Wall Street to start higher amid another heavy day for earnings

Stocks on Wall Street are set to open modestly firmer on what is shaping up to be another big day for company results.

The Dow Jones Industrial Average is expected to open around 23 points higher at 34,005 while the broader-based S&P 500 is seen advancing 5 points to 4,193.

The technology stocks haven, the Nasdaq 100, should open some 19 points firmer at 14,045 if spread-betting sites are to be believed.

Yesterday’s announcement of results by Tesla Inc (NASDAQ:TSLA) after the bell yesterday is still generating plenty of comment.

“Last night, we received Q1 earnings from Tesla, one of the most loved and hated companies in the world, showing revenue of $10.4bn in line with estimates and adjusted EPS of $0.93 vs. est. $0.80. The company says it expects to deliver 50% vehicle delivery growth in 2021; consensus is expecting revenue to be up 57% y/y in 2021. This revenue target could be difficult if deliveries are up 50% as the average selling price (ASP) is under pressure across several markets and most notably in China; Tesla’s ASP declined by 13% y/y,” reported Peter Garnry, the head of equity strategy at Saxo Bank.

“It’s worth noticing that out of the $0.93 in non-GAAP [generally accepted accounting principles] earnings per share, $0.54 is stock-based compensation per share, so essentially more than half of shareholders’ profit is shared through stock options with employees. The biggest potential risk in the Q1 report is that inventory is down to 8 days as the company is struggling with parts and computer chips like the rest of the industry. Few words are mentioned on this situation, but it could turn out to be a negative throughout the year.

“Overall, strong results as expected but not a blowout quarter for Tesla that is still facing enormous complexity in expanding its production while rolling out new models and battling more competition than ever. This was not the result that will give the bears ammunition except they can still claim aggressive valuation, but the narrative is still intact; Tesla is the best pure-play on EV [electric vehicles] and that will warrant a premium over other carmakers for now. Shares are down 3% in extended trading to $716,” he added.

Microsoft Corp (NASDAQ:MSFT) and Google’s parent company Alphabet Inc (NASDAQ:GOOG) are due to release their earnings after the close today. Both Alphabet and Microsoft’s share prices hit a record high yesterday

“Microsoft is expected to report strong Q1 earnings. Consensus estimates point to a 17% year-on-year revenue hike to $41 billion, with EPS at USD1.78. The stock hit a fresh all-time high on Monday and sits just USD2 per share under a USD2 trillion valuation. As a stock that has benefited greatly from the work-from-home ethos, guidance will be particularly in focus,” according to Sophie Griffiths at OANDA.

“The biggest threat to the positive trend in technology stocks is the reflation trade, which would boost demand for cyclical stocks and move capital from the tech stocks towards the value names but it looks like that migration from growth to value is happening without too much harm for the tech stocks for now, and some digital services, including the cloud business, will unlikely be affected by the reflation theme as the end of the pandemic won’t reverse the migration of our data storage to the cloud,” said Ipek Ozkardeskaya at Swissquote.

Also on the slate today are announcements from Starbucks Corp (NASDAQ:SBUX), Raytheon Technologies Corp (NYSE:RTX) and General Electric Co (NYSE:GE).

Four things to watch for on Tuesday:

• Other major companies reporting earnings today include credit card firm Visa Inc (NYSE:V), pharma firm Eli Lilly & Co (NYSE:LLY), electronics group Texas Instruments Inc (NASDAQ:TXN) and delivery firm United Parcel Service Inc (NYSE:UPS)
• Shares in grain and seed processor Archer-Daniels-Midland Co (NYSE:ADM) will be in focus after the company reported earnings that beat expectations
• Reddit trader favourite GameStop Corp (NYSE:GME) could also see some action after the video game retailer said it had raised US$551mln through the sale of 3.5mln shares to accelerate its turnaround efforts
• It’s also fairly busy on the macroeconomic data front, with the US include the Conference Board’s consumer confidence indicator for April, the FHFA house price index for February and the Richmond Fed’s manufacturing index for April

Story by ProactiveInvestors