Tesla's shares dropped 6.0% after the company mentioned logistical challenges, as deliveries grew by less than its guidance of 50%.

Tesla was among a flurry of corporate results released yesterday. The numbers are all over the place, but overall, they are holding up pretty well to the world's current woes.

Stock market indexes took a breather yesterday, after two sessions of rebound that allowed them to erase some of the losses accumulated at the beginning of the month. The declines were modest, with -0.7% for the S&P 500 and 0.4% for the Nasdaq 100.

The upturn seen on Monday and Tuesday is therefore losing steam. Indeed, the bond markets continued to tell a slightly different story, and they moved yesterday. The yield on 10-year U.S. debt rose to 4.14%, a sign that investors are concerned that fighting inflation will require tighter policy, longer. Since salvation is unlikely to come from central banks in the short term, investors turned to corporate earnings.

And from that perspective, there is some good and some bad. Although Tesla missed its guidance, it still delivered strong results. Some companies have downward revisions of forecasts but also increases. It's hard to see the big picture. I looked at a few transcripts of earnings conferences to understand how companies, even in industry, are managing to raise their targets while being hit by input and energy price increases. And the answer is actually quite simple. First, they have not had much difficulty passing on the price increases to their customers. Second, some are covered. The Swedish company Sandvik, for example, explains that it is covered by financial products for the current year and part of the next, while conceding that it will be more complicated the following winter if the price fever continues. A major automotive supplier explains that manufacturers were initially reluctant to accept the passing on of costs, but that they realized that they had no choice but to do so.

When I said that the explanation is quite simple, it's because in all cases, it's the customer who ends up paying. For now, the consumer hasn't totally given up. There was some concern that this would happen in the second quarter of 2022, but it hasn't happened. It's still a little early to draw any conclusions about the third quarter, but the early numbers show that there is still a response. Even so, there may be a few more holes in the pipeline because the confidence indicators are deteriorating, which means that consumer tolerance is shrinking, which should in all likelihood lead to increased vigilance on spending.

Meanwhile, things are moving quite a bit in China. As the 20th Communist Party Congress continues, the authorities are reportedly holding emergency talks to organize a response to Washington's decision to further limit access to US semiconductor technologies. But what has the market buzzing this morning are rumors that China is considering reducing health restrictions on the free movement of people within its borders. This is speculating that a relaxation of the zero-covid policy could help boost the country's growth and thus give a boost to global momentum.

The other big news today is the resignation of British Prime Minister Liz Truss, which said that due to the current conditions, she couldn't deliver the mandate under which she was elected, and that she would be replaced by the end of next week.

 

Economic highlights of the day:

German producer prices, US weekly jobless claims the Philly Fed index, Existing Home Sales and the Leading Index are on the agenda today. All the macro agenda is here. 

The dollar is trading at EUR 1.0204 and GBP 0.8880. The ounce of gold is worth $1634. Oil is up, with North Sea Brent crude at USD 93.22 per barrel and US WTI light crude at USD 85.61. The yield on 10-year US debt is trending at 4.14%. Bitcoin is back on top of USD 19,200 per unit.

 

In corporate news:

* Tesla said Wednesday night it expects to miss its full-year delivery target after third-quarter sales fell short of Wall Street expectations, citing logistical difficulties while seeking to reassure that demand will remain strong. The stock was down 6.2% in pre-market trading.

* International Business Machines (IBM) reported better-than-expected quarterly results and said it expects to exceed its annual growth target thanks to strong demand for its digital services, which is mitigating the impact of the stronger dollar. The stock was up 3.1% in early pre-market trading.

* DOW was down 2.2% in premarket trading after a 56% drop in the chemical group's third-quarter profit due to higher energy costs and a weaker-than-expected recovery in demand. The group also announced that it expects fourth-quarter sales to be below the Wall Street consensus.

* AT&T raised its annual profit forecast on Thursday after reporting better-than-expected adjusted earnings in the third quarter on the back of strong demand for cell phone and Internet services. The company is also in talks with several investors to create a joint venture that could invest several billion dollars in developing fiber-optic networks, Bloomberg reported, citing sources close to the matter. The stock was up 2.8 percent in premarket trading.

* American Airlines said Thursday it expects earnings to beat Wall Street expectations for the three months ended in December, helped by a solid rebound in travel as demand shows no signs of slowing despite higher fares. The stock was up 3% in premarket trading.

* Alcoa was down about 8% in after-hours trading Wednesday after it reported lower-than-expected quarterly results and cut some of its forecasts.

* Twitter - Elon Musk said he was excited about buying the social network but noted that his offer overvalued it.

* Altria announced that Philip Morris International has agreed to pay $2.7 billion for the exclusive right to market its IQOS heated tobacco products in the United States. Philip Morris also raised its bid for Swedish Match on Thursday by more than 9% to 116 Swedish kronor per share and warned that this proposal was the last.

* The U.S. Department of Justice has asked for details of CVS Health's proposed $8 billion takeover of Signify Health, suggesting that the deal could lead to a full investigation.

 

Analyst recommendations:

  • Ally Financial: Morgan Stanley downgrades to equal-weight from overweight. PT up 5.9% to $28.
  • American Water: Wells Fargo Securities upgrades to equal-weight from underweight. PT up 4.5% to $140.
  • ASML ADRs: Fubon Securities upgrades to buy from neutral. PT up 18% to $500.
  • Cheniere Energy: Raymond James adjusts price target to $210 from $178, reiterates strong buy rating.
  • Dominion Energy: KeyBanc downgrades to sector weight from overweight.
  • Glencore: SBG Securities upgrades to buy from hold. PT up 3.9% to 490 pence.
  • Meta: MKM Partners lowers price target to $195 from $240, maintains buy rating.
  • Monarch Casino: Stifel upgrades to buy from hold. PT up 25% to $77.
  • Moneysupermarket: Liberum upgrades from hold to buy targeting GBp 215.
  • National Retail: Oppenheimer & Co reinstated coverage with a recommendation of outperform. PT up 22% from last price to $48.
  • Northern Trust: Keefe, Bruyette & Woods downgrades to market perform from outperform. PT up 9.3% to $87.
  • Oracle: Piper Sandler upgrades to neutral from underweight. PT up 5.6% to $70.
  • PNM Resources: Wells Fargo Securities downgrades to equal-weight from overweight. PT down 2.8% to $45.
  • Southern Co: KeyBanc Capital Markets upgrades to overweight from sector weight. PT up 8.2% to $70.
  • Xcel Energy: Wolfe Research upgrades to outperform from peerperform. PT up 13% to $69.