As Hertz announced its selling 30,000 EVs because, shock of shocks, they are more expensive to maintain than advertised and consumers don’t want them and Ford is losing $132,000 per EV they sell, Tesla’s atrocious earnings led to a 12% rally in the stock. Makes sense…. In fairness, it was down almost 66% from the highs so sometimes “well, it could have been worse…” leads to rallies. I believe the stock is worth $54 a share (not investment advice) so it’s got a long way to go to get there.
On the flip side, Meta, which is up 500% from the lows last year, beat on revenue and earnings but lowered it’s revenue guidance for next quarter and continues to pour money at AI which is losing billions a quarter and absorbing a large share of the $40 billion of capex Meta plans to spend this year. So, logically their stock got pummeled, down 12% this morning and setting up an interesting afternoon when Google and Microsoft report. The magnificent 7 have powered this market 20-30% higher than I think it should be at, and more than 50% will have reported by 5 pm eastern today.
In the background to these tech bellwethers is that the 10 year treasury has climbed to 5 month highs at 4.7% with US economic numbers being released this morning. The economy grew 1.6% in the last quarter despite huge deficit spending while inflation pushed up to 3.7%. Can you say “stagflation?” The truth is, the US is going to have to leave rates where they are to encourage bond buyers to actually. Equally, in order to encourage the YOLO equity crowd to move money from equities to treasuries, the Fed will have to start messaging higher for longer and even … gasp … rate increases. The 2 year is at 5% and I wouldn’t be at all surprised to see mortgage rates hit 8% this summer.
Ugly earnings from Microsoft and Google and negative comments on the AI business case could lead to a big negative acceleration for equity markets tomorrow. But in this topsey turvey world, maybe bad is good and down is up. We will see! Hang on to your VR headsets!!