Global markets were higher on Friday, once again ending the week on a positive note. The S&P 500 and Nasdaq rose just enough to notch record closing highs for the second time last week, as investors digested mixed corporate earnings and economic data.
US economic growth (GDP) data showed gross domestic product rising faster than expected due to high inventories while consumer and business spending slowed sharply, and homebuilding investment contracted for a fifth straight quarter. The data soothed investor fears that the US economy is about to fall off a cliff.
For the week ahead, investor attention will likely remain focussed on US corporate earnings season – with the likes of McDonalds, Google, and Apple reporting results, but the key event to watch will be Thursday morning's US Federal Reserve policy announcement.
Stock in Focus: Tesla (TSLA:Nasdaq)
Shares in Tesla shares sunk to the lowest level in two years on Friday, rounding out a rough week that included worse-than-expected quarterly results and a pitch by Chief Executive Elon Musk on autonomous cars that failed to win over investors.
Tesla has swung from a profit in its fourth quarter of 2018 to a non-GAAP loss of $2.90 per share in its first quarter of 2019. The hit to earnings came as Tesla's first-quarter deliveries were lower than expected due to weaker demand for its Model S and X vehicles.
Despite reporting worse-than-expected first-quarter deliveries and a significant quarterly loss, Tesla remains optimistic about the rest of the year. Not only does Tesla expect second-quarter deliveries to increase about 50% sequentially and more than double on a year-over-year basis, but management expects to narrow its loss in Q2 and return to profitability in Q3. Pointing to Tesla's guidance for demand to increase, several analysts believe this is unrealistic, and a number of commentators think Tesla will try to raise capital this year.
Tesla has always been a contentious investment which sees a large divergence in opinion. From a big picture point of view, we have always said that buyers of Tesla shares in essence need to believe in the Tesla story and Elon Musk.
On a positive note, there seems to be a settlement reached on Friday in Tesla CEO Elon Musk's battle with the US Securities and Exchange Commission. A settlement is likely a breath of fresh air for investors, as it likely involves no punishment for Musk or Tesla.
We currently have a HOLD recommendation on Tesla.
Members should look out for a full update to be released on Tesla in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was a touch higher on Friday (ASX 200 index +0.05%) during a thin day of trade, but the local bourse shook off a subdued resources sector to remain at a near 11-year high.
In stock news, Beleaguered wealth manager IOOF breached its new licence conditions by missing a deadline to overhaul its scandal-rocked superannuation business. IOOF said on Friday an independent review of compliance had identified 76 issues to be addressed by March 31, with four issues still in progress relating to its superannuation business. Bellamy's Australia shares closed the week 16.8% higher after the company received approval from China's market regulator, the State Administration for Market Regulation, for a new Bellamy’s branded formulation-series to be produced at the ViPlus Dairy facility in Toora, Victoria.
The New Zealand market retraced on Friday (NZX 50 index -0.77%) The as the NZX 50 Index fell back below the recently achieved 10,000 level. Blue-chip stocks including Spark New Zealand, Goodman Property Trust and Ryman Healthcare were among those sold down.
Spark continues to come under pressure as it attracted more criticism over an outage on its new sports streaming platform during the trans-Tasman Anzac Day hockey test. There are concerns that there are problems on the platform, which could dent the telco's reputation if it happened during the Rugby World Cup
3 Things Markets Will be Watching this Week
- The US first-quarter reporting season continues this week.
- Thursday morning (AU/NZ time) sees a meeting of the US Federal Reserve, and the release of important monthly US manufacturing data.
- The latest NZ employment figures are published on Wednesday.
Have a Great Day,