) data came in a bit stronger than expected, yet “not enough to seriously challenge” expectations of a September interest rate cut from the Federal Reserve, Evercore ISI strategists said.

The US GDP release for Q2 indicates stronger-than-expected 2.8% annualized growth, with real final sales to domestic purchasers increasing by 2.7%. The robust figures align closely with the near-term potential output growth, driven by a surge of immigrant workers, strong domestic labor force participation, and healthy productivity levels.

Meanwhile, consumption growth at 2.3% annualized, coupled with strong investment in equipment “should moderate concerns that the US economy is slowing too fast rather than settling into a soft landing,” strategists noted.

Solid personal income growth continues to support consumption, although a two-speed economy may be emerging, with lower-end consumers feeling more financial pressure.

Strategists also highlighted that per capita income and consumption are growing more slowly than aggregate data suggests, due to the influence of immigrant workers earning and spending money.

Moreover, Q2 core PCE inflation came in slightly higher than expected at 2.9% annualized, implying modest upward revisions to the past three months of inflation data.

“These revisions will not be helpful for the Fed,” strategists commented. “But we do not think they are of a magnitude that makes a meaningful difference to the very high probability of a September rate cut.”

While the GDP data reduces concerns about a rapid shift in the balance of risks, it slightly lowers the likelihood of a third cut in November, in addition to the expected cuts in September and December.

“We continue to expect that the Fed will use the July meeting to clearly tee up a September move, though policymakers will continue to insist that it is not a done deal and policy remains data-dependent,” Evercore’s team added.

The strategists maintain a view of less than 50% probability for a November cut, though they still consider it much more likely than only one cut or none at all.

Investing.com — Wall Street looks set to end a difficult week on a bright note, although the release of the Federal Reserve’s favorite inflation gauge later in the session could influence sentiment. Apple is losing market share in the important Chinese market, while European corporate earnings continue to flow. 

1. Key PCE inflation data due 

The spotlight Friday will be on the Federal Reserve’s preferred gauge of inflation, which could test market expectations that the U.S. central bank is all but certain to cut interest rates in September.

June’s personal consumption expenditures (PCE) price index is expected to have climbed 0.1% on the month, with the annualized figure at 2.5%, very close to the Fed’s 2% target.

Additionally, “Friday’s June core PCE inflation report is expected to show a 0.2% m/m increase in prices last month, leaving the year-ago increase unchanged at 2.6%,” JPMorgan economists said in a note.

The consumer price index fell in June for the first time in four years, cementing market expectations that the Fed is primed to cut interest rates, although next week’s meeting is likely too soon. 

2. Futures edge higher; weekly losses likely

U.S. stock futures edged higher Friday ahead of a key inflation reading, but Wall Street remained on course for hefty losses this week, led lower by the tech sector. 

By 04:00 ET (08:00 GMT), the Dow futures contract was 210 points, or 0.5%, higher, S&P 500 futures climbed 35 points, or 0.7%, and Nasdaq 100 futures rose by 170 points, or 0.9%.

The S&P 500 and tech-heavy Nasdaq Composite closed lower Thursday, while the blue-chip Dow Jones Industrial Average bucked the trend, adding  0.2%.

However, all three indices are set to post a losing week, with the S&P 500 down 1.9% so far, the Nasdaq losing nearly 3.1%, and the DJIA down roughly 0.9%.

All eyes will be on the release of June’s personal consumption expenditures report, the Fed’s favorite inflation reading, as investors look for more clues pointing to a September rate cut.

There will be more earnings to digest Friday, from the likes of Bristol Myers (NYSE:BMY), 3M Company (NYSE:MMM) and Colgate-Palmolive (NYSE:CL).

3. Apple suffers drop in Chinese sales

Apple (NASDAQ:AAPL) is facing intensifying competition in China, its third-largest market, resulting in the iPhone maker dropping out of the top five in a list of smartphone vendors.

Apple’s smartphone shipments in China fell by 6.7% in the second quarter of 2024, according to data from market research firm Canalys, with total shipments of 9.7 million units, down from 10.4 million units in the same quarter last year.

Apple’s shipments have been declining since the first quarter when they dropped 25% year on year to 10 million units.

Chinese consumers are increasingly turning to local suppliers for their smartphones, as these Chinese brands aggressively incorporate generative AI into their products.

The Canalys data revealed that Apple’s market share decreased to 14% from 16% in the same quarter of 2023, with its ranking in the Chinese smartphone market falling from third to sixth place.

Vivo was the top vendor with a share of 19%, followed by Oppo, Honor and Huawei with 16%, 15% and 15% respectively.

4. Mercedes-Benz (OTC:MBGAF) disappoints in Europe

The quarterly earnings season is also continuing in Europe, with investors digesting results from a number of important companies.

Mercedes Benz (ETR:MBGn) stock fell after the German luxury automaker narrowed its annual forecast for the profit margin in its core car division, adding to the weakness in the sector in the region after Stellantis (NYSE:STLA) reported on Thursday a sharp fall in net profit for the first half of 2024.

Capgemini (EPA:CAPP) stock slumped 9% after the French IT consulting group forecast a surprise fall in annual revenue, citing persistent weakness in its North American market.

EssilorLuxottica (EPA:ESLX) stock rose 7% after the eyewear maker reported a strong financial performance for the first half of 2024, underpinned by solid revenue growth and margin expansion.

Hermes (EPA:HRMS) stock gained 3% after the luxury goods company reported a hefty rise in second-quarter sales, demonstrating the continued appetite for its expensive handbags.

5. Crude on course for negative week

Crude prices stabilized Friday, but were on track for a third straight week of decline, largely due to weak demand in China, the world’s largest crude importer. 

By 04:00 ET, the U.S. crude futures (WTI) traded largely flat at $78.28 a barrel, while the Brent contract rose 0.1% to $82.39 a barrel.

The Brent contract was trading marginally lower this week, while WTI was down over 2%, and the benchmarks have fallen about 5% in the last 3 weeks.

Concerns over waning demand in China have weighed heavily, with data this week showing the Asian giant’s apparent oil demand fell 8.1% to 13.66 million barrels per day in June.

Gross domestic product data, released last week, showed the Chinese economy grew less than expected in the second quarter, and Beijing has unexpectedly cut a swathe of lending rates this week, suggesting growing concerns over sluggish growth in the country. 

Investing.com– U.S. stocks rose Friday, helped by data showing cooling inflation, lifting the chances of interest rates cuts near term. 

At 06:0 ET (10:50 GMT), Dow Jones Industrial Average rose 550 points, or 1.4%, S&P 500 rose 40 points, or 0.7%, and NASDAQ Composite rose 95 points, or 0.6%. 

PCE data keeps rate cut hopes alive 

The PCE price index, the U.S. Federal Reserve’s preferred inflation metric, rose 0.1% on a monthly basis in June and 2.5% annually, both as expected.

The Federal Reserve meets next week, when the central bank is widely expected to keep rates steady.

The in-line data kept bets for an interest-rate cut by September intact.

Tech earnings continue next week 

Tech earnings are set to continue in the coming week, with Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) due on Tuesday and Thursday, respectively. Prints from Advanced Micro Devices (NASDAQ:AMD), Qualcomm Incorporated (NASDAQ:QCOM) and Amazon (NASDAQ:AMZN) are also due next week. 

On Friday, Bristol-Myers Squibb (NYSE:BMY) stock rose over 7% after the drugmaker posted better-than-expected second-quarter results, driven by growth from new products like anemia treatment Reblozyl and heart drug Camzyos as well as from its top-seller, blood thinner Eliquis.

3M Company (NYSE:MMM) stock soared 14% after the industrial conglomerate raised the low end of its full-year adjusted profit forecast expecting to benefit from restructuring measures and increasing demand for electronics.

Deckers Outdoor (NYSE:DECK) stock rose 10% after the athletics shoes and apparel company raised its annual profit forecast following a first-quarter results beat.

On the flip side, DexCom (NASDAQ:DXCM) stock slumped 40% after the medical device maker cut its annual revenue forecast, saying it had fewer new customers than expected.

Crude set for weekly losses 

Crude prices fell Friday, on track for a third straight week of decline, largely due to weak demand in China, the world’s largest crude importer. 

By 09:50 ET, the U.S. crude futures (WTI) traded 1.1% lower to $77.39 a barrel, while the Brent contract fell 1.2% to $81.34 a barrel.

The Brent contract was trading over 1% lower this week, while WTI was down over 3%, and the benchmarks have fallen over 5% in the last three weeks.

Concerns over waning demand in China have weighed heavily, with data this week showing the Asian giant’s apparent oil demand fell 8.1% to 13.66 million barrels per day in June.

(Ambar Warrick contributed to this article.)

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Bank of America economists expect the Federal Reserve to maintain its policy rate unchanged in July while indicating that progress on reducing inflation has resumed.

The Fed is optimistic about the possibility of near-term rate cuts but is unlikely to signal that a September cut is a “done deal,” economists said in a note.

“It could happen, but it would depend on the data. This was the general tone of most FOMC members that delivered public remarks recently,” they noted. While the inflation data has been encouraging, more evidence is needed before policy rate normalization can begin.

BofA also believes that Fed Chair Jerome Powell will signal a shift in the Fed’s focus from solely inflation to a more balanced approach. Previously, with inflation far from its target and employment closer to its goal, the Fed prioritized inflation.

“Now, with smaller deviation in inflation and employment from target, the Fed’s attention can be more balanced. Cuts can happen because the economy cools, because inflation slows, or both.”

Despite markets pricing in a full rate cut in September and roughly 2.5 cuts this year, the Fed may not need to strongly endorse a September cut. The more intriguing question is whether they will push back against market expectations, economists pointed out.

“If there is pushback, we think it will be mild,” they wrote.

“After all, Powell has said the committee remains data dependent and decisions will be taken on a meeting-to-meeting basis.” Powell will have another opportunity at the Jackson Hole symposium in late August to either validate or counter market pricing, economists said.

Overall, BofA continues to hold the view that the Fed will cut rates once this year in December and are less concerned about the risks of a sharper economic slowdown. However, they acknowledge that a September cut is now closer to their baseline.

“We think markets are back to being overly optimistic about the upcoming cutting cycle. A dovish Fed, soft July employment, or a repeat of June inflation could change our thinking.”

On the flip side, a strong July unemployment report and uneven inflation data, complementing the above-consensus 2Q GDP print, could lead the Fed to delay rate cuts beyond September, economists noted.

Investing.com– Bitcoin price jumped on Friday, recovering some measure of losses this week as crypto markets awaited an address by Republican presidential nominee Donald Trump at the Bitcoin Conference this weekend. 

The world’s largest cryptocurrency rose 5% in the past 24 hours to $67,295.0 by 09:06 ET (13:06 GMT), recovering from lows of around $63,000 hit earlier in the week.

Bitcoin was caught up in a wave of selling pressure across global financial markets, which saw investors dump risk-driven assets. This risk-off trend was particularly damaging to crypto, given the sector’s highly speculative nature.

But this risk-off trend appeared to easing somewhat on Friday. 

Analysts optimistic as Bitcoin approaches key resistance level

Some analysts are growing increasingly optimistic about Bitcoin’s price outlook following a rebound toward a critical resistance level earlier this week.

After testing the 50-day simple moving average support near $63,500, bitcoin has surged past $67,000 and is now approaching a resistance line defined by the trendline connecting the March and April highs. This descending trendline has been a significant hurdle, capping gains on Monday and previously in May, making it a key level for bulls to overcome.

Analysts suggest that a breakthrough may be imminent.

Two potential catalysts could influence this move. First, the U.S. core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure, eased slightly from a year ago in June, helping pave the way for a widely anticipated September interest rate cut. Second, Republican presidential candidate Donald Trump’s upcoming speech at the Bitcoin conference in Nashville could play a significant role.

“Incoming PCE data could be the final nail in the coffin for high interest rates and lead to imminent rate cut announcements, while Trump’s speech at the Bitcoin conference could start a stronger rally if rumors of an announcement of a national strategic reserve for BTC come true,” analysts at digital assets advisory firm BRN, said in a note seen by CoinDesk.

These developments could propel bitcoin to new highs, analysts added.

The PCE price index rose by 0.1% in June and increased 2.5% year-over-year, according to the Commerce Department’s report on Friday. This aligns with Dow Jones estimates. In May, the year-over-year increase was 2.6%, with the monthly measure remaining unchanged.

Trump set for keynote address at Bitcoin Conference

Trump is set to appear as a keynote speaker at the Bitcoin Conference in Nashville on Saturday, with his appearance coming as the former president struck a largely pro-crypto tone in recent campaigning efforts. 

Crypto traders will be largely watching to see if he maintains this rhetoric during the address, and whether he will provide plans for more regulatory clarity in the U.S. crypto industry. 

Speculation over a Trump presidency had afforded Bitcoin some strength last week, especially as the Republican candidate was seen leading in approvals after a failed assassination attempt. 

But Democratic frontrunner Kamala Harris, who was endorsed by President Joe Biden after he dropped out of the election race, was seen narrowing the gap with Trump, polls showed this week. 

A Harris presidency is expected to potentially continue the government’s regulatory crackdown on crypto, which had rattled the industry over the past two years. 

Marathon Digital buys $100 mln of Bitcoin

Marathon Digital Holdings Inc (NASDAQ:MARA), one of the biggest Bitcoin miners in the U.S., said on Thursday it had purchased $100 million of Bitcoin off the open market, and that it held over 20,000 Bitcoin tokens on its balance sheet.

The miner also vowed to retain all of its mined Bitcoin, and that it will also buy more tokens from the open market.

Crypto price today: altcoins rise, more macro signals awaited 

Among broader crypto markets, altcoin prices tracked a recovery in Bitcoin, with traders also awaiting key U.S. inflation data and a Federal Reserve meeting in the coming days. 

World no.2 token Ether rose 3% to $3,238.67, seeing its first positive session since the launch of spot exchange-traded funds in U.S. markets this week.

ADA and SOL rose 5% and 6.6%, respectively, while XRP dropped 3.3%. Among meme tokens, DOGE added 5% while Investing.com Shiba Inu Index rose 3.2% 

The Personal Consumption Expenditures (PCE) price index, a key inflation gauge that the Federal Reserve closely monitors, showed only a modest increase in June.

The core PCE inflation, which excludes volatile food and energy prices, edged up by 0.18% month-over-month, slightly higher than the anticipated 0.16%.

Despite this increase, the year-on-year core PCE reading remained unchanged at 2.6%, bolstered by upward revisions to May’s core PCE figures, which were adjusted from an initial 0.08% to 0.13%.

In the same report, personal income growth was reported to be weaker than expected, rising by only 0.2% month-over-month.

Citi: “We continue to expect Fed officials to begin a series of rate cuts starting in September.”

Wells Fargo: “Today’s report on June personal income and spending is the last major indicator before next week’s Fed meeting and while there is plenty to unpack, there is nothing that compels a rate cut at the July meeting or that prevents one in September.”

Bank of America: “The June personal income and outlays report was another tick of the box. Inflation is back on track towards the 2% target even if base effects will lift the y/y rate in 2H. Therefore, the likelihood a rate cuts continues to increase.

“That said, solid spending and strong GDP growth means the Fed can be patient and await more data. We remain comfortable with our forecast that cuts will start in December, but upcoming inflation and employment data could tip the scale to an earlier cut. Focus now shifts to July data.”

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