Traders work on the floor of the New York Stock Exchange (NYSE) on July 24, 2024 in New York City.
Spencer Platt | Getty Images
This report is from today’s CNBC Daily Open, our international market newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. As you see? You can subscribe here.
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What you need to know today
Wall Street is sinking
The S&P 500 and Nasdaq Composite had their worst day since 2022 as earnings fell short of two tech megacaps. The broader index fell 2.3%, while the tech-heavy Nasdaq fell 3.6%, with the Dow Jones Industrial Average losing 504 points. Google-parent Alphabet posted its steepest one-day decline since January 31, falling 5% after YouTube ad revenue missed estimates. Tesla shares are down more than 12%. Nvidia, Meta Platforms, and Microsoft also fell 6.8%, 5.6% and 3.6% respectively. The yield on the 10-year Treasury rose, while US oil prices rebounded from a three-day loss.
Ford profit and loss
Ford Motor shares fell 11% in extended trade after the company missed Wall Street’s second-quarter earnings expectations due to rising warranty costs. The automaker beat revenue estimates and raised its free cash flow target, but maintained its 2024 earnings guidance, disappointing investors. Ford reported adjusted earnings per share of 47 cents, short of expectations of 68 cents, while automotive revenue came in at $44.81 billion, beating expectations of $44.02 billion.
Tesla dives
Shares of Tesla fell more than 12% on Wednesday, the biggest drop since 2020, after the electric vehicle maker reported weaker-than-expected quarterly earnings and reduced automotive revenue. Declining revenue, due to price cuts and incentives amid slowing sales and increased competition, particularly in China, has dragged the stock down 13% so far this year, while the Nasdaq is up 16% over the same period.
NBA media rights
The National Basketball Association rejected Warner Bros. Discovery’s attempt to match Amazon’s $1.8 billion-a-year bid for media rights, but instead voted to finalize its deal with Amazon. It ended a decades-long partnership with Warner Bros. Discovery and cable network TNT. The NBA’s decision is part of an 11-year, $77 billion media rights renewal, with Disney and Comcast’s NBCUniversal securing the other two packages.
Blockbusters
Disney’s “Inside Out 2” has surpassed “Frozen II” to become the biggest animated film, with ticket sales exceeding $1.46 billion worldwide. The success will continue because the film has not yet opened in Japan, a market that contributed almost $33 million to the total of $850.5 million “Inside Out” in 2015. hits and misses, especially with Pixar films affected by streaming releases related to pandemic.
(PRO) Harris crypto effect
Former President Donald Trump has been embraced by the crypto community. However, Vice President Kamala Harris entering the presidential race adds uncertainty to the outcome of the election and its implications for the crypto industry. Here’s what the Harris administration means for crypto.
Bottom line
During a recent earnings call, Tesla CEO Elon Musk seemed more interested in discussing the future of the company’s autonomy than addressing concerns about its legacy car business.
“A lot of Tesla’s value is autonomy. This is more in noise relative to autonomy,” said Musk. Tesla is due to unveil its robotaxi in October, after delaying the launch for two months.
Tesla is down nearly 18% from its last high in July. Wall Street analysts see further downside ahead especially after adjusted operating margins shrank to the lowest in three years amid a decline in auto sales.
“Any time the gap between what is reality and what is happening today versus what is in Musk’s mind and will happen in the future. When the gap widens out the stock comes under a lot of pressure,” TD Cowen analyst Jeff Osborne told CNBC’s “Squawk on the road.” Osborne has a $180 price target on the stock, which is nearly 17% below Wednesday’s close.
It’s “not clear” how Tesla “solves the automotive problem” with lower structural margins, Osborne said. “He didn’t touch it with a 10-foot pole on the phone.”
“It is unclear whether the path forward around any type of new vehicle to reinvigorate demand.”
As for Alphabet, CNBC’s Samantha Subin wrote that investors in parent Google should prepare for unstable times. As companies plan to spend $12 billion per quarter to prepare themselves for the future of AI, advertising revenues are under pressure.
The S&P 500 and Nasdaq fell after disappointing numbers from Alphabet and Tesla.
“Usually in a bull market, now and again, we get a selloff, and this is not good, I think this will be an official correction in the Magnificent 7,” Ed Yardeni of Yardeni Research told CNBC’s “Closing Bell.”
“If you look at the fundamentals of the economy, I don’t think we’ll get a 10% to 20% S&P correction because I don’t see a recession out there and I don’t think investors are really worried about a recession, because the Fed has promised to lower interest rates if necessary and I don’t see a bear market.
But investors’ expectations are very high for this earnings season, Goldman Sachs tactical specialist Scott Rubner highlighted.
“The bar for earnings of the most important company on planet earth is very high. Earnings and guidance must be good, and by good, we mean big,” wrote Rubner.
– CNBC’s Fred Imbert, Lisa Kailai Han, Hakyung Kim, Lora Kolodny, Alex Sherman, Michael Wayland and Spencer Kimball and contributed to this report.