Stock Futures Edge Slightly Higher To Start August On A Strong Note
U.S. stock futures edge slightly higher after concerns about slowing growth sparked a selloff on Wall Street last week. The spread of delta variants continued to keep investors on edge. Now, the seven-day average of daily coronavirus cases in the U.S. has surpassed the peak seen last summer. Therefore, some may be expecting a modest pullback in economic activities. Overall, the major stock benchmarks have traded sideways in recent sessions. This came as investors await more catalysts from corporate earnings results, economic data, and policymakers.
“We’re going through a couple of transitions right now at the same time…”The first one, of course, is this deceleration in growth. We’ve seen this massive lift-off and growth since the pandemic.” “Secondly, we have to contend with the Fed and with their transition as well, both on the leadership side and also with respect to policy,” he added. “And then third … We’ve got the Delta variant as well to consider, in terms of transitioning potentially to a new wave of cases in the COVID-19 situation.- George Mateyo, Key Private Bank chief investment officer
Crude oil prices and treasury yields are falling sharply on signs of slowing economic growth. Thus, more support would be needed from corporate earnings this week. Investors are also closely monitoring progress in Washington. This came as lawmakers move toward a bipartisan infrastructure bill that would devote $550 billion to U.S. infrastructure. The Dow, S&P 500, and Nasdaq 100 futures were all in the positive territory, moving 0.47% and 0.37% and 0.12% higher respectively at 6:55 a.m. ET.
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Strong Recommendation From Analysts Sent Tesla Stock Surging
Tesla (NASDAQ: TSLA) reported record earnings last week, and TSLA stock has climbed higher ever since. From the second-quarter earnings report, Tesla sold more than 200,000 vehicles. It surpassed $1 billion in net income for the first time. It’s also worth mentioning that Tesla is also on track to build its first Model Y vehicles at new factories in Berlin and Texas.
Following the upbeat quarterly performance, Vijay Rakesh from Mizuho Securities set a new price target to $825. This represents a more than 16% potential upside from Monday’s closing price. Rakesh believes that the cost efficiencies across production facilities are one of the reasons Tesla will perform even better in the quarters to come.
Given the strong delivery numbers coming from Chinese EVs such as Nio (NYSE: NIO), XPeng (NYSE: XPEV), and Li Auto (NASDAQ: LI) over the past two days, investors are also anticipating strong numbers from Tesla’s Shanghai factory. Rakesh added, “TSLA noted post its cost optimization and capacity ramp success in Shanghai, the Shanghai Gigafactory has become the global export hub for its vehicles. While TSLA noted it sees chip shortages continuing to constrain production, we believe they are trending towards potential improvement in the 2H21.”
Tencent (TCEHY) Stock Retreat On Regulatory Concerns
Investors remained skittish on the extent of Beijing’s regulatory crackdown today. Tencent (OTCMKTS: TCEHY), China’s biggest social media and video games company, would likely see its share price slide when the market opens today. Earlier today in Hong Kong, Tencent stock slid more than 10% during its intraday trading there. This came after a Chinese state media outlet branded online gaming as a “spiritual opium”. It also called for more curbs in the gaming industry.
According to the article from Economic Information Daily, “No industry, no sport, can be allowed to develop in a way that will destroy a generation,” which also likened online games to “electronic drugs“.
This is stoking concerns the sector could become the next target of the clampdown. After all, some are still reeling from the crackdown on the private tutoring industry last month. Following this news, other gaming companies such as NetEase (NASDAQ: NTES) are also expected to trade lower in the stock market today. The clampdown today would prompt nervous investors to reevaluate their investment in Chinese stocks. This came as they ponder the longer-term ramifications of a crackdown on a series of firms. Meanwhile, Alibaba (NYSE: BABA) reported its first-quarter earnings this morning.
Lyft Earnings Report In Focus
Lyft (NASDAQ: LYFT) is due to report its June-quarter earnings today after the closing bell, with Uber Technologies (NYSE: UBER) following 24 hours later. The recovery in the ride-sharing business is picking up steam with the reopening of the economy.
But investors may be wondering if the rebound in travels could be strong enough to boost LYFT stocks. Even if the ride-hailing business fails to gather momentum, the company’s recent partnership with Ford (NYSE: F) could be another key growth driver to watch in the years to come.
As you may or may not be aware, Ford’s self-driving start-up Argo AI is partnering with Lyft. They are aiming to launch a self-driving taxi service by the end of this year. This partnership will utilize Ford vehicles, Argo’s self-driving hardware and software, and Lyft’s ride-hailing network. Should the game plan pan out accordingly, we could experience the robotaxis in Miami before year-end and in Austin next year.
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More Earnings Underway
Expectations for the corporate earnings season are sky-high amid the slew of strong earnings thus far. Admittedly, some major tech companies have warned about a possible slowdown in growth. Nevertheless, most of the earnings reported so far have topped estimates. Some of the notable stocks reporting this morning include BP (NYSE: BP), Discovery Communications (NASDAQ: DISCA), and Clorox (NYSE: CLX).
There are notable gaming companies reporting today and they include Activision Blizzard (NASDAQ: ATVI) and Skillz (NYSE: SKLZ). Other big names from the energy sector reporting are set to report after the closing bell today as well. They include SunPower (NASDAQ: SPWR), Energy Transfer (NYSE: ET), and Occidental Petroleum (NYSE: OXY). These will come on the heels of an already strong second-quarter earnings season. Would the strong reports from Chevron and ExxonMobil be of any guide? If so, the oil stocks reporting today are also primed to benefit from the increase in oil prices.