This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Tesla clocks worst week of the year Tesla shares dropped more than 15% last week to close at $211.99 on Friday, marking the worst weekly performance for the stock this year as CEO Elon Musk sounded pessimistic about macroeconomic issues on a recent earnings call. Shares of the electric automaker are still up 96% year-to-date.
Big earnings week Investors will be watching out for an action-packed week of earnings as companies including Microsoft, Meta Platforms, Amazon, Alphabet, General Motors and Ford among others gear up to post their quarterly results. The carmakers will be under the radar this week amid ongoing strikes and contract negotiations with the United Auto Workers union.
X to launch new subscription tiers Owner Elon Musk said X, the social media service formerly known as Twitter, will launch two new tiers of subscriptions for users. One tier will be “lower cost with all features, but no reduction in ads,” while the other is “more expensive, but has no ads,” Musk said.
[PRO] Earnings playbook Big Tech takes center stage in what could be a make-or-break week for S&P 500 earnings. About 150 S&P 500 companies are slated to report, including Microsoft, Meta Platforms, Amazon and Alphabet. Those results come during a tough time for Wall Street, as higher rates and conflict in the Middle East rattle investor sentiment. Here’s how to trade a busy week of earnings.
Rising Treasury yields, looming interest rate hikes to fight inflation and the heightening conflict in the Middle East drove investors away from risky assets last week.
The yield on the benchmark 10-year Treasury crossed 5% for the first time since 2007 on Thursday, a level perceived by markets as a potential drag on the U.S. economy as it could translate to higher rates on mortgages, credit cards, auto loans and more.
A move into safe-haven gold seemed like a sensible bet, given the worsening crisis in the Middle East. Gold was up 2.5% last week, recording its second consecutive weekly rise after adding 5.22% in the prior week.
Investors are now bracing for a heavy week of earnings as Big Tech companies including Alphabet, Amazon, Meta and Microsoft will take centerstage.
“We’re hopefully going to see some continued positive strength there on the economy and what they see going forward,” said Ryan Detrick, chief market strategist at Carson Group. “The headlines are scary, for sure. But the fundamentals to us are pretty strong. We’re still seeing earnings season that’s going to come in better than expected.”
This will arrive after a mixed batch of earnings from behemoths like Tesla and Netflix last week. Tesla marked its biggest weekly decline after Elon Musk shared his pessimistic view on the macroeconomic landscape, while Netflix shares soared as markets cheered its new ad-tier subscription plan.
Given the huge role advertisers and subscriptions play for the bottom lines of such firms, it was no surprise that Musk turned his attention to improving the usability of social media platform X, formerly known as Twitter.
Musk said. X is gearing up to launch two new tiers of subscriptions for users, in hopes that it could improve the company’s finances and open new revenue streams. Musk’s sweeping changes across the company, including firing most of its employees and reinstating previously banned accounts, scared advertisers away.
The most popular question on Ark Invest’s website has nothing to do with investing in the U.S., according to the firm’s CEO and Chief Investment Officer Cathie Wood.
“The No. 1 question on our website as we track these questions is: Why can’t we buy your strategies in Europe?” the tech investor told CNBC’s “ETF Edge” this week.
Wood’s firm expanded its exposure to Europe last month by acquiring the Rize ETF Limited from AssetCo.
“We found this little gem of a company inside of AssetCo, which philosophically and from a DNA point-of-view, is very much like Ark,” Wood said. “They know what’s in their portfolios. They’re very focused on the future, thematically oriented. They do have a sustainable orientation, which is absolutely essential in Europe.”
She speculates 25% of total demand for Ark’s research strategies comes from Europe.
“We’re terribly impressed with the quality of their [Rise ETF] own research and due diligence,” Wood said. “We saw it during the deal, and I think we’re going to hit the ground running if the regulators approve our strategies there. And, of course, we’d like to distribute their strategies throughout the world including the US.”
Wood’s firm has around $25 billion in assets under management, according to the firm. As of Sept. 30, FactSet reports Ark’s top five holdings are Tesla, Coinbase, UiPath, Roku and Zoom Video.
Tesla shares dropped more than 15% over the last few days to close the week at $211.99 after CEO Elon Musk waxed pessimistic about macroeconomic issues on a third-quarter earnings call Wednesday.
It marks the worst week for Tesla stock of the year, although shares of the electric automaker are still up 96% year-to-date.
For the period ending Sept. 30, 2023, Tesla reported $23.35 billion in revenue and $1.85 billion in profits, a decline versus the prior quarter. Profits were lower than the same quarter last year, too.
On an earnings call to discuss the Q3 results CEO Elon Musk, who divides his time between Tesla, the social network X (formerly Twitter), defense contractor SpaceX, and startups xAI, Neuralink and The Boring Co., struck a deeply pessimistic note about the economy and emphasized that cost-cutting and price cuts would be essential for Tesla in coming quarters.
Musk also threw cold water on shareholders’ expectations for Tesla’s long-delayed Cybertruck, while declining to give details about a “robotaxi” and autonomous vehicle tech that the company has been working on and promising for years. The company is already lagging Cruise and Waymo in the U.S., and robotaxi developers including the ridehailing giant, Didi, in China.
In regards to the company’s deeply unconventional pickup, Musk went so far as to say, “We dug our own grave with Cybertruck” on the Q3 call. He also said he wanted to “temper expectations” for the vehicle, saying it’s a “great product,” but Tesla expects it will take a year to 18 months before the Cybertruck becomes a “positive cash flow contributor.”
“Demand is off the charts. We have over 1 million people who have reserved the car, so it’s not a demand issue,” Musk claimed. “But we have to make it, and we need to make it a price that people can afford, insanely difficult things.”
Tesla is planning an event to officially debut the Cybertruck on Nov. 30, but hasn’t yet disclosed the truck’s final specifications and pricing. It’s not clear how many of the people who paid for a $100 refundable reservation for the Cybertruck will follow through and purchase the trucks.
Musk repeatedly addressed Tesla’s efforts to reduce costs internally, and the cost of its electric vehicles for customers. During a question-and-answer portion of the earnings call with analysts, Musk said, “I am worried about the high-interest rate environment that we’re in.” For car buyers, he said, “If interest rates remain high or if they go even higher, it’s that much harder for people to buy the car. They simply cannot afford it.”
“Reducing the cost of our vehicles is our top priority,” Tesla’s new CFO Vaibhav Taneja said on the call, echoing Musk’s concerns and priorities. “We’ve tried to offset such adjustments via our focus on reducing costs. However, there is an inherent lag in cost reductions, which in turn impacts margins,” he added.
Musk made some optimistic claims on the call, for example assuring investors that Tesla will continue to, “invest significantly in AI development,” a technology that he has pegged as “the massive game changer,” with “potential to make Tesla the most valuable company in the world by far” with “fully autonomous cars at scale and fully autonomous humanoid robots.”
However, the market did not respond to the celebrity CEO’s long-term vision statements as it has in the past. Even some of the analysts who are reliably bullish on Tesla issued cautious notes after the company’s Q3 results as CNBC Pro reported.
For example, “No more rose-colored glasses,” Wells Fargo analyst Colin Langan wrote in a note Wednesday. And Morgan Stanley’s Adam Jonas reduced his price target to $380 from $400. His forecast still implies more than a 56% upside in a note out after the Q3 Tesla call.
Jonas asked, “How can we defend a ‘growth’ stock that appears ready to enter its 2nd consecutive year of earnings decline?” He later answered, “We feel it is also important and reasonable to consider the long-term potential of the products and services being commercialized by the company,” in the note.
Toni Sacconaghi of Bernstein, who is typically more skeptical of Tesla’s hype, maintained an underperform rating on the EV maker with a $150 price target on shares, suggesting a 38% downside from Wednesday’s close. “5% auto revenue growth, collapsing margins and trading at 200x FCF — is the story broken?” the analyst asked in a note out Thursday.
Some of Tesla’s long-term believers, including Jonas, see the company’s Q3 results as an alarm bell signaling a difficult outlook for EVs broadly. Chinese EV makers, among other automakers, saw shares decline following Tesla’s cautious, third-quarter call as well.
Federal Reserve Chairman Jerome Powell speaks during a meeting of the Economic Club of New York in New York City, U.S., October 19, 2023.
Brendan Mcdermid | Reuters
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Powell says inflation is too high Federal Reserve Chair Jerome Powell said the central bank would be “resolute” in its commitment to its 2% mandate, despite acknowledging recent signs of cooling inflation. Still, Powell didn’t commit to a specific policy path and gave no indication that he was leaning toward a push higher for interest rates.
Shaky markets Stocks slid on Thursday, with the Dow down over 250 points after Powell’s speech. The benchmark 10-year U.S. Treasury yield crossed the key level of 5% for the first time since 2007. Asia-Pacific markets were all lower on Friday, with South Korean stocks leading declines.
Disneyland or Disney World? Disney highlighted in a filing just how strong its theme park business is for its bottom line. The theme parks segment had more than $24 billion in revenue for the nine months ended July 1. That’s 17% higher than the comparable year ago period. Admissions alone accounted for nearly $8 billion of 2023′s nine-month total, up 21% from last year.
Las Vegas Sands’ Asia bet The world’s largest casino company’s recovery from the Covid-19 pandemic is gaining steam, and Asia is a big reason why. Las Vegas Sands announced it pulled in $1.12 billion in third-quarter adjusted property EBITDA, an important gauge of profitability in the gambling industry. That’s nearing pre-pandemic levels, off just 6% from the same period in 2019.
[PRO] Should you lock in those high yields right now? A bond bear market has dominated this year. But with 10-year Treasury yields surging to 5% — a 16-year high, many investors might now be tempted to lock in those high yields and buy into bonds. Volatility in the bond market may, however, cause some hesitation among investors. Wall Street weighs in on the right moves to make.
Stock markets have had a rough run this week as fears of inflation and high Treasury yields linger. There’s no two ways about where the Federal Reserve stands on its battle against rising prices as Chair Jerome Powell firmly backed the central bank’s 2% target, adding that he doesn’t think rates are too high now.
“Does it feel like policy is too tight right now? I would have to say no,” he said.
Recent data has shown that while U.S. inflation remains well above the target rate, the pace of monthly increases has decelerated, but evidently not fast enough by Fed standards.
To top it all off, the yield on the 10-year Treasury bond notched above 5% as it rose for the fourth day in a row, pressuring equity markets further.
High bond yields pressure equity markets because stocks are traditionally looked at as riskier assets that can sometimes provide higher returns, while bonds stand to provide a steady, less-risky source of regular income.
These high interest rates have also pressured some of the largest and most profitable banks in the United States as big Wall Street lenders have quietly been laying off workers all year — and some of the deepest cuts have yet to come.
“Banks are cutting costs where they can because things are really uncertain next year,” Chris Marinac, research director at Janney Montgomery Scott, said. “They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad.”
In the same vein, Tesla CEO Elon Musk expressedconcerns about the high interest rate environment and said it makes it harder for consumers to buy cars, sending shares of the EV maker down over 9% on Thursday.
Netflix on the other hand, surged 16% on Thursday following an encouraging quarterly earnings report and several victories, including a 70% jump in its new ad-supported subscription tier.
The Tesla Inc. Model Y electric vehicle during the launch in Kuala Lumpur, Malaysia, July 20, 2023.
Samsul Said | Bloomberg | Getty Images
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Markets slide U.S. stock markets slid on Wednesday as earnings season picked up steam and Treasury yields touched multi-year highs — breaking above 4.9% for the first time since 2007. Asia markets started the day on the back foot, with stocks in Japan, South Korea and Hong Kong seeing falls of about 2% each by midday trading. Hong Kong-listed shares of Chinese EV makers also plunged Thursday morning after Tesla CEO Elon Musk delivered grim news on Tesla’s outlook overnight.
Tesla misses on earnings Tesla reported third-quarter results that missed expectations on both earnings and revenue for the first time since the second quarter of 2019. The electric vehicle maker reported adjusted earnings of 66 cents per share vs. 73 cents per share expected and revenue of $23.35 billion per share vs. $24.1 billion expected. Tesla’s total operating margin also came in significantly lower at 7.6%, from the year-ago quarter’s 17.2%.
Netflix profit tops expectations Netflix’s password-sharing crackdown and its new ad-supported tier boosted subscriber growth in the third quarter. The streaming giant added 8.76 million global subscribers during the quarter, higher than expectations of 5.49 million and the most it’s added since the second quarter of 2020 – when Covid restrictions kept people at home. Its earnings came in at $3.73 per share, better than the $3.49 per share expected.
iPhone 15 sales off to a slow start in China A month after Apple’s iPhone 15 came out, analysts and investors are starting to see signs of slow demand in China versus last year. Sales of iPhone 15 models are down 4.5% for the first 17 days in Apple’s third largest market compared to last year, according to an estimate from Counterpoint Research.
[PRO] JPMorgan warns of rate cut impact on stocks JPMorgan Asset Management says cut in interest rates by the Federal Reserve next year would likely be bad news for U.S. equity investors. Stocks have typically rallied on multiple occasions over the past two years on any dovish signal from central bankers but JPMorgan believes Fed cuts in 2024 would likely coincide with declining corporate earnings, creating headwinds for stocks. Find out here where to invest.
U.S. stock markets closed out Wednesday with sweeping declines. The yield on the benchmark 10-year Treasury hit 4.908%, rising above 4.9% for the first time since 2007 as investors scoured economic data for clues on the Federal Reserve’s interest rate trajectory.
Housing starts rose in September, but at a slower-than-expected rate, according to data released Wednesday. Building permits fell last month, but less than economists anticipated. This arrives a day after consumers showed surprising strength in September, boosting retail sales well above expectations.
Traders are still expecting an over 85% chance that the Fed will hold its rates steady when it announces its next monetary decision on Nov. 1, but the retail sales figure has given way to some bets of another hike in December.
Markets seemingly have no dearth of catalysts this week as earnings season gathers steam. Tesla missed third-quarter expectations on both profit and revenue. Netflix’s password-sharing crackdown efforts along with interest in its new ad-supported tier set its quarter up for success.
Netflix’s results also showed that the streaming giant is back on track. Just in April 2022, it had reported a loss of 200,000 subscribers. Turns out, a cheaper advertising tier — a product Netflix hoped would appeal to those who had shared passwords — helped the company add more subscribers. Of course, not as much as it did during the throes of the Covid-19 lockdowns but a step in the right direction.
More lies ahead for investors who will focus on Federal Reserve Chair Jerome Powell’s speech at noon ET. “Powell is always tacking back to whatever helps feed the narrative that they need to stay vigilant, and for understandable reasons,” said Luke Tilley, chief economist at Wilmington Trust.
He is expected to assure markets the central bank is committed to its fight against inflation, but maybe this time with a little less force.
People walk near the New York Stock Exchange on July 18, 2023 in New York City
View Press | Corbis News | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Markets slide U.S. stock markets slid on Wednesday as earnings season picked up steam and Treasury yields touched multi-year highs — the 10-year U.S. Treasury yield broke above 4.9% for the first time since 2007. The pan-European Stoxx 600 index closed 1% lower, with much of the attention on UK inflation data. U.K. inflation came in at 6.7% in September, slightly ahead of expectations and unchanged from the previous month.
Tesla misses on earnings Tesla reported third-quarter results that missed expectations on both earnings and revenue for the first time since the second quarter of 2019. The electric vehicle maker reported adjusted earnings of 66 cents per share vs. 73 cents per share expected and revenue of $23.35 billion per share vs. $24.1 billion expected. Tesla’s total operating margin also came in significantly lower at 7.6%, from the year-ago quarter’s 17.2%.
Netflix profit tops expectations Netflix’s password-sharing crackdown and its new ad-supported tier boosted subscriber growth in the third quarter. The streaming giant added 8.76 million global subscribers during the quarter, higher than expectations of 5.49 million and the most it’s added since the second quarter of 2020 – when Covid restrictions kept people at home. Its earnings came in at $3.73 per share, better than the $3.49 per share expected.
iPhone 15 sales off to a slow start in China A month after Apple’s iPhone 15 came out, analysts and investors are starting to see signs of slow demand in China versus last year. Sales of iPhone 15 models are down 4.5% for the first 17 days in Apple’s third largest market compared to last year, according to an estimate from Counterpoint Research.
[PRO] Morgan Stanley’s top China video game stock Morgan Stanley is calling this China stock a global video game “powerhouse” with a 40% upside. In the past decade, the company has increased its game revenue tenfold and tripled its market share in China from 8% to 9% in 2013 to 2014, to 24% by the end of 2023.
U.S. stock markets closed out Wednesday with sweeping declines. The yield on the benchmark 10-year Treasury hit 4.908%, rising above 4.9% for the first time since 2007 as investors scoured economic data for clues on the Federal Reserve’s interest rate trajectory.
Housing starts rose in September, but at a slower-than-expected rate, according to data released Wednesday. Building permits fell last month, but less than economists anticipated. This arrives a day after consumers showed surprising strength in September, boosting retail sales well above expectations.
Traders are still expecting an over 85% chance that the Fed will hold its rates steady when it announces its next monetary decision on Nov. 1, but the retail sales figure has given way to some bets of another hike in December.
Markets seemingly have no dearth of catalysts this week as earnings season gathers steam. Tesla missed third-quarter expectations on both profit and revenue. Netflix’s password-sharing crackdown efforts along with interest in its new ad-supported tier set its quarter up for success.
Netflix’s results also showed that the streaming giant is back on track. Just in April 2022, it had reported a loss of 200,000 subscribers. Turns out, a cheaper advertising tier — a product Netflix hoped would appeal to those who had shared passwords — helped the company add more subscribers. Of course, not as much as it did during the throes of the Covid-19 lockdowns but a step in the right direction.
More lies ahead for investors who will focus on Federal Reserve Chair Jerome Powell’s speech at noon ET. “Powell is always tacking back to whatever helps feed the narrative that they need to stay vigilant, and for understandable reasons,” said Luke Tilley, chief economist at Wilmington Trust.
He is expected to assure markets the central bank is committed to its fight against inflation, but maybe this time with a little less force.
Apple iPhone supplier Foxconn, officially known as Hon Hai, said its semiconductor strategy is to focus on producing “specialty chips” — not competing in cutting-edge chips.
“We do not chase [after] the most advanced technology. Hon Hai will not compete with leading edge players like 4-nanometer or 3-nanometer. We focus more on specialty technology,” Chiang Shang-Yi, chief strategy officer for semiconductor at Hon Hai Technology Group, told CNBC’s Emily Tan on Tuesday.
Specialty chips are known as semiconductors found in sectors such as automotive and internet of things. Chips for automotive uses are typically made using mature technology – 28-nanometer or larger chips.
“Nanometer” in chips refers to the size of individual transistors on a chip. The smaller the size of the transistor, the more powerful and efficient it is, but it also becomes more challenging to develop.
“If we tried to chase 3-nanometer, 2-nanometer, we are way too late. The way we are working on [is to] just try to manage the supply chain. And we call it specialty technology – that is not late at all,” said Chiang.
Our strategy is we attack all.
Jun Seki
Hon Hai’s chief strategy officer for EVs
Hon Hai Technology Group is the world’s largest contract electronics manufacturer that assembles consumer products like Apple’s iPhones. But in the last couple of years, the Taiwanese firm has made its foray into semiconductors and electric vehicles.
When it comes to EVs, Chiang said the focus lies in power devices and silicon carbide chips — increasingly a material of choice among EV-makers, thanks to its higher efficiency at higher voltages common in EVs.
Foxconn first announced EV prototypes in 2021 made by Foxtron, a venture between Foxconn and Taiwanese car maker Yulon Motor.
Foxconn currently only produces a small number of EVs, but has set an initial target of capturing a 5% market share globally by 2025, according to Reuters.
“When we [talk] about EV business, we have a component business. We have a platform business. We have a CDM business: contract, design and manufacturing services,” said Jun Seki, Hon Hai’s chief strategy officer for EVs, told CNBC in a separate interview.
“Our strategy is we attack all. Component module platform makes our cost very competitive. This is an area that makes traditional auto OEMs profitability very poor, he said referring to original equipment manufacturer, which are products sold to other companies as components.
We have a little bit of everything. There’s a good reason for that. If you do a little bit in everything, you know what’s going on in that area.
Chiang Shang-Yi
Chief strategy officer for semiconductor
“Sometimes we may have to build their cars by their drawings. If our customers can give a chance to us, we can build our ideas into their cars, then we can make customers more competitive,” said Jun.
However, the global EV market is only getting more competitive.
China, Europe and the U.S. are major players when it comes to electric cars. From third-quarter 2021 to second-quarter this year, the top three players – Tesla, BYD and Volkswagen – held 42% of the global EV market, according to Counterpoint Research.
Foxconn’s foray into semiconductor has had a tough start, pointing to the difficulty for new players to enter a market dominated by firms with extensive experience and a highly intricate supply chain.
Earlier this year, Foxconn pulled out of a joint venture with Indian metals-to-oil conglomerate Vedanta to set up a semiconductor and display production plant in India as part of a $19.5 billion deal.
“You call it a failure, but I don’t think it’s finalized yet. I think we learnt through the way how we interpret, how we work with the government. So far, the government is still not making a decision yet. So I will not call it a failure at this moment. We are all still trying to work with the government, to find ways so the government will support our proposal,” Young Liu, Hon Hai’s CEO and chairman, told CNBC.
In August, the government of the state of Karnataka in India said Foxconn will pump in more than $600 million to build a phone manufacturing project and a separate semiconductor equipment facility.
India could account for 20% to 30% of Hon Hai’s manufacturing, which is “very similar to China,” Liu said.
“We’ve been working with countries like India, Indonesia and Thailand. They’re all going quite well,” the CEO said. Foxconn is exploring cooperation with Indonesia and Thailand EV-related companies.
He added that Hon Hai “very much focus on the entire supply chain,” he added. “There’s a good reason for that.”
“If you do a little bit in everything, you know what’s going on in that area. Like we all know, two years ago, there’s a big shortage in chips and many cars cannot be shipped because they lack chips. And this case, Hon Hai will have a better idea because we’ll know what’s going on. And we give us more lead time to try to manage them,” said Chiang.
Here are Tuesday’s biggest calls on Wall Street: Wells Fargo upgrades Air Products to overweight from equal weight Wells said it sees robust earnings growth. “We are upgrading APD to OW from EW given its mega project backlog is expected to come on stream over the next several years boosting EPS growth.” JPMorgan reiterates Alphabet as overweight JPMorgan said it’s standing by its overweight rating heading into earnings next week. ” GOOGL has been the quietest of the FANG names in our discussions w/investors recently, perhaps a function of less controversy & very limited forward outlook provided at earnings.” Wells Fargo initiates Toll Brothers, Lennar, PulteGroup and D.R. Horton as overweight Wells said in its initiation of several homebuilders that “volatility presents opportunity.” “We initiate coverage of U.S. Homebuilding & Building Products, with DHI, LEN , MAS, PHM & TOL OW; KBH, FERG & OC EW; and MHK UW. Recent volatility presents opportunity.” Stifel initiates Amazon as buy Stifel said no other platform can come close to Amazon. “Initiating coverage with a Buy rating and $173 target price. No other e-commerce platform comes close to matching the scale that Amazon has amassed.” Read more about this call here. Raymond James initiates Lam Research and Applied Materials as outperform Raymond James Lam and Applied Materials that the valuations appear reasonable for both names. “We view geopolitical factors as a net neutral and expect any additional risk from China export controls to be modest. Valuations do not appear stretched, and a case can also be made for multiple expansion given higher trough earnings.” Loop initiates Microsoft as buy Loop said growth is set to accelerate for Microsoft. “We are initiating coverage of Microsoft with a Buy rating and $425 PT. In our view, MSFT growth is set to accelerate driven by the two most strategic businesses, Azure and GenAI products (M365 Copilot).” JPMorgan upgrades ViaSat to overweight from neutral JPMorgan said it sees an attractive entry point for the satellite company. ” VSAT shares have sold off ~56% since the 5/31 close of the Inmarsat deal vs SPX +~5%, and we believe the sell-off offers an attractive entry point with the stock now trading at 5.4x our FY25 EBITDA.” JPMorgan upgrades CyberArk to overweight from neutral JPMorgan said it sees “accelerating demand” for the cyber company. “We see opportunity for upside in the wake of accelerating demand as CyberArk has some of the most favorable exposure to high priority Security spending within our coverage.” Evercore ISI reiterates Tesla as in line Evercore said Tesla shares will be volatile. “we raise our price target to $180 from $165 on the rollover to ’26. We believe the recent re-rate due to AI/NVDA correlation will be sustained, but TSLA may see increased volatility the next 6 months on 15% EPS risk to ’24/25 resulting in a very wide $140-$265 range.” Evercore ISI upgrades Mobileye to outperform from in line Evercore said it sees a compelling entry point for the auto tech company. ” MBLY currently trades within our $35-45 ‘corridor’ (25-35x ’25 EPS of $1.20- $1.30) but with the rollover to ’26 probability-weighted EPS of $1.85 would be a $45-65 stock.” Goldman Sachs upgrades Dollar Tree buy from neutral Goldman said in its upgrade of the discount retailer that it sees improving earnings growth. “We are upgrading DLTR to Buy from Neutral, as we see strong earnings growth potential supported by continued market share gains from improving traffic trends with sticky new customers, an improving discretionary cash flow outlook for lower and middle income consumers in 2024, and better shopability/in-stocks after recent investments.” Citi upgrades Sunnova to buy from neutral Citi said the solar company’s valuation is compelling. “While we believe NOVA’s 3Q consensus has downside, valuation is too compelling for us to ignore Goldman Sachs initiates TripAdvisor as buy Goldman said it sees upside to estimates for the travel website company. “For TRIP , our view is that the structural growth profile of the business is changing as metasearch gives way to lower funnel businesses that are exposed to secular growth tailwinds and see upside to Street estimates on the back of faster revenue growth at Viator/Experiences & scale/operating efficiencies leading to better profitability.” Bernstein initiates Exxon Mobil as outperform Bernstein said the oil and gas giant is well positioned. “We rate XOM Outperform. We reach our target price of $140/sh by applying a 7.0x multiple to 2025E EBITDA of $73.5B and incorporating additional FCF to shareholders.” Morgan Stanley upgrades Hannon Armstrong Sustainable Infrastructure Capital to overweight from equal weight Morgan Stanley said investors should buy the dip in shares of the climate solutions company. “We believe the sell-off in HASI is overdone and incongruous with business fundamentals. Read more about this call here . Bank of America reiterates Apple as neutral Bank of America said its survey checks show iPhone lead times are picking up for Apple. “Our proprietary interactive dashboard shows that iPhone 15 Pro & Pro Max availability picked up from October 9th to October 15th.” JPMorgan initiates Teck Resources as overweight JPMorgan said the metals and mining company is its preferred play. ” Teck is our preferred copper play given its extensive pipeline of copper projects and likely exit from its carbon intensive coal business, which should drive a meaningful rerating.
Meta founder and CEO Mark Zuckerberg speaks during Meta Connect event at Meta headquarters in Menlo Park, California on September 27, 2023.
Josh Edelson | AFP | Getty Images
At Meta’s annual Connect conference last month, virtual reality enthusiasts gathered to hear about Mark Zuckerberg’s multibillion-dollar bet on the metaverse, the technology that’s supposed to define the company’s future.
But at this year’s event, VR developers were inundated with panel discussions about a topic that’s quickly becoming less about tomorrow and more about the present: artificial intelligence.
“Don’t tell Mark, but it feels less mixed reality and more AI these days,” joked Joseph Spisak, who joined the company as director of product development for generative AI two months earlier, during his session at Connect. “It kind of feels like an AI conference, which is kind of in my wheelhouse.”
Sandwiched between panels about Meta’s latest Quest 3 VR headset and augmented reality developer software were several sessions dedicated to Llama, Meta’s large language model (LLM) that’s gained popularity since OpenAI’s ChatGPT chatbot exploded onto the scene in November, sparking a sprint by leading tech companies to bring competitive offerings to market.
Zuckerberg, who changed Facebook’s name to Meta in late 2021 to signal his commitment to the metaverse, reminded Connect attendees that Llama was the power supply to the company’s latest digital assistants unveiled at the conference.
While Zuckerberg still views the growth of the nascent metaverse as critical to his company’s success, AI has emerged as the market he’s trying to win today. Meta views Llama and its family of generative AI software as the open source alternative to GPT, the LLM from Microsoft-backed OpenAI, and Google’s PaLM 2, which powers the search company’s Bard AI technology.
Industry experts compare Llama’s positioning in generative AI to that of Linux, the open source rival to Microsoft Windows, in the PC operating system market. Just as Linux software made its way into corporate servers worldwide and became a key piece of the modern internet, Meta sees Llama as the potential digital scaffolding supporting the next generation of AI apps.
Andrew Bosworth, Chief Technology Officer of Facebook, speaks during Meta Connect event at Meta headquarters in Menlo Park, California on September 27, 2023.
Josh Edelson | AFP | Getty Images
On Wall Street, Llama is hard to value and, for many investors, hard to understand. Because AI researchers are at a premium and the infrastructure required to build and run models requires massive costs, Meta is investing heavily to build Llama, the updated Llama 2 that was introduced in July, and related generative AI software.
After the July announcement, Yann LeCun, the AI researcher Zuckerberg hired in 2013 to lead Facebook’s new AI research group, wrote on Twitter that, “This is going to change the landscape of the LLM market.”
But open source means Meta is giving away the software for free to developers, a dramatically different approach to the traditional software license and subscription models and far afield from the highly lucrative digital ad business that turned Facebook into an internet powerhouse.
In announcing Llama 2, Meta said the new version would have a commercial license that allows companies to integrate it into their products. The company has said it isn’t focused on monetizing Llama 2 directly, but it does earn an undisclosed amount of money from cloud-computing companies like Microsoft and Amazon, which offer access to Llama 2 as part of their own generative AI enterprise services.
Zuckerberg said on the company’s second-quarter earnings call that he doesn’t expect Llama 2 to generate “a large amount of revenue in the near term, but over the long term, hopefully that can be something.”
Meta is looking to benefit from Llama in other ways.
Zuckerberg told analysts in July that improvements made to Llama by third-party developers could result in “efficiency gains,” making it cheaper for Meta to run its AI software. Meta said it expects capital expenditures for 2023 to be in the range of $27 billion to $30 billion, down from $32 billion last year. Finance chief Susan Li said the figure will likely grow in 2024, driven in part by data center-and AI-related investments.
Influence brings its own advantages. If the world’s leading AI researchers use Llama, Meta could have an easier time hiring skilled technologists who understand the company’s approach to development. Facebook has a history of using open source projects, such as its PyTorch coding framework for machine learning apps, as a recruiting tool, luring technologists who want to work on cutting-edge software projects.
Spisak helped oversee PyTorch and other open source AI projects when he worked at Meta from 2018 until January 2023. He left the company for a brief stint at Google and returned to Meta in July.
Meta is also betting that third-party developers will steadily improve Llama 2 and related AI software so that it runs more efficiently, a way of outsourcing research and development to an army of volunteers.
Cai GoGwilt, chief architect of legal tech startup Ironclad, said the open source community worked on the first version of Llama to “make it faster and make it run on a mobile phone.” GoGwilt said his company is waiting to see how enthusiastic developers will bolster Llama 2.
“Part of the reason we’re not immediately using it is because the bigger interest for us is what the open source community is going to do with it,” GoGwilt said.
Meta debuted the original Llama LLM in February, offering it in several different variants ranging from 7 billion parameters to 65 billion parameters, which are essentially variables that influence the size of the model and how much data it processes. In general, more parameters means a more powerful model, with the tradeoff being the cost of running and training the AI software.
Like OpenAI’s GPT and other LLMs, Llama is an example of a transformer neural network, the AI software developed by a team of Google researchers that’s become the foundation for generative AI, which generates smart responses and clever images based on simple text prompts.
To help with the computationally intensive process of training gigantic AI models like Llama, Meta has been using its own Research SuperCluster supercomputer, built to incorporate a whopping 16,000 Nvidia A100 GPUs, the AI industry’s “workhorse” computer chips.
Although Llama was originally incubated inside Meta’s Fundamental AI Research team (FAIR), it’s since moved to the company’s generative AI organization led by Ahmad Al-Dahle, who previously spent over 16 years at Apple. Zuckerberg announcedthe group in late February.
Meta said it took six months to train Llama 2, starting in January and ending in July, using a mix of “publicly available online data,” which doesn’t contain any Facebook user information. It’s unclear whether Meta plans to incorporate user data into the forthcoming Llama 3.
As Zuckerberg strives for efficiency, he’s got his eyes on Nvidia, which is generating billions of dollars in quarterly profits for its AI chips. Meta is one of its biggest customers. Jim Fan, a senior AI science at Nvidia, said in a post on X that it likely cost Meta $20 million to train Llama 2, considerably more than the estimated $2.4 million it took to train its predecessor.
Mainstream adoption of Llama 2 could influence Nvidia to ensure its graphics processing units (GPUs) work well with Meta-sanctioned software, lowering the company’s AI training and computing costs.
Meanwhile, Meta has its own internal AI chip projects, giving it a potential alternative to Nvidia’s processors.
“It gives them some price negotiating room,” said Arjun Bansal, CEO of enterprise startup Log10 and a former AI chip executive. “Nvidia wants to charge a lot and they can be like, ‘Hey, we got our own thing.'”
Nvidia President and CEO Jensen Huang speaks at the COMPUTEX forum in Taiwan, May 28, 2023.
Sopa Images | Lightrocket | Getty Images
Nathan Lambert remembers the energy emanating from his colleagues at AI startup Hugging Face the weekend Meta debuted its much-anticipated Llama 2.
Lambert and his teammates worked overtime to ensure the company’s infrastructure was ready to handle the influx of coders looking to take Llama 2 for a test drive.
Along with cloud-computing engines Microsoft Azure and Amazon Web Services, Hugging Face was one of Meta’s chosen launch partners for Llama 2, but arguably the most important. Developers, AI researchers and thousands of companies use Hugging Face’s platform to share code, data sets and models, making it one of the industry’s biggest communities.
Although a number of open source LLMs are available, Lambert said Llama 2 is by far the most popular.
“It’s the model that most people are playing with and that most startups are playing with,” said Lambert, who announced on Oct. 4 that he’s leaving Hugging Face though he didn’t say where he’s going.
As with all things Zuckerberg, the project is not without controversy. Some in the industry consider Meta’s licensing agreement to use Llama 2 as limiting, conflicting with the spirit of collaborative development and innovation.
For instance, third-party developers must request approval from Meta to use Llama 2 if they incorporate the software into any products or services that had “greater than 700 million monthly active users” in the month prior to its July release. Critics have said this clause was a way to keep rivals like Snap or TikTok from using Llama 2 for their own services.
“It’s pretty restrictive,” said Umesh Padval, a venture partner at Thomvest Ventures and investor in AI startup Cohere, which builds proprietary LLMs. “It looks like Meta wants all the benefits of open source for their business while keeping the competition away.”
Lambert said Meta could do itself a favor with the open source community and release more details about the specific, underlying datasets used to train Llama 2 so developers could better understand the training process. Open source adherents and privacy experts have pushed for more transparency into what kinds of data has been used to train LLMs, but companies have so far revealed few details.
“We believe in open innovation, and we do not want to place undue restrictions on how others can use our model,” a Meta spokesperson said in a statement. “However, we do want people to use it responsibly. This is a bespoke commercial license that balances open access to the models with responsibility and protections in place to help address potential misuse.”
Despite some detractors, Meta’s model is seeing plenty of early uptake. The company disclosed at Connect that there have been “more than 30 million downloads of Llama-based models through Hugging Face and over 10 million of these in the last 30 days alone.”
Nvidia’s Fan noted in his X post that Llama 2’s new commercial license could lure more companies to experiment with the language model compared to the original Llama.
“AI researchers from big companies were wary of Llama-1 due to licensing issues, but now I think many of them will jump on the ship and contribute their firepower,” Fan wrote.
As of today, businesses investing in AI prefer to use commercially available LLMs, according to a recent TC Cowen survey of 680 firms in cloud computing. The survey found that 32% of respondents have used or plan to use commercially packaged LLMs like OpenAI’s GPT-4 software while 28% were focused on open source LLMs like Llama and Falcon, developed in the United Arab Emirates. Only 12% of respondents planned on using in-house LLMs.
At the U.S. Government Accountability Office, Taka Ariga studies how bleeding-edge technologies like LLMs could help the agency better conduct audits and investigations through its Innovation Lab.
By the end of the year, Ariga’s team is planning to finish its first experiment investigating how LLMs can potentially be used to summarize numerous GAO reports and materials on a particular topic, and then combine those files with various other potentially relevant documentation from other agencies.
“The general public or a member of congress might say, ‘What has the GAO done in the area of nuclear safety?'” Ariga said, regarding the LLM project. “Of course, we have done a lot of work, but that’s sort of report-by-report basis; you can’t do that kind of sort of topical search.”
The GAO is currently using AWS’ Bedrock generative AI service to help the agency experiment with various popular LLMs, including proprietary models offered by startups like Cohere and Anthropic.
While AWS recently said Bedrock will soon support Llama 2, Ariga said the GAO is first testing Anthropic’s Claude LLM and will likely pass on using Llama 2 because of Meta’s poor reputation in Washington.
Meta has earned the ire of lawmakers over the years due to a host of issues, including data privacy scandals, antitrust investigations and allegations that Facebook censors conservative voices, Ariga noted, likening Zuckerberg to Elon Musk, the CEO of Tesla and owner of X.
“Mark Zuckerberg is, just like Elon, a bit of a lightning rod when it comes to political technology,” Ariga said.
“We know that while AI has brought huge advances to society, it also comes with risk,” Meta’s spokesperson said. “Meta is committed to building responsibly and we are providing a number of resources like our responsible use guide to help those who use Llama 2 do so.”
Even among prospective customers that are unconcerned about reputational issues, Meta has to prove that it has superior LLM technology.
Nur Hamdan, a product manager at AI startup aiXplain, said OpenAI’s GPT-4 is better than Llama 2 at understanding context over long, extended conversations. That means GPT-4 would likely produce conversations in a way that feel more lifelike, Hamadan said.
Tests comparing GPT-4, Llama 2 and other LLMs are becoming routine. In one such test, researchers discovered that GPT-4 was able to generate better software code than Llama 2. Meta has since released a version of Llama 2 specifically for creating code.
Sam Altman, CEO of OpenAI, at an event in Seoul, South Korea, on June 9, 2023.
Bloomberg | Bloomberg | Getty Images
In today’s land grab, Meta is competing against Amazon, Google and heavily funded startups like OpenAI and Cohere. They’re each aiming to be the cornerstone of next-generation apps. Meta sees open source as a key advantage, versus other companies that are selling the technology and packaging it with other services.
“Somebody like Google or Microsoft, they may all be a little bit conflicted there,” said longtime infrastructure technology executive Guido Appenzeller, who held senior roles at VMware and Intel. “Facebook was not and that’s sort of how they move forward and democratizing this, giving sort of broad access to open source. I think it’s something incredibly powerful.”
A Microsoft spokesperson said in an emailed statement that the company will provide customers with options and let them choose what model they prefer, whether it’s “proprietary, open source, or both.”
“Each foundational model has unique benefits and we hope to make it easy for customers to select, fine-tune, and deploy them responsibly to maximize the outcome from these tools,” Microsoft said.
Representatives from Amazon and Google didn’t respond to requests for comment.
Llama’s impact on the technology industry could rival that of Kubernetes, the open source data center infrastructure software that Google released in 2014, experts said. In giving away Kubernetes, Google dramatically impacted the business models of once hot startups like Docker and CoreOS, which Red Hat acquired in 2018.
Meta is deploying a Kubernetes-like strategy with Llama 2, but in a market that’s expected to be much bigger.
“I’m a fan of Facebook, I understand what Mark has done,” Thomvest’s Padval said. “They’re reinventing the company.”
However, open source doesn’t always win, and Padval acknowledged that “in this case, I don’t know how it’s going to evolve.”
By most measures, Gary Black qualifies as a big supporter of electric-vehicle giant Tesla. The Chicago fund manager has had Tesla as his No. 1 or No. 2 holding since he opened his fund in 2021, and often appears on social media (and sometimesCNBC) to talk about it, usually supportively. But there’s one thing Black has had on his mind lately: That Tesla is wasting money on price cuts to keep growth rates high.
His once-lonely campaign has been picking up allies lately in a domain where Musk pays close attention — social media. An online poll run by @TroyTeslike, another active social-media Tesla fan, found half of the 8,000-plus respondents thought Tesla should start advertising, beating out growth strategies like more price cuts and adding technology to high-end Model S and Model X.
The investor pressure, or at least nudging, didn’t come out of nowhere. Last May at Tesla’s annual shareholder meeting, Musk looked surprised, if a little amused, when a shareholder challenged him on the issue about 70 minutes in, to the cheers of a crowd dominated by Tesla fanboys.
“525 bucks off of every car this year is half of Netflix’s ad budget, and 1000 bucks is the entire Netflix ad budget and I see their ads everywhere. Why not advertise these things you told us about here?” said Kevin Paffrath, who runs The Meet Kevin Pricing Power ETF in southern California. Hespecifically referred to safety features including airbag deployment technology as Tesla advantages that might appeal to consumers through advertising.
Musk expressed openness to the idea.
“There are amazing features and functionality about Teslas that people just don’t know about, although obviously a lot of people who follow the Tesla account and my account to some degree, it is preaching to the choir and the choir is already convinced,” Musk said.
Then Musk made a promise. “I think what you are saying does have some merit and I believe in taking suggestions and we’ll try a little advertising and see how it goes,” he said.
The shareholders erupted in cheers, to which Musk responded, “I wasn’t expecting that level of enthusiasm.”
If shareholders expected a major advertising push, they’d be disappointed today. In the months since, according to Wedbush analyst Dan Ives, Tesla has spent very minor amounts on online and social advertising. At the same time, the major price cuts continue as Musk’s primary strategy to drum up more interest in Teslas.
Musk has been a firm proponent of cost-cutting first. As he said at this year’s annual meeting, Tesla’s goals include bringing electric transportation to mass-market consumers, and as he said, many Model 3s can be had in the U.S. market for less than the average cost of a new passenger vehicle.
Indeed, the average price of most Teslas has fallen about 20% since August 2022, according to Cox Automotive. The figures don’t include the restoration of the $7,500 federal tax credit for Teslas under the 2022 Inflation Reduction Act.
But the most recent round of price cuts, announced over the past month, is costing Tesla an annual $2 billion a year, Black said. Overall, the price cuts over the past year have shaved revenue by much more, Ives estimated.
Black’s premise, in effect, is that Musk should reconsider how much Tesla relies on price cuts versus spending money on advertising to get the word out about features like the falling cost of EVs and safety features like over-the-air software updates. It becomes especially pressing considering that Tesla stock, while up about 140% this year, is still one-third below its 2021 peak and has trailed the S&P 500 over the last year.
“I don’t think that you get that much demand elasticity by cutting a Model Y to $48,000 from $55,000,” Black said. “Instead of a $2,000 price cut, let’s do $1,800 and try advertising more.”
CNBC reached out to Tesla multiple times. The company did not respond.
In effect, Black argues that Tesla price cuts are a de facto marketing expense, saying Tesla’s share losses among EVs by Tesla this year suggest price cuts alone aren’t working.
Indeed, Tesla’s U.S. market share among EVs has been slipping even as it cuts prices. Third-quarter deliveries were 435,059 units, up sharply from 343,830 a year earlier but below second-quarter unit sales of 466,140 and first-quarter sales of about 423,000. In a press release, Tesla blamed the third-quarter number, which missed analyst projections, on “planned downtime for factory upgrades.”
The lower prices are also showing up in Tesla’s gross margins, which dropped to 18% of sales in the second quarter from 25% in the second quarter of 2022, Ives said. That implies a $1.5 billion drop in potential gross profit, unless some of it is made up in higher sales volume, he said.
What a Tesla ad campaign might look like
It’s possible to guess at what an effective Tesla ad campaign might do, said Allen Weiss, CEO of MarketingProfs, a marketing research and training firm, who pointed to many features beyond just safety that consumers do care about.
“I would start by identifying what benefits customers are looking for, which are likely some [about performance] but others are [about] luxury and even others are symbolic, [being] a person who helps save the planet,” he said. “I would find out what these benefits are, target a segment of these buyers and put a great theme around these benefits. That way, you can have fun ideas but are connecting with the buyers on what they really care about.”
New Tesla electric vehicles fill the car lot at the Tesla retail location on Route 347 in Smithtown, New York on July 5, 2023.
Newsday Llc | Newsday | Getty Images
Tesla’s challenge is that, as it grows, it’s competing more directly with companies that are experienced marketers, Weiss said. Ford has already spent conspicuously to promote its F-150 Lightning pickup, and General Motors has run Super Bowl ads for the last three years. Weiss said Swedish EV maker Polestar also advertises, spending an estimated $20 million this year. Polestar and BMW have both touted EVs on the Super Bowl telecast, the most expensive U.S. TV buy, and industry data firm iSpot estimates that about a quarter of 2022 car ad spending was for EVs, a move Ives called a “tidal wave” that he predicts will grow.
“Other carmakers are used to focusing more on customer benefits, while Tesla is not,” Weiss said. “Go to Ford’s website and click on electric and you will immediately see words like head-turning design, impressive performance and thrill. Go to BMW’s electric vehicles page and you see ‘cutting edge performance and luxury.’ Go to Tesla’s site and you see, well, price.”
Musk himself conceded at the annual meeting that he is often confronted by people who tell him that EVs are too expensive.
“I’ve talked to lots of people who still think Teslas are, like, super-expensive,” Musk said. “I’m like, no, the [average selling price] of a Tesla is lower than the average selling price in the U.S.”
Tesla doesn’t need to spend as much as Ford or GM do on advertising, Ives said, arguing that a focused campaign could zero in on specific Tesla or EV advantages.
“There are differentiations to Tesla that people don’t know about,” he said. Advertising can also be deployed to sustain Tesla’s luxury brand image even as the average cost of its cars falls, he said. “You start to change perceptions.”
The “name of the game” at Tesla as it reaches its full scale is volume and operating margins, Ives said. Black argues that it’s worth finding out, soon, whether advertising more will help. Even Musk may be convincible, and the irony of his longstanding reluctance to advertise wasn’t lost on him at the annual meeting:
“I think it’s ironic that Twitter [X] is highly dependent on advertising and here I am ‘never use advertising’ and now have a company that’s highly dependent on it. I guess I should say advertising is awesome and everyone should do it.”
CNBC’s Jim Cramer said Wednesday he sees conditions that could spur a stock market rally, following a challenging few weeks on Wall Street. The biggest factor in this, he said, arrives Friday with the government’s official September jobs report.
“We certainly have plenty of tinder for a rally — there are some Kingsfords lying around, maybe even a Duraflame or two,” he said. “You get a weak payroll number on Friday, then I think we can get a narrow repeat of the rebound we saw in March.”
To Cramer, Friday’s nonfarm payroll report is the only set of government data with “true staying power.” If the figures show more layoffs than expected, he said, the Federal Reserve may be less inclined to raise interest rates, which would likely please the market. However, he added that this potential economic weakness could hurt plenty of sectors, including retailers, banks and housing.
Cramer suggested recent market conditions may end up being similar to those in February and March, where stocks sold off due to concerns about the Fed’s aggressive rate hikes and the collapse of multiple regional banks. But this weakness soon gave way to a tech-fueled rally, he said.
He added that he’s not sure whether the “uniform negativity” on Wall Street — especially talk of declining bond prices — means a bottom, but to him, it’s a possibility.
“Maybe all that needs to happen is for the frantic bond sellers to slow the pace of their sales — they don’t even have to stop, they just have to be less desperate,” he said. “Once that happens, we can finally focus on the myriad stocks that’ve been crushed for weeks now, many of which don’t deserve it. No need to jump the gun, though. We’ll find out soon enough.”
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Analysts at Citi on Thursday dialed down their expectations for Tesla Inc.’s third-quarter deliveries and profit, saying they based their new numbers on China sales, global registration data and an implied production pace for the EV maker.
Tesla TSLA, +2.44%
and General Motors Co. GM, +2.50%
are scheduled to report third-quarter vehicle sales next week, while Ford Motor Co. F, +1.37%
and a few others are slated to report September sales.
Earlier this week, a Deutsche Bank analyst warned that there was “meaningful downside risk” to current 2024 Tesla projections due to limited volume growth, and cut his price target on Tesla stock.
The Citi analysts, led by Itay Michaeli, said they trimmed their Tesla quarterly sales estimates to 450,000 vehicles, from a previous expectation of 468,500 vehicles.
They lowered their forecast for adjusted per-share earnings to 75 cents in the quarter, from a prior estimate of an adjusted EPS of 81 cents for the quarter.
The Citi’s expectations compare with FactSet consensus of Tesla deliveries of 462,000 vehicles in the quarter, and consensus around an adjusted EPS of 79 cents for the quarter.
“We will revisit our model post the [third-quarter] delivery report,” the Citi analysts said. They kept the equivalent of a hold rating on the stock.
The update on the sales estimates was based on recent weekly China data “in part reflecting the Model 3 refresh transition,” as the compact sedan in some parts of the world is getting a minor update; the latest available global Tesla registration data; and their observations on production rate and “inventory discounting, with our estimates assuming some [quarter-on-quarter] de-stocking,” the analysts said.
Given Tesla’s production pace and the Model 3 changes, “we see a greater range of delivery outcomes vs. typical quarters,” they said.
Tesla shares have doubled so far this year, compared with gains of around 12% for the S&P 500 index SPX.
Tesla Inc. was sued Thursday by the U.S. Equal Employment Opportunity Commission, which alleges the EV maker violated federal law by “tolerating widespread and ongoing racial harassment of its Black employees” at its Fremont, Calif., plant, and by retaliating against those opposing the harassment.
Black employees at the Fremont factory, Tesla’s TSLA, +2.44%
first assembly plant and for years its only vehicle-manufacturing facility in the U.S., “have routinely endured racial abuse, pervasive stereotyping and hostility” as well as having racial slurs hurled at them, the lawsuit alleges.
“Slurs were used casually and openly in high-traffic areas and at worker hubs,” the EEOC said. Black employees “regularly” saw graffiti with slurs, swastikas, threats and nooses throughout the facility, including on desks, in bathroom stalls and elevators, according to the suit.
Tesla, which disbanded its media relations team during the pandemic, did not immediately return a request for comment. In August, SpaceX, another one of Tesla’s Chief Executive Elon Musk’s companies, was sued by the Justice Department over its hiring practices.
Employees who spoke up against the racial hostility suffered retaliations that included being fired or transferred, the EEOC said.
The lawsuit was filed in the U.S. District Court for the Northern District of California after attempts at reaching a settlement before the litigation. It seeks compensatory and punitive damages as well as back pay for the affected workers. It also seeks changes to Tesla’s employment practices to prevent discrimination in the future, the EEOC said.
Shares of Tesla have doubled so far this year, compared with an advance of around 12% for the S&P 500 index SPX.
The first Model S rolled out of the Fremont factory in 2012, and the plant now makes Model S, Model 3, Model X and Model Y vehicles, with capacity to make more than a million vehicles a year as well as energy products and battery cells.
Tesla opened up its second U.S. vehicle-making factory in the Austin, Texas, area in the spring of 2022.
China is allowing foreigners in Shanghai and Beijing to move their money freely into and out of the country, in a significant move toward relaxing its strict capital controls as it tries to woo overseas investors.
The news was announced just weeks after official data showed foreign direct investment (FDI) in the country had hit a record quarterly low amid a slump in business confidence.
Foreign investors — either individuals or companies — at the Shanghai pilot free trade zone, where tens of thousands of firms are located, can remit their funds without any restriction or delay, according to a statement from the city government posted Thursday.
The funds need be “real and [legally] compliant” and related to their investments in China, it said. The rules, which do not apply to mainland Chinese nationals, took effect on September 1.
Shanghai’s free trade zone is one of China’s largest and is slightly bigger than the city of Seattle.
It’s home to Tesla’s Gigafactory as well as the country headquarters of hundreds of multinationals, including HP, AstraZeneca and BlackRock.
On the same day, the Beijing city government proposed similar regulations, pledging to facilitate cross-border fund flows for foreign businesses. It’s seeking public feedback on the proposal.
The policies are aimed at attracting foreign investment to build an open economy, the government said.
China maintains a “closed” capital account, which means companies and individuals can’t move money in or out of the country except in accordance with strict rules.
The Chinese currency has weakened more than 6% against the US dollar since the start of April, as economic growth lost momentum and its central bank eased monetary policy more aggressively than its Western peers. A weak currency could further reduce a country’s investment appeal and accelerate the outflow of capital.
Thursday’s measures are the latest effort by Chinese leader Xi Jinping’s government to woo foreign capital and stabilize ties with the West.
A gauge of FDI in China plunged in the second quarter, hitting its lowest level since 1998, when records began, according to data published by the State Administration of Foreign Exchange last month.
Separate statistics published by the commerce ministry Sunday showed that its measure of FDI dropped more than 5% during the first eight months of 2023, compared with a year earlier.
Business confidence among American firms in China appears to have plummeted.
On Tuesday, a survey by the American Chamber of Commerce in Shanghai showed that only 52% of respondents were optimistic about their five-year business outlook, the lowest level since the survey began in 1999. That compares with 55% in 2022 and 78% in 2021.
Foreign companies and investors have grown wary of rising risks in the world’s second largest economy, including a slowdown marked by weak domestic demand and a housing crisis, Beijing’s desire to prioritize national security over economic growth and deteriorating relations between China and many Western countries.
China has made a series of moves recently to stabilize foreign trade and investment, including cutting a tax on stock trading for the first time since 2008.
On Monday, the People’s Bank of China met with a number of top Western companies, including JP Morgan, Tesla and HSBC, pledging to further open up the financial industry and “optimize” the operating environment for overseas companies.
The latest relaxation in capital controls is part of a policy package announced by Beijing and Shanghai, the country’s two biggest cities, to facilitate foreign trade and investment.
Expatriates working at foreign enterprises in the Shanghai free trade zone — including employees from Hong Kong, Macao and Taiwan — can transfer their income abroad without restriction, according to the rules.
Beijing’s policy contains similar measures. It also promised to make it easier for foreign companies to transfer data overseas with “fast-track” channels and encouraged them to invest in the city’s high-end manufacturing, services and green industries.
Cathie Wood, CEO of Ark Invest, speaks during an interview on CNBC on the floor of the New York Stock Exchange (NYSE) in New York City, February 27, 2023.
Brendan McDermid | Reuters
ARK Invest CEO Cathie Wood said she did not participate in Arm‘s blockbuster initial public offering last week because she finds the British chip designer was overvalued relative to its competitive position.
The initial buzz has since fizzled, with the stock suffering successive daily declines to end the Tuesday trade session at $55.17.
Speaking on CNBC’s “Squawk Box Europe” on Wednesday, Wood said the recent frenzy around AI-exposed companies was justified and that “innovation is undervalued given the enormous opportunities that we see ahead, catalyzed very importantly by artificial intelligence.”
“As far as Arm, I think there might be a little bit too much emphasis on AI when it comes to Arm and maybe not enough focus on the competitive dynamics out there,” she added.
Arm CEO Rene Haas and executives cheer, as Softbank’s Arm, chip design firm, holds an initial public offering (IPO) at Nasdaq Market site in New York, U.S., September 14, 2023.
Brendan Mcdermid | Reuters
“So we did not participate in that IPO, and we also compare it to the stocks in our portfolios. Arm came out, we think, from a valuation point of view on the high side, and we see within our portfolios much lower priced names with much more exposure to AI.”
After taking a beating during the recent cycle of aggressive interest rate hikes from the U.S. Federal Reserve, the ARK ETF resurged this year, as investors flocked to stocks with AI exposure. Wood said that the anticipation of interest rates peaking would further this trend.
“The appetite for innovation is stirring here, and I think one of the reasons is because many investors and analysts are starting to look over the interest rate hike moves we’ve seen, record breaking in the last year or so, and to the other side,” she explained.
With inflation coming down across major economies and with central banks expected to begin unwinding their aggressive monetary policy tightening over the next year, Wood suggested the coming period “should be a very good environment for innovation and global megatrend strategies.”
ARK Invest on Wednesday acquired British thematic ETF issuer Rize ETF for £5.25 million ($6.5 million), marking the company’s first venture into the European passive investment market.
Wood said that Europe has not had access to actually invest in the company’s U.S.-based ETFs until now, despite accounting for around 25% of demand for the company’s research since ARK’s inception in 2014.
“The cost of technology, especially with artificial intelligence now, is collapsing, and therefore it’s going to be much easier to build and scale tech companies anywhere in the world. This is no longer just the purview of Silicon Valley,” Wood said. “We are very open-minded about technologies flourishing throughout the world, including Europe.”
MALIBU, California – The most amazing thing about the $2.1 million Rimac Nevera is how easy it is to just get in and drive.
The Nevera is an electric hypercar from Croatia. It sits low — very low — to the ground, and at first glance it looks like the simple act of getting into it could be complicated. But the doors, which lift up and out sort of like a Lamborghini’s, cut into the roof just enough to ensure that I don’t bump my head as I drop myself into the driver’s seat.
Getting underway does take a little bit of learning. Gears are shifted with a big knob to the left of the steering wheel, the power seat’s adjustments are hidden in a touchscreen, and switches for the turn signals and headlights are mounted directly on the steering wheel. But once you’ve got that down, it’s simple to operate.
The whole car is like that — simple to operate — its 1,914 horsepower notwithstanding.
One of the first things I noticed as we got underway is that it’s easy to see out of the Nevera. That’s not a given with cars like this. For example, in Ferraris and Lamborghinis and other low-slung highway rockets, it’s often a challenge to see what’s behind you. But while the Nevera is definitely low slung, there’s just enough of a rear window to make it easy to drive in highway traffic. Good side mirrors certainly help with that.
There’s also just enough mechanical noise to remind you that you’re in a hypercar. There may not be an engine, but there are four electric motors and they make mellifluous mechanical sounds as the car moves down the road. Not so loud that I couldn’t converse with my passenger, Rimac’s Ryan Lanteigne, in a reasonable talking voice. It is just loud enough to remind us that we’re driving in something special.
And the Nevera is very special indeed — as it should be for its just over $2 million asking price. You’ll see why in the video.
Rimac — pronounced REE-mahtz, roughly — is Croatia’s first and only automaker. Its 35-year-old founder, Mate (MAH-ta) Rimac, started tinkering with electric vehicles after he blew the engine in an old BMW he raced as a teenager. After rebuilding it with an electric drivetrain — and winning some races, besides — he founded Rimac Automobili in 2009, hoping to one day build an electric supercar in his home country.
Although Rimac the company’s first years were a struggle, Mate’s timing turned out to be excellent in retrospect, with automakers around the world moving to electrify their fleets.
Rimac’s early prototypes were impressive enough to attract significant investments from Hyundai and Porsche, and it raised another 500 million euros (or about $534 million) last year. Those served as the foundation of what is now a thriving business consulting to traditional automakers eager to build high-performance EVs. Aston Martin and Swedish supercar maker Koenigsegg are among Rimac’s clients, along with a number of others that the company says it can’t yet disclose.
The Nevera is named for the fierce summer storms that roll into Croatia from the Adriatic Sea. (Rimac employees like to say that neveras — the storms — are “extremely powerful and charged by lightning,” just like their car.)
The Nevera (the car) serves both as a rolling display of Rimac’s EV expertise and as the supercar that Mate Rimac has long dreamed of building. It’s a four-motor design — one for each wheel — with a 120 kilowatt-hour battery pack, enough for about 300 miles of range under normal driving conditions.
But there’s nothing normal about the Nevera’s power output. Those four motors give it a total of 1,914 horsepower, and 2,360 newton-meters of torque — enough for a top speed of 258 miles per hour. Zero to 60 miles per hour takes just 1.74 seconds, according to Rimac.
I didn’t verify that time with any great accuracy, but I can attest that such a power thrust is plausible. As friendly as it is to drive in traffic, the Nevera is almost unbelievably quick when fully uncorked. But it never feels uncontrollable, and that’s a significant engineering achievement.
Even more impressive, albeit more subtle, is the way those four motors work together. The car’s systems adjust each motor’s power output 100 times a second to ensure optimum handling moment to moment. Or, put another way, the Nevera blasts through and out of tight corners without hesitation. That’s a trick that other supercars can only emulate with braking.
It’s an even more impressive trick given the car’s weight, around 5,100 pounds. But as hard as it might be to believe, that weight is so well packaged, with the batteries mounted low and close to the Nevera’s center, that it’s hardly noticeable. (Of course, the tremendous power on tap helps.)
It’s a good-looking car, too, low and radical but not over the top. Civilized. It’s well-made, with flawless carbon fiber on the outside and comfortable leather throughout the interior. Croatia doesn’t have a tradition of car making, but the Nevera does reflect some national pride: In addition to the car’s name, the intakes on its sides are styled to resemble a cravat, the ancestor of the modern necktie — a Croatian invention dating to the 16th century.
The Nevera starts at 2 million euros, or just over $2.1 million. If that’s in your price range, speak up soon. Rimac says it plans to build just 150 of them.
Tesla CEO Elon Musk arrives for a U.S. Senate bipartisan Artificial Intelligence Insight Forum at the U.S. Capitol in Washington, D.C., Sept. 13, 2023.
Andrew Caballero-Reynolds | AFP | Getty Images
WASHINGTON — Three Democratic members of the Senate Committee on Armed Services have asked the Pentagon for information about SpaceX CEO Elon Musk, and whether he “directed the unilateral disabling or impediment of function of Starlink satellite communications terminals used by the Ukrainian Armed Forces in southern Ukraine in 2022,” or ever had the authority to do so.
Democratic Sens. Jeanne Shaheen of New Hampshire, Elizabeth Warren of Massachusetts and Tammy Duckworth of Illinois wrote a letter Friday to Defense Secretary Lloyd Austin to express their “serious concerns about whether Musk has personally intervened to undermine a key U.S. partner at a critical juncture.”
Their questions follow the publication of a biography of Elon Musk, who is CEO of SpaceX and automaker Tesla, and owner and chief technology officer of the social network X, formerly known as Twitter. In the book, author Walter Isaacson wrote that a Ukrainian drone submarine attack on Russian warships was disrupted by a disconnect from Starlink, ordered by Musk.
Excerpts from the book raised alarm bells in Washington, among NATO allies and in the Ukrainian capital. After they were published, Musk painted himself as a peacekeeper and wrote on social media that he did not disconnect Starlink over Crimea, but rather denied a request by Ukraine to provide it there. He wrote, “If I had agreed to their request, then SpaceX would be explicitly complicit in a major act of war and conflict escalation.” Isaacson has issued a correction to his biography stating that connectivity had already been disabled in the affected area, and that Musk had simply refused a request to turn it on.
Musk also argued, as he has in the past, that Ukraine should strike a “truce” with Russia. Musk’s “peace plan” argument was shouted down by Ukraine officials, politicians and Putin experts.
On Tuesday, in an interview with CNBC’s “Squawk Box,” Isaacson discussed SpaceX developing a military-grade version of Starlink, which would help resolve concerns expressed by Musk regarding the satellite networks’ use in war.
CNBC asked the U.S. Department of Defense several questions pertaining to SpaceX, including whether the department would be re-evaluating any of the company’s government contracts, whether Musk’s calls for a truce between Ukraine and Russia reflect the U.S. government’s position and whether Musk’s conduct, including taking personal meetings with Putin in the past, had been in line with the terms of contracts awarded to his company.
A spokesperson for the department, Jeff Jurgensen, told CNBC via email, “The Department does contract with Starlink for satellite communication services in support of our Ukrainian partners,” but declined to offer further details or answer the specific questions posed.
He added that the Department of Defense “continues to work closely with commercial industry to ensure we have the right capabilities the Ukrainians need to defend themselves — and more broadly — the kind of communication and space-related capabilities necessary to accomplish our own global missions and support our national defense strategy.”
Earlier in the week, Sen. Warren called for a Congressional probe of Musk and SpaceX. “Congress needs to investigate what’s happened here, and whether we have adequate tools to make sure foreign policy is conducted by the government and not by one billionaire,” Warren said Monday, Bloomberg first reported.
SpaceX is currently working to obtain a new license from the Federal Aviation Administration and approvals from the U.S. Fish and Wildlife Service to resume test flights for its Starship Super Heavy launch vehicle from its Boca Chica, Texas, facility. An earlier test flight this year resulted in an explosion and a mishap investigation overseen and recently completed by the FAA.
The company plans to use Starship to launch and deploy its next generation Starlink satellites. Musk also envisions Starship taking astronauts and supplies to the moon, and eventually, Mars.
Morgan Stanley has revealed a list of global stocks it likes, with four of them providing parts for Tesla ‘s supercomputer system. Called Dojo, the system has revolutionized the AI chip industry, the analysts said in a Sept. 12 note, and is said to result in “significant efficiencies and 6x cost savings.” Morgan Stanley says its list of tech stocks are “well-positioned for US hyperscalers’ acceleration of custom chip design,” especially since custom chips are expected to outgrow the AI graphics processing units in the long term. More aggressive AI custom chip designs are supposedly being developed by big technology companies to improve the performance and efficiency of running large neural networks. Powering Tesla’s Dojo In its research note, Morgan Stanley pointed out that Taiwan Semiconductor Manufacturing Company is the wafer foundry vendor for Tesla’s Dojo 1 (D1) and Dojo 2 (D2). The analysts reiterated their overweight position on TSMC at 718 Taiwanese dollars ($22.47), giving it a 32% upside from its price on Sept. 12. Morgan Stanley raised their price target on AIchip to 2,880 Taiwanese dollars, a 14% upside from its Sept. 12 price. The company “provides part of the design service [for] Dojo 1 and generates 5% of its revenue from this project,” the analysts wrote. Korean electronics manufacturer Samsung received an overweight rating from the bank for “winning projects in HBM (high bandwidth memory)” and being “the key foundry supplier for Tesla’s FSD (full self-driving) chip”. Samsung supplies 32GB of high-bandwidth memory to work with the Dojo interface processor, the analysts said. They have priced the stock at 95,000 Korean won ($71.45), giving it a 35% upside from its Sept. 12 price. Morgan Stanley also likes Nvidia since “Tesla still expects Dojo to operate alongside NVIDIA GPUs – and there are also non-hyperscalers customers needing AI GPU”. The bank is overweight on the stock and has given it a price target of $630 – a 39% upside from its $451.78 price on Sept. 12. New stock on the radar Taiwanese semiconductor company MediaTek was also added to Morgan Stanley’s list of global technology stocks, with an upgrade to “overweight” from “neutral.” The analysts pointed out that the company “should leverage sufficient and cheaper engineering resources to secure one of Google’s TPU (tensor processing units projects, which should contribute 2% of its (forecast) 2025 revenue and trigger a stock re-rating as the company diversifies away from its smartphone-centric business to AI.” The company was given a target price of 888 Taiwanese dollars, giving it a 21% upside from its price of 728 on Sept. 12. — CNBC’s Michael Bloom contributed to this report.
Gasoline prices for full serve and self serve are displayed at the Union 76 gas station ahead of the Labor Day weekend on August 28, 2023 in Beverly Hills, California.
Mario Tama | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Biggest monthly jump this year The U.S. consumer price index for August rose 3.7% from a year ago and a seasonally adjusted0.6% for the month, mostly in line with the expected 3.6% and 0.6%, respectively. Though expected, it’s still the biggest month-on-month increase in prices this year. Energy prices, which soared on the month, were mostly to blame. Core inflation, which excludes food and energy prices, was up 4.3% on the year and 0.3% on the month.
Optimistic markets U.S. markets were mixed Wednesday, with the Dow Jones Industrial Average the only major index to fall. Asia-Pacific stocks mostly rose Thursday. Japan’s Nikkei 225 climbed 1.47% even as shares of Softbank slipped slightly. Australia’s S&P/ASX 200 added around 0.55% as data showed unemployment rate in the country holding steady at 3.7% in August.
The risks of shadow banks in China The difficulties faced by China’s real estate sector recently have highlighted, once again, the risks of shadow banking — a term that refers to financial services offered outside the highly regulated banking system. Chinese developers “were able to borrow liberally from shadow banks,” a researcher said, which pushed up land prices and housing costs. That contributed to the developers’ huge debt today.
Taiwan is ‘not for sale’ At the All-In Summit, a conference on technology and markets, Elon Musk commented that China probably views Taiwan as “analogous to Hawaii or something like that, like an integral part of China that is arbitrarily not part of China.” It drew a swift rebuke from Taiwan’s Ministry of Foreign Affairs, which said Taiwan is “not part of the PRC and certainly not for sale!”
At first glance, August’s CPI report seems bad news. The month-over-month jump in prices is the highest in a year. And even core inflation came in hotter than expected. But look more closely and you’ll find things aren’t as terrifying as they seem.
The headline number was pushed up by rising oil prices, which have been steadily increasing in recent weeks, as we’ve talked about. Gasoline prices soared 10.6% in August, the largest contributor to inflation last month, according to the U.S. Bureau of Labor Statistics.
But it’s likely gasoline prices will fall after a month or two, according to Andrew Hunter, deputy chief U.S. economist at Capital Economics. And gasoline prices have actually retreated 3.3% from a year ago, suggesting that they’re still on a downward trend in the long run.
Excluding volatile energy prices, monthly core inflation was up 0.3% against the expected 0.2%. Here, shelter costs were the main culprit for the hotter-than-expected increase. “Housing continues to contribute an outsized share to the inflation measures,” said Lisa Sturtevant, chief economist at Bright MLS.
But, Sturtevant added, “rent growth has slowed considerably and median rents nationally fell year-over-year in August.” That slowdown in prices will show up in future reports, meaning that August’s core CPI numbers is just “a little bump in the road,” as Kayla Bruun, senior economist at Morning Consult, put it.
“It doesn’t mean it’s turning around and going in the other direction,” Bruun said. “Overall, most of the pieces are headed in the right direction.” Indeed, the annual measure of core CPI still dropped from 4.7% in July to 4.3% in August.
Markets took the numbers in their stride. The Dow was the only major index to fall, losing 0.2% as shares of 3M and Caterpillar sank. The S&P 500 added 0.12% and the Nasdaq Composite rose 0.29%, helped by gains in Tesla and Amazon. And traders are still betting the Federal Reserve won’t raise rates next week, according to the CME FedWatch Tool.
Markets can act in irrational ways sometimes. But sometimes, the crowd psychology of markets manifests as collective wisdom.
— CNBC’s Jeff Cox and Greg Iacurci contributed to this report
A view of a gas station as gas prices are at the highest level from last year in Virginia, on August 16, 2023.
Celal Gunes | Anadolu Agency | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Biggest monthly jump this year The U.S. consumer price index for August rose 3.7% from a year ago and a seasonally adjusted0.6% for the month, mostly in line with the expected 3.6% and 0.6%, respectively. Though expected, it’s still the biggest month-on-month increase in prices this year. Energy prices, which soared on the month, were mostly to blame. Core inflation, which excludes food and energy prices, was up 4.3% on the year and 0.3% on the month.
An Arm and a leg Arm is pricing its initial public offering at $51 per share, the top of its expected price range. That values the company at over $54 billion, giving it a price-to-earnings multiple of about 104. By comparison, Apple’s multiple is around 30, Tesla’s is 77 and Nvidia’s is 110 for the previous 12 months. Softbank, Arm’s current towner, will control about 90% of the company’s outstanding shares.
Rebuilding Citi Citigroup CEO Jane Fraser reorganized the firm, dividing it into five main business lines that report directly to her. Previously, the bank had only two main divisions. The corporate shuffling will include job cuts, though the number is yet to be decided. Shares of Citigroup have declined about 40% since Fraser assumed the top job in March 2021, and trades for the lowest valuation among U.S. big banks.
[PRO] Joining the Tesla party On Monday, Morgan Stanley published a note asserting Tesla could rally 60%. But that’s nothing compared to the call made by Ron Baron, the billionaire investor who founded Baron Capital in 1982. Baron thinks Tesla could grow to as much as five times its current stock market capitalization — here’s what he has to say about the electric vehicle manufacturer and Elon Musk’s other companies.
At first glance, August’s CPI report seems bad news. The month-over-month jump in prices is the highest in a year. And even core inflation came in hotter than expected. But look more closely and you’ll find things aren’t as terrifying as they seem.
The headline number was pushed up by rising oil prices, which have been steadily increasing in recent weeks, as we’ve talked about. Gasoline prices soared 10.6% in August, the largest contributor to inflation last month, according to the U.S. Bureau of Labor Statistics.
But it’s likely gasoline prices will fall after a month or two, according to Andrew Hunter, deputy chief U.S. economist at Capital Economics. And gasoline prices have actually retreated 3.3% from a year ago, suggesting that they’re still on a downward trend in the long run.
Excluding volatile energy prices, monthly core inflation was up 0.3% against the expected 0.2%. Here, shelter costs were the main culprit for the hotter-than-expected increase. “Housing continues to contribute an outsized share to the inflation measures,” said Lisa Sturtevant, chief economist at Bright MLS.
But, Sturtevant added, “rent growth has slowed considerably and median rents nationally fell year-over-year in August.” That slowdown in prices will show up in future reports, meaning that August’s core CPI numbers is just “a little bump in the road,” as Kayla Bruun, senior economist at Morning Consult, put it.
“It doesn’t mean it’s turning around and going in the other direction,” Bruun said. “Overall, most of the pieces are headed in the right direction.” Indeed, the annual measure of core CPI still dropped from 4.7% in July to 4.3% in August.
Markets took the numbers in their stride. The Dow was the only major index to fall, losing 0.2% as shares of 3M and Caterpillar sank. The S&P 500 added 0.12% and the Nasdaq Composite rose 0.29%, helped by gains in Tesla and Amazon. And traders are still betting the Federal Reserve won’t raise rates next week, according to the CME FedWatch Tool.
Markets can act in irrational ways sometimes. But sometimes, the crowd psychology of markets manifests as collective wisdom.
— CNBC’s Jeff Cox and Greg Iacurci contributed to this report
