Nasdaq futures fall 1% as Tesla earnings disappoint

(Reuters) – Nasdaq futures slid 1% on Thursday as Tesla shares tumbled after the electric-vehicle maker posted its lowest quarterly gross margin in two years, while investors grew nervous about the outlook for U.S. interest rates.

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 March banking crisis, but rapidly rising rates and recession worries have dimmed their outlook.

Tesla Inc slid 7.4% in premarket trading after its first-quarter gross margin missed market expectations due to aggressive price cuts for its vehicles and boss Elon Musk said it would put sales growth ahead of profit.

Shares of other megacap stocks such as Apple Inc, Amazon.com Inc and Alphabet Inc fell between 0.7% and 1.2%.

“A lot of companies are keeping their heads above water but there remain plenty of headwinds to cloud the outlook,” said Russ Mould, investment director at AJ Bell.

“The prospect of another round of interest-rate hikes in the U.S. and Europe will further increase the cost of borrowing, coinciding with fears that banks are going to have stricter lending policies following the recent Silicon Valley Crisis.”

Traders are reassessing the outlook for U.S. interest rates after data pointed to a slowing U.S. economy that was not weak 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 of further tightening by the U.S. central bank.

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.

Fed funds futures traders are pricing in an 83% probability of a 25 bps rate hike next month, according to CME Group’s Fedwatch tool.

The two-year Treasury yield, which typically moves in step with near-term rate expectations, traded below the one-month high it hit on Wednesday. [US/]

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Investors are also focused on whether Congress will raise the nation’s debt ceiling, with some analysts concerned that the Treasury could run out of money faster than previously expected due to weak tax receipts.

At 05:51 a.m. ET, Dow e-minis were down 146 points, or 0.43%, S&P 500 e-minis were down 30.25 points, or 0.72%, and Nasdaq 100 e-minis were down 137 points, or 1.04%.

The day ahead includes weekly jobless claims data and Philadelphia Fed’s business index. A host of Fed policymakers are also expected to speak later in the day.

IBM Corp gained 1.8% after the software company beat analysts’ estimates for first-quarter profit and signaled demand for IT services was better than feared.

Las Vegas Sands Corp climbed 4.4% after the casino operator reported quarterly revenue that surpassed Wall Street estimates, helped by accelerated gaming volumes, retail sales and hotel occupancy.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)