Stocks Slide as Tesla and LVMH Earnings Disappoint: Markets Wrap

(Bloomberg) — Stocks fell on lackluster results from Tesla Inc., LVMH and Deutsche Bank AG, fueling concern about the health of global business as the reporting season kicks into overdrive.

Nasdaq 100 index futures sank more than 1%. Tesla slumped after a fourth straight quarter of disappointing earnings. Deutsche Bank dropped on its first quarterly loss in four years and scrapped plans for a buyback. LVMH tumbled after sales in China plummeted during the quarter, adding evidence that an economic slowdown is hurting European companies.

Analysts are poring over this week’s raft of earnings as they hunt for signs that the tech-driven rally of the first half of the year has longer to run. The market is facing pressure into the summer months, with volatility also likely to be heightened by uncertainty as the US presidential race gathers pace. 

“What we’re seeing during this earnings season is the growing gap between the rather optimistic profit consensus from analysts and slowing economic growth,” said Benoit Peloille, chief investment officer at Natixis Wealth Management. “With unemployment now on the rise, earnings disappointment is to be expected and that’s what we’re seeing this season. This is true for the US and to some extent for Europe.”

Yields on Treasuries edged lower as investors awaited US debt auctions and manufacturing PMI data. The euro slipped as European data showed private-sector activity barely grew. The yen climbed 1%, the strongest since May.

So far, about a fifth of S&P 500 companies have reported results. Analyst estimates slid ahead of the season as they usually do, but market strategists including Morgan Stanley’s Michael Wilson and Barclays’ Emmanuel Cau have warned that the downgrades have been milder on this occasion, setting the bar for positive surprises higher. Investors appear particularly worried about sales, with less than half of companies beating expectations.

Hopes for the so-called Magnificent Seven — comprising Tesla, Alphabet Inc., Apple Inc., Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Nvidia Corp. — are lofty. Analysts project profits at these companies to have jumped 30% in the second quarter, compared with a 10% increase for the S&P 500 as a whole, according to data compiled by Bloomberg Intelligence.

Corporate Highlights: 

• Alphabet shares fell almost 4% in premarket trading, as analysts highlighted weakness in YouTube and higher capex spending. However, Google’s parent company reported second-quarter results that beat expectations on other key metrics.
• LVMH dropped to a six-month low after disappointing results, with analysts flagging a hit from currency movements as well as weakness in China.
• AT&T Inc. added far more mobile-phone subscribers than Wall Street expected in the second quarter, with fewer customers canceling and many adding wireless service to their broadband plans.
• Deutsche Bank lost as much as 8.5%. Germany’s largest lender said trading slowed and that it would most likely refrain from conducting a second share buyback this year, after a €1.3 billion ($1.4 billion) litigation provision tied to its Postbank retail unit.
• Blackstone Mortgage Trust Inc., which provides financing for commercial real estate, is cutting its dividend by 24% as defaults increase and borrowers struggle to make payments or refinance their loans.
• Moody’s Ratings lowered Thames Water’s class A debt to junk after the UK’s water regulator placed the company under a so-called turnaround oversight regime.
• Banco Santander SA’s strategy to get rid of low-yielding assets and risks will boost its profitability substantially this year, the lender said Wednesday, underlining the growing importance of risk-transfer deals.
• UniCredit SpA “prudentially set aside” €228 million ($247 million) of funds related to the decision by a Russian court to seize assets in the country, Chief Executive Officer Andrea Orcel said in an interview.

In Asia, most shares of Tesla suppliers and electric vehicle peers also declined. Taipei’s bourse was shut due to Typhoon Gaemi, meaning shares of tech giant Taiwan Semiconductor Manufacturing Co. didn’t trade.

The Japanese yen strengthened past 155 per dollar for the first time since early June as traders repositioned for the possibility the central bank will raise interest rates in coming months, if not at next week’s policy meeting. 

Oil rose, snapping a run of losses, after an industry report indicated that US crude inventories fell for a fourth week.

Key events this week:

• Germany IFO business climate, Thursday
• US GDP, initial jobless claims, durable goods, Thursday
• US personal income, PCE, consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.7% as of 7:58 a.m. New York time
• Nasdaq 100 futures fell 1.1%
• Futures on the Dow Jones Industrial Average fell 0.4%
• The Stoxx Europe 600 fell 0.3%
• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was little changed at $1.0847
• The British pound was little changed at $1.2919
• The Japanese yen rose 0.9% to 154.16 per dollar

Cryptocurrencies

• Bitcoin rose 0.8% to $66,386.29
• Ether fell 0.7% to $3,460.75

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.23%
• Germany’s 10-year yield was little changed at 2.44%
• Britain’s 10-year yield was little changed at 4.13%

Commodities

• West Texas Intermediate crude rose 1.2% to $77.91 a barrel
• Spot gold rose 0.3% to $2,417.31 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Aya Wagatsuma and Andras Gergely.

©2024 Bloomberg L.P.