Oct 21, 2021
Tesla (NASDAQ:TSLA) reported its best-ever quarter, but its stock struggled to build on its sky-high valuation. Donald Trump is set for a return to social media. Intel (NASDAQ:INTC) and AT&T (NYSE:T) will report earnings in the course of the day. The U.S. releases weekly jobless claims numbers and China Evergrande is closer to being formally in default. And the first lockdown of fall is there, as Moscow orders all shops, bars and restaurants to be shut against a backdrop of record deaths and infections (and a miserably low vaccination rate). Here's what you need to know in financial markets on Thursday, 21st October.
1. Tesla's record quarter
Tesla delivered its best quarter ever for revenue and profit but its stock struggled to build on gains that have left its valuation looking stretched, even by its own standards. The stock currently trades at 20 times sales and 451 times last year’s earnings.
The company had already reported record production and delivery numbers for the three months through September. Its best-ever operating margin – achieved despite an unfavorable product mix and the well-documented sectoral problems involving shipping and component shortages – painted a picture of a company that is no longer dependent on emissions credits to turn a profit.
The only off notes struck were in the absence of CEO Elon Musk from the regular analyst call, leaving CFO Zachary Kirkhorn to warn that supply chain issues and higher input costs may yet weigh on future quarters.
2. Trump returns to social media
Donald Trump is returning to social media, ahead of a widely-expected run for the Presidency in 2024.
Trump announced on Wednesday that he will establish a new social media platform called TRUTH Social “to challenge the tyranny of Big Tech”. He has been banned from Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) since his supporters stormed the Capitol on January 6th in an effort to stop Congress certifying Joe Biden’s election victory.
The platform, to be owned by Trump Media and Technology Group, will go public by a merger with Digital World Acquisition (NASDAQ:DWAC), a SPAC that listed in September. DWA stock soared 45% in premarket trading.
Facebook stock and Twitter stock reacted only moderately to the news, inching down by less than 1% in line with benchmark stock futures.
3. Stocks set to open lower; jobless claims due
U.S. stocks are set to open lower later, as earnings continue to pour in. Wednesday’s round of results were solid enough to push the S&P 500 to within a whisker of its record high close in August, but consolidation is likely to be the order of the day ahead of the release of weekly jobless claims at 8:30 AM ET (1230 GMT), the day’s only major economic release.
By 6:20 AM ET (1010 GMT), Dow Jones futures were down 100 points, or 0.3%, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.1%.
The day’s earnings roster is headed by AT&T before the open and by Intel after the close. Medical devices group Danaher (NYSE:DHR) already put out results ahead of expectations, as did Anglo-Dutch consumer giant Unilever (NYSE:UL), which followed Nestle and Procter & Gamble (NYSE:PG) in saying it expects to be able to pass higher input prices on to consumers.
4. First of the autumn lockdowns in Russia
The pandemic isn’t over yet. The first lockdowns of the northern hemisphere winter are here, with Russia ordering a week-long factory shutdown and its capital Moscow ordering all shops, bars and restaurants to close from Oct. 28.
That comes as levels of both new cases and deaths running at record levels, a result of popular resistance to the locally-developed Sputnik vaccine, which was the first effective vaccine against Covid-19 to be authorized by any G20 country. Less than one-third of the country’s 140 million population is fully-vaccinated.
Elsewhere, the U.K. government has been forced to play down suggestions that it will reintroduce Covid-19 prevention measures, after dropping mask mandates and refusing to adopt vaccination passes earlier in the summer. New case levels are running at over 60,000 a day, while death levels are also running at a steady rate of between 130-140 a day.
5. Evergrande rumbles on toward formal default
China Evergrande inched closer to a formal default after failing to complete the sale of a key money-making asset to help meet its short-term obligations.
The stricken developer’s stock fell as much as 14% in Hong Kong as it resumed trading after a three-week hiatus, after announcing the end of talks to sell a stake in its property services unit to Hopson Developments.
The grace period for the first dollar bond on which Evergrande missed payments expires at the end of Friday. Other developers are currently missing full payments on their dollar bonds on a near-daily basis. The yuan remained stable, reflecting confidence in official reassurances that systemic risks are being contained.