Tesla, Alphabet Earnings Underwhelm But Can't Stop Market Uptrend
Positive progress on trade deals helped drive the major indexes to new all-time highs.
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A trade deal with Japan, along with reports that a deal with the European Union is close, helped propel the S&P 500 and DJIA to fresh all-time highs. The Russell 2000 small-cap index IWM outperformed, gaining 1.5%.
Speculation in smaller stocks is running hot, with over 100 names moving up by more than 10% and 21 names experiencing gains of more than 20%. There is quite a bit of talk about "meme" action in junk stocks, but most of these names reversed sharply lower after gapping high. It isn’t the frenzy that we saw back in 2021.
What is driving the market is a steady diet of positive news. Trade deals are being made, inflation isn’t an issue, growth is solid and economic optimism is robust. So far, earnings have been good, but will be tested on Wednesday night when Alphabet GOOGL and Tesla TSLA report.
Alphabet reported EPS $2.31 versus the consensus of $2.19 and revenue of $96.43 billion versus the consensus $94.02 billion. It is a beat, but the initial reaction is negative, with the stock down about 2% so far. There is a big jump in capex spending to $85 billion in 2025, which will be favorable for chip supplies like Nvidia NVDA. Some dip buyers are already jumping in on the pullback.
Tesla TSLA reports Q2 adjusted EPS of 40 cents versus the consensus of 40 cents and revenue of $22.5 billion, versus the consensus of $22.13 billion. These aren’t blowout numbers, but expectations for Tesla were low, and the stock is up about 1.5% on the report. The company expects to launch new models later this year.
The important issue with these two reports is that there isn’t a rush to "sell the news." The headline Tesla numbers are nothing special, but there is still an appetite for the stock, which is a great sign for continued momentum.
There are dozens of other reports hitting, and most look quite solid so far. There doesn’t appear to be anything in the way of the market at this point, other than a reluctance to keep chasing new all-time highs.
