Stock Market Plunges as Tesla and AT&T Lead the Way Lower

by Joshua Brown
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Right now on Wall Street, things are looking a bit down. The S&P 500 went lower in the afternoon and the Dow Jones Industrial Average dropped by 40 points today, which is about 0.1%. The Nasdaq composite has also declined a little – at least 0.42% lower than before. This comes after some big companies released their earning reports and it looks like our US economy might be slowing down too.

Tesla had a bad day for the second time in a row because people were concerned about how much money it was making from selling electric cars. It went down by 7.5% when it announced that its profits in the first three months of the year weren’t as high as investors had hoped, since Tesla kept lowering the prices of its vehicles.

Some banks suddenly became less valuable after releasing their financial report that was not as good as expected. KeyCorp and Zions Bancorp experienced drops in their value especially because lots of people took out their money from the banks due to the second- and third-largest U.S. bank failures last month.

Zions dropped 4.4%, while KeyCorp fell 4.6%. Truist Financial declined 2.7% after a weaker profit than usual showed up in its report.

AT&T’s stock went down 10% when it announced that its money coming in wasn’t as much as expected, even though its profits were just enough. This is the worst drop AT&T has ever experienced in two decades. However, some other businesses did really well and made lots of money because they beat what experts predicted.

Lam Research saw an increase of 8.9% after it announced that it made more profit and sales than what was expected by Wall Street. Steel Dynamics went up 8%, house builder D.R Horton increased 6.7%, Las Vegas Sands gained 6.2%, while Nucor steel rose 6.7% too after they all declared that their profits were higher than expected as well.

Recently, most companies have been doing better than expected, which we think is partly due to the fact that predictions for their success were fairly low heading into this season.

Analysts said that the S&P 500 earnings per share (EPS) would be worse than when the Coronavirus was really affecting us last year. Profits are being challenged because of inflation, higher interest rates, and some sectors slowing down.

The bond market has been seeing lower yields lately due to some reports about the state of the U.S. economy. Last week more people applied for unemployment benefits than in the previous one, which could mean that the job market is starting to get worse due to higher interest rates. What’s more, it seems as if there have been more applications for jobless benefits than ever since November 2021, according to Rubeela Farooqi from High Frequency Economics.

A new report suggested that manufacturing in the mid-Atlantic region was not doing well, worse than what economists had thought. This caused the 10-year Treasury’s yield to drop from 3.59% to 3.54%, and the two-year yield, which is connected to the Federal Reserve, fell from 4.25% to 4.12%.

The Fed has been trying to slow down the economy for over a year because they want inflation to stay stable. To do that, they raise short-term interest rates. This is an effective but strong move that makes the economy slower and higher chances of getting a recession. That also makes investments more expensive.

The housing market was one of the first things to be affected by higher interest rates from the Federal Reserve. This made it more expensive for people to get mortgages. There was a report on Thursday that sales of homes had slowed in March, but it is still above where it was at the beginning of this year. On Thursday, when yields (or interest rates) went down, stocks also became lower which helps investments because lower rates make them better.

In other countries, stock prices went in different directions when news came out today saying that Japan’s trade deficit got smaller last month because their exports increased more than expected. However, exports to China dropped which shows that the world is still trying to recover from the problems caused by coronavirus. In Europe, stocks were not changing much.

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