Futures rip, Tesla pops, Boeing flies, Rogers miss, Intel job cuts
The newsletter writing process was interrupted several times this morning with my daughter insisting I pick her clothes. My first option for her was “too boring” and she needed something fancy. But the fancy choice was “too itchy”. Choosing her own clothes was out of the question. In the end, she chose fancy over function. Sometimes I wonder if its all a power trip just to remind us who is boss.
Should you buy the dips or stick with relative strength? The answer is a bit of both according to Liz Miller of Summit Place Financial. She has been managing money for 20 years and seen her fair share of cycles. The art is about picking the right stocks to chase lower and knowing which ones to stay away from. Don’t miss this actionable-packed interview. Watch here!
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Trump put: Futures are ripping higher this morning on hope that tensions between China and the US are fading. It seems that hope was selectively doled out yesterday when US Treasury Secretary Scott Bessent told a private meeting of investors at a JPMorgan event that tensions between the two countries was unsustainable and to expect it to “de-escalate” soon. Word got out and markets rallied sharply yesterday. The party continued after-hours as US President Donald Trump confirmed Bessent’s private musings saying tariffs will come down “substantially” on Chinese goods. He also said he has no intention of firing Fed Chair Jerome Powell. That double whammy of relief is sending stocks and the US dollar higher while bonds are also in rally mode. Tech stocks are leading the charge. Copper prices are also advancing despite a cut to global growth forecasts by the IMF this morning (down to 2.8% from 3.3% in January). Today we have earnings to distract us with 36 companies reporting on the S&P 500 and 10 companies on the TSX.
Something about Tesla: Tesla delivered a stunningly bad set of quarterly results so naturally the stock is surging in the pre-market. Quarterly profit dropped 70% while total sales dropped 9% from last year – it’s worst quarterly sales drop since 2012. A combination of political backlash weighing on demand and higher promotional activity to sell cars meant margins came in at 2.1% – the lowest since 2019 and lower than GM and Ford. Except, GM and Ford trade between 4-5x earnings, while Tesla trades at 117x. So why is the stock up? The answer is and always will be: Elon Musk. On the conference call with analysts Musk said that most of his work with the government is complete and starting May he will be “allocating more of my time to Tesla.” He also reaffirmed the commitment to start rolling out cheaper versions of its SUV soon and for robotaxis to hit the road by June. “More important than numbers, this was the time Musk could pivot, speak to shareholders/employees, and take a turn away from the DOGE/Trump White House and recommit as CEO of Tesla…and he did it loudly and clearly in a conference call that we view as a turning point in the Tesla story,” wrote Dan Ives of Wedbush. The stock was also down 50% going in to the quarter, so the bar was very low for good news. It likely also helps that the tape is enjoying calmer words from Trump on Chinese trade.
Take flight: Shares of Boeing are up nearly 5% after reporting a smaller loss than expected while commercial airplane revenue soared. Total sales at the plane maker jumped nearly 18% from last year thanks to a 75% increase in commercial plane sales. While it still burned through $2.3 billion in cash, this was better than the $3.4 billion analysts had feared. This stock is also likely being supported by the changing tone around China this morning. Recall, China halted aircraft deliveries of Boeing jets amidst the trade war. However, Boeing still has plenty more headaches as it comes off a difficult 2024 that saw a near fatal airline failure to start the year, production delays, strikes, and a new CEO. Boeing hasn’t turned a profit since 2021.
Pick up the phone: We will watch shares of Rogers at the open after it missed profit expectations and saw a slowdown in new customer growth. Rising competition and lower immigration weighed on growth this quarter with the company adding only 34,000 new customers compared to 61,000 last year. However, the growth was better than feared (consensus was at 27,700) and the stock is trading around a 15-year low. “Given the significant drag in stock performance lately, we would not be surprised to see a relief rally in the stock,” wrote Scotia’s Maher Yaghi, “However, the outlook remains sluggish.” Debt is a big concern at Rogers and the company announced it would remove the discount on its dividend reinvestment plan. RBC says this is a modest positive and wasn’t expected. Shares of AT&T, meanwhile, are trading higher in the pre-market after the telco reported better than expected sales and profit and strong free cash flow. It added more subscribers than expected, which is a relief after Verizon missed their numbers yesterday. Shares of AT&T have had a tremendous run and are trading at the highest level in 5 years, however it was just a year and a half ago that it was trading at a more than 30-year low.
Deep cuts: Intel is popping this morning up 5% in the pre-market on reports it is planning to slash 20% of its workforce in an effort to dramatically reshape the chip maker. This would amount to nearly 22,000 jobs lost. This would be the first major move by new CEO Lip-Bu Tan who took over last month. Intel has missed nearly every innovation cycle in semiconductors and is badly behind in the AI revolution. Intel reports tomorrow and likely will give details around these job cuts and other plans for a turnaround. The stock has had several head fake rallies over the past few months, but could be an interesting name to watch if you like turnarounds.
