U.S. stocks rose on Wednesday morning as investors looked to Federal Reserve Chairman Jerome Powell’s upcoming speech for clues as to whether interest rates will remain high for an extended period of time.
The S&P 500 (^GSPC) rose about 0.4%, and the Dow Jones Industrial Average (^DJI) jumped about 0.2%. The tech-heavy Nasdaq Composite Index (^IXIC) led the gains, rising 0.6% after the major index closed in a sea of ​​red on Tuesday.
Stocks have retreated from a strong start to the year as strong economic data dampened hopes for three Fed rate cuts. Investors are scaling back bets to the point where they expect a smaller and slower easing than policymakers expected.
Stocks reversed losses on Wednesday morning after prices paid in the services sector hit their lowest level since March 2020, pointing to the possibility of lower inflation in the future. The data contrasted with similar data for the manufacturing sector on Monday, which showed inflation pressures increasing last month.
The focus now is on Chairman Powell, whose economic outlook speech later in the day will be considered for any hint of whether the June Fed meeting will result in a change in policy. Earlier, Atlanta Fed President Rafael Bostic told CNBC he expected the Fed to cut interest rates for the first time in the fourth quarter.
The results of the shareholder vote are expected later Wednesday, and all eyes will be on who wins the fierce proxy battle between Disney and activist investor Nelson Peltz. There are signs Disney has secured enough support to fend off a board shakeup proposed by Mr. Peltz’s Mr. Tryon, people told Reuters.
Looking at individual stocks, Intel (INTC) stock fell about 7% after the chip company posted a significant operating loss in its foundry business.
Meanwhile, rival TSMC (TSM) was forced to halt some chip production after the earthquake that hit Taiwan, raising concerns about its suppliers to Apple (AAPL) and Nvidia (NVDA). The company’s US-listed shares fell slightly.
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Tesla placed in penalty box by JP Morgan
You can’t bury the lead here.
JPMorgan analyst Ryan Brinkman lowered his price target on Tesla (TSLA) this morning from $130 to $115, which assumes about 30% downside from current price levels. (The stock has already fallen 33% since the beginning of the year.) The price target revision comes after Brinkman “significantly lowered” his forecast for Tesla following lackluster delivery reports.
Here are some interesting numbers from Brinkman’s report.
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First quarter EPS was $0.42, down from the prior estimate of $0.69. The current consensus is around $0.60.
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Free cash outflow in the first quarter was $1.3 billion, compared with the previously expected inflow of $300 million. Brinkman blamed Tesla’s high inventory following a disappointing quarter.
Brinkman said of Tesla stock:
“While Tesla stock is down 59% from its all-time high of $409.97 on November 4, 2021 (up 11% vs. the S&P 500), Tesla stock still appears to be very expensive. Trends over the past few quarters have shown that the company’s current valuation of $167 per share, as well as its $115 price target (market capitalization of $401 billion, outpacing Toyota’s $391 billion, making it the most valuable automaker in the world). (we are nervously noting) even the need to grow to reach ($580 billion).
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