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Tesla falls as gross margin lags estimates
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AT&T slides after missing revenue est
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Debt ceiling jitters hit sentiment
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Futures down: Dow 0.58%, S&P 0.79%, Nasdaq 0.97%
(Adds fresh analyst comment, updates prices)
By Sruthi Shankar and Ankika Biswas
April 20 (Reuters) - Wall Street was set to open lower
on Thursday as disappointing results from Tesla, AT&T and some
regional banks dented investor sentiment already soured by
prospects of further U.S. interest rate hikes.
The main U.S. stock indexes have remained steady this week
as mixed earnings from U.S. banks allayed concerns of a
contagion from the banking crisis in March, but rapidly rising
rates and recession worries have dimmed their outlook.
Tesla Inc slid 8.0% in premarket trading after its
first-quarter gross margin missed expectations on aggressive
price cuts for its vehicles and CEO Elon Musk said the company
would put sales growth ahead of profit.
"Tesla is and has been struggling. They've been cutting
prices pretty regularly and that's not something that you do if
the market is strong for your product," said Paul Nolte, market
strategist at Murphy & Sylvest Wealth Management.
Among other companies that reported earnings, AT&T Inc fell 5.4% as the wireless carrier missed Wall Street estimates
for first-quarter revenue, while American Express Co slipped 1.3% after downbeat results.
Traders are reassessing the path for interest rates after data indicated that a slowdown in the U.S. economy was not enough to push the Federal Reserve to start cutting rates as early as this year. Comments from Fed policymakers this week have also supported bets on further policy tightening.
The Fed will deliver a final 25-basis-point rate hike in May and then hold rates steady for the rest of the year, according to economists in a Reuters poll, which also showed a likely short and shallow recession in 2023. The two-year Treasury yield , which typically moves in tandem with near-term rate expectations, slipped from one-month highs hit on Wednesday. Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, suggesting that the labor market was gradually slowing. Another set showed business activity in the U.S. Mid-Atlantic region slumped more than expected in April. "The market is anticipating anywhere between 50 and 100 basis points cut by the end of the year, they are expecting something that the Fed is not talking about at this point," added Nolte.
Adding to worries, the cost of insuring exposure to U.S. sovereign debt rose to the highest level since 2011, over market jitters that the government could hit its debt ceiling sooner than expected. Republican U.S. House Speaker Kevin McCarthy on Wednesday unveiled a plan to raise the nation's debt ceiling by $1.5 trillion and cut federal spending by three times that amount. At 8:38 a.m. ET, Dow e-minis were down 197 points, or 0.58%, S&P 500 e-minis were down 33 points, or 0.79%, and Nasdaq 100 e-minis were down 127.5 points, or 0.97%. IBM Corp gained 1.1% after the software company beat estimates for first-quarter profit. Las Vegas Sands Corp climbed 5.3% after the casino operator reported better-than-expected quarterly revenue, while Alaska Air Group Inc fell 1.5% on wider-than-expected first-quarter loss. Among regional banks, Zions Bancorp , Truist Financial Corp and KeyCorp dropped between 1.6% and 5.2% after their quarterly profits missed estimates. (Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Editing by Arun Koyyur and Vinay Dwivedi)
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