Stock Market Futures Slide Lower Ahead Of Big Tech Earnings
U.S. stock futures slipped in the pre-market trading, suggesting that Wall Street will start the week on a soft note. This came after major averages closed at record highs last week. The U.S stock market is likely to open lower after the negative lead from Europe and Asia. Attention for much of this week is likely set on the Federal Reserve’s two-day policy meeting. From here, investors could see when the U.S. central bank will plan to scale back its hefty asset-purchasing program.
Tech stocks rose last week on better than expected second-quarter earnings reports. If the earnings last week are any indication, we could be seeing good things ahead for Big Tech. They are on tap to report quarterly results this week. Amongst the Big Tech FAANG stocks, Alphabet (NASDAQ: GOOGL) has been the best performer so far in 2021, with shares rising 54% year to date.
With a strong earnings season demonstrating the recovery of the U.S. economy, Wall Street has essentially kicked off the second quarter with a strong rally. However, the stock futures seem to paint a different picture in the stock market today. Investors started the week on a cautious note amid ongoing concerns about the spread of the delta variant. Besides, China’s crackdown on its tech giants continues to unsettle many investors. The Dow, S&P 500, and Nasdaq 100 futures were all in the negative territory, moving 0.33% and 0.22% and 0.13% lower respectively at 6:48 a.m. ET.
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Surprise Tech Giant Support Sends Bitcoin & Dogecoin Higher
Bitcoin and Dogecoin have surged this week after some tech giants signaled their support for crypto. Bitcoin soared on Monday to approach $40,000, a level it hasn’t seen over 6 weeks. The rally came amid ongoing speculation over Amazon’s (NASDAQ: AMZN) potential involvement in the crypto space. The e-commerce titan advertised a job vacancy for a digital currency product lead, stirring speculation it might accept digital currency for transactions.
The rally was also largely attributed to traders exiting bets on declines. According to data from Bybt.com, more than $700 million of Bitcoin shorts were liquidated on Monday. That’s the most of any day in at least the past three months. This bullish momentum comes with the backdrop of recent support from Elon Musk, Jack Dorsey, and Cathie Wood.
Even Dogecoin has also surged above 20 cents today. And that’s because Musk has shared a tweet that proclaims the memecoin isn’t a speculative asset but rather “dogecoin is money”. Of course, the continuous pumping by Musk could briefly improve sentiments and price movements. However, it is also worth mentioning that Dogecoin is concentrated in very few addresses. Also, despite Musk calling out for devs to work on the project, any real development has yet to be seen.
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Chinese Stocks Tumble As Beijing Widens Crackdown Beyond Tech
Beijing’s latest tightening is a reform of its $100 billion ed-tech sector, undermining one of China’s hottest investment plays in recent years. Amongst them, TAL Education (NYSE: TAL) and New Oriental Education (NYSE: EDU) lost more than half of their value on Friday. Among other things, China’s new policy also appears to ban after school-tutoring businesses from advertising. And it forbids them to operate during public holidays.
The fallout hit Chinese stocks broadly and came as fears have been mounting over intervention from the Chinese Communist Party. Many would-be aware of Beijing slapping restrictions on recent ridesharing giant IPO Didi Global (NYSE: DIDI) earlier this month. Earlier in April, the Chinese government fined Alibaba Group (NYSE: BABA) $2.8 billion over antitrust violations.
Other Chinese stocks are also sliding due to censorship issues or have simply fallen in line with the general sentiment. For instance, JD.com (NASDAQ: JD) has not been directly targeted by Beijing but has fallen in sympathy with Alibaba on fears of a broader crackdown in the e-commerce space. Therefore, it may be better to stay put on buying the dips until the dust settles.
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Tesla Earnings
All eyes will be on Tesla (NASDAQ: TSLA) today when it reports its Q2 results after the closing bell. The company already revealed that it had more than 200K deliveries in the quarter. That was its best ever for a single quarter. Wall Street is largely expecting the top EV stock to beat analyst estimates with its earnings. Should that be the case, we could see TSLA stock moving higher later this evening.
From the earnings report, investors will also want to know when Tesla’s new Germany plant and Austin, Texas facility will start delivering cars. The Austin plant will build Tesla’s Cybertruck. Additionally, Tesla has been on the hunt for recurring revenue. There will also likely be questions about its driver-assistance software as a subscription. Besides, many would-be keeping an eye on how much money the company could make from its charging network. To recap, Musk tweeted last week that Tesla would open its charging network to other EVs down the road.
“A double-fly-wheel. We believe Tesla can leverage its cost leadership in EVs to aggressively expand its user base, over time generating a higher % of revenue from recurring/high-margin services revenue. Services drive the upside. We forecast Tesla’s network services EBITDA as a % of total TSLA EBITDA to reach 11% by 2025, ~18% by 2030, and ~35% by 2040. Tesla Service revenue includes automated driving, infotainment, upgrades, supercharging, maintenance, telematics, etc,”– Adam Jonas, equity analyst at Morgan Stanley.
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Big Tech Earnings
Wall Street is gearing up for probably the busiest earnings week in the second quarter with Big Tech dominating the scene. Major tech companies including Microsoft (NASDAQ: MSFT), Alphabet, Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB), and Amazon are set to report this week.
With earnings results from Snap (NYSE: SNAP) and Twitter (NYSE: TWTR) taking the stock market by storm last week, good things could be in store for some of the tech giants. This morning, we have some industrial stocks reporting. They include Lockheed Martin (NYSE: LMT), Koninklijke Philips (NYSE: PHG), and Otis (NYSE: OTIS), just to name a few. With all that being said, this is quite possibly the busiest week of the quarter for those paying attention to the large caps.
