The Dow fell 128 points on heavy trading volume to close at 27,140. IBD still has markets in rally mode but today’s action showed that market action is choppy and caution id advised.
Several car companies reported earnings and the results were not good. Ford reported flat revenue and a 4% increase in net income. Both revenue and profit numbers were less than expected and CEO James “Buddy” Hackett gave light forward guidance. Meanwhile Nissan saw a 98% decrease in profits and said it could lay off 12,000 workers globally.
Tesla reported a 59% increase in sales and a loss that was greater than expected even thought it was half the loss reported in Q2 of last year. At issue seems to be declining sales of high margin model S and X’s. The reason for this decline could be cannibalization from the popular but less profitable model 3 especially in Europe where the model X and S were big sellers before the model 3 came along. Tesla is sitting on $5 billion in cash and expects to sell 360,000 to 400,000 cars this year. The company continues to invest heavily in the Gigafactory 3 in China and plans on selling model 3’s there by year end. Mr. Wall Street was not happy with the report because they had been secretly hoping for a profitable quarter. One-minute Wall Street complains about not enough model 3 deliveries and now they are worried about too many model 3 deliveries. Sigh…..
The old Hee-Haw song “If it weren’t for bad luck, I’d have no luck at all. Gloom despair and agony on me” seems to apply to the European economy these days. ECB President Mario Draghi today in a speech in Frankfurt sounded a sad song and set the stage for a radical round of economic stimulus to combat falling business optimism and strength. “Super” Mario said that “it’s getting worse and worse” and cited survey data which shows euro-area manufacturing contracting and business confidence crumbling. Falling inflation is also a concern and recession risk appears to be high. The European economy is export driven and trade issues, new leadership in the UK and a hard Brexit in 96 days are spiking the uncertainty meter. See the old Hee-Haw song on our Facebook page.