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Tesla’s place among the so-called Magnificent 7 stocks is under serious threat. In fact, the group’s role in the driving market higher is also at risk.
The electric-vehicle maker’s first-quarter deliveries were pretty awful, missing estimates by a long way. But it’s not a blip—the stock has now fallen 33% this year, the S&P 500’s second-worst performer in 2024 behind
Humana
.
That’s hardly magnificent.
The adjective’s use to describe the other six is also looking more shaky—for Apple in particular, which has dropped 12% this year. The Mag 7’s outperformance began to fade in March as a market-cap-weighted composite index of the stocks rose 1.6% compared with the S&P 500’s 3.1% jump.
The group’s dominance has meant growth stocks have long outperformed value stocks but that, too, may be changing. The S&P 500 Value index has climbed 2.7% over the past month, while its Growth index counterpart is up just 0.2%.
The Federal Reserve may have something to do with that. Smaller cap stocks stand a better chance of benefiting from hopes that the central bank will soon cut borrowing costs. The Big Tech names were largely unscathed by the Fed’s aggressive hiking campaign and similarly may not get as much of a boost from the cutting cycle.
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The broader market may have the positive impact of rate cuts to look forward to, but the wait is becoming increasingly frustrating. Fed officials continue to display very little urgency over cutting rates, citing the need for more data.
That’s not a new problem for markets, but it seems they can no longer rely on the Mag 7—and the artificial-intelligence boom—to come to the rescue in the meantime.
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EV Maker’s Disappointing Deliveries Have Analysts Fretting About Demand
Tesla
’s
disappointing first-quarter delivery numbers have Wall Street wondering if there is a bigger issue at Elon Musk’s electric-vehicle maker. A wider-than-expected 46,561 discrepancy between the number of Teslas produced and sold suggests there could be a serious demand issue,
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analyst Emmanuel Rosner said.
- Tesla delivered 386,810 vehicles in the quarter, well below Street estimates. Analysts called it “shockingly disappointing” and an “unmitigated disaster.” Tesla sees itself in the middle of two growth waves—the first with its Model Y and 3 vehicles, and the second with its upcoming lower-priced Model 2.
- Reviving growth won’t be easy. Wedbush Securities analyst Dan Ives said Musk has exacerbated things with side distractions, such as his comments on building an AI company outside of Tesla, having his 2018 pay package litigated in a Delaware court, and asking shareholders to vote on moving Tesla to Texas.
- Tesla investor Gary Black of the
need for an
ETF wants the company to start advertising to boost sales. Early EV adopters are long gone, and so are the days when Tesla could sell vehicles with no ads, he said, creating the -like strategy to entice consumers.
- Tesla stock’s 4.9% drop on Tuesday wiped out about $6 billion in the value of Musk’s stake, combining stock and options. Musk is still one of the world’s richest people, ranking third on the Bloomberg Billionaires Index, with a net worth of $189 billion as of April 1.
What’s Next: Investors want Tesla to accelerate the move toward its Model 2 program, which currently isn’t slated to arrive until late 2025. The new vehicle will compete with several all-battery vehicles priced below $30,000 from China’s
BYD
,
Xiaomi
,
and others.
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Fed Officials Question Rate-Cut Urgency, Citing Need for Data
Cleveland Federal Reserve President Loretta Mester said more evidence is needed to confirm that inflation is still on track to decline in 2024 toward its 2% target, and that she’s unlikely to have that confidence by the Fed’s May meeting. That comment cast doubts on the timing of interest-rate cuts.
- Traders aren’t expecting a cut in May, either. Prices for interest-rate futures imply a nearly 60% probability of a quarter-point decrease at the Fed’s June meeting, and the greatest likelihood of a total 0.75 percentage-point reduction in 2024.
- The Fed has made substantial progress on bringing the rate of inflation down since its 2022 peak, but it remains above target. Mester told a gathering of business leaders in Cleveland that the disinflation process won’t be a smooth path back to 2%.
- San Francisco Fed President Mary Daly cautioned about keeping rates high for too long. Policymakers must try to create a durable expansion without triggering a recession, she said in Las Vegas. With the labor market still strong and no urgency to adjust the rate, standing pat is the right policy at the moment, she added.
- Mester last month changed her forecast of the long-run fed-funds rate to 3%, from 2.5%. Daly said that three quarter-point cuts in 2024 matches her base case should the economy evolve as expected, but that she could adjust her assumptions based on the data.
What’s Next: Mester sees better 2024 economic growth than before, based on the strong start to the year, forward-looking data, and anecdotes from businesses and individuals in her district. Growth will moderate, but gross domestic product will still increase at an above-average pace in 2024, she said.
—Nicholas Jasinski and Janet H. Cho
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Taiwan Rocked By Deadly Earthquake. Chip Stocks Fall.
Taiwan’s biggest earthquake in 25 years, on Wednesday morning local time, has killed at least seven people and injured more than 700. It occurred just off the eastern coast of the island and while a tsunami warning was issued in Japan it was later lifted. The earthquake also caused a selloff in the country’s semiconductor stocks.
- Shares of Taiwan Semiconductor Manufacturing, one of the biggest makers of chips in the world and a major supplier to Apple and Nvidia, fell on the day. The company said it evacuated factories after the quake but workers are now returning.
- The Fubon FTSE TWSE Taiwan 50 ETF exchange-traded fund closed 0.4% lower in Taiwan. American depositary receipts of ASE Technology Holding and United Microelectronics also slipped early.
- Beyond the destruction it caused, the earthquake is the latest threat to global supply chains following the bridge accident in Baltimore last week that closed a major U.S. port.
- Separately, TMSC’s rival chip maker Intel said operating losses in its chip manufacturing arm should peak this year, with the business expected to reach break-even in 2027. Its new disclosures show that its Foundry segmentlost $7 billion in 2023, widening from a loss of $5.2 billion in 2022.
What’s Next: The disaster wasn’t as bad as the 1999 earthquake that killed more than 2,000 people, but it may add to pressure on companies trying to shift production out of Taiwan to diversify supply chains as the U.S. and China impose restrictions on exports.
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Hollywood’s Endeavor Group Returning to Private Realm
Three years after its IPO, the talent agency and entertainment company
is returning to the private realm. Its biggest investor, the private-equity firm Silver Lake, is buying the part it doesn’t already own in a deal that values Endeavor at $13 billion.
- Silver Lake called it the largest private equity take-private in more than a decade and the largest in the media and entertainment sector. Endeavor is run by superagent Ari Emanuel, who bought up several talent agencies and sports entertainment companies in the past few years. Endeavor went public in 2021.
- Endeavor started a strategic review last fall, indicating it was thinking about going private. Silver Lake is paying $27.50 a share in cash. But its sports operation
which includes the wrestling and martial arts brands WWE and the Ultimate Fighting Championship, will remain a publicly traded company.
- Emanuel’s acquisition spree was designed to diversify beyond the representation business. Endeavor’s umbrella also includes the talent agencies WME and IMG, the Professional Bull Riders league, sportsbook technology firm OpenBet, streaming platforms, and live event production. It had nearly $6 billion in revenue in 2023.
- A dispute with the Writers Guild of America forced it out of the content production business. Endeavor also can’t get lucrative packaging fees for TV series and movies that include a significant number of WME clients, The Wall Street Journal reported.
What’s Next: Silver Lake’s deal isn’t subject to financing conditions or stockholder approvals, and the companies expect the transaction to close by the end of the first quarter of 2025.
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—Janet H. Cho and Angela Palumbo
***
Cal-Maine Halts Egg Production at Texas Plant Citing Bird Flu
the biggest U.S. egg producer, halted production at a Texas plant, where a bird flu outbreak forced it to destroy nearly two million chickens. The company said there are no known risks related to bird flu for eggs currently in the market, and it isn’t recalling any.
- The affected birds made up 3.6% of Cal-Maine’s total flock. The facility, in the Texas panhandle, is following Department of Agriculture protocols. Cal-Maine is trying to secure production at other plants to minimize disruption. Health officials say the risk of bird flu to the U.S. population is low.
- The disclosure comes a day after health officials identified a human case of bird flu, also in Texas, in a person who had contact with dairy cows that were thought to have been infected. Officials have identified bird flu infections in cows in Texas, Kansas, New Mexico, and Michigan.
- The company soundly beat expectations for its fiscal third quarter, with record sales volume on increased demand and lower egg prices. CEO Sherman Miller said consumers are looking for protein options that are affordable. It reported earnings of $3 a share on revenue of $703 million.
- Sales volumes rose 3.2% from the same time last year, with sales of regular eggs up 2.6% while sales of specialty eggs rose 4.4%. The results represented the highest total of dozens sold and highest number of specialty dozens sold in any quarter for Cal-Maine Foods, the company said.
What’s Next: Texas Agriculture Commissioner Sid Miller said the state’s agriculture department would continue to monitor and provide guidance to producers and consumers, adding that safety measures and pasteurization ensure that dairy products remain unaffected by bird flu.
***
Dear Quentin,
My relationship with my parents has been strained for as long as I can remember.
My father and mother are 82 and 76, respectively. I am 45 and their only child. We don’t live near each other so our communication is currently about one FaceTime every three weeks, no calls or texts in the interim, and I see them about once a year.
They have lived in the same house in New Jersey for 50 years and they don’t throw anything away so the house is filled with 50 years’ worth of junk. They have told me that they plan to let it be my problem after they die as they have no desire to deal with it themselves.
They are fairly secretive and distrusting, so I haven’t felt comfortable asking questions about money or accounts. The idea of being left with cleaning up their mess (both the stuff and the financial) after they are gone is pretty stressful.
I don’t know anything about their financial situation or if they have a will. I’ll end up scrambling when the time comes. Their health is questionable, they are not very active, and they have no other family or friends. Which brings me to my question—how do I prepare for this?
—Overwhelmed and Anxious
Read the Moneyist’s response here.
—Quentin Fottrell
***
—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner
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