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Markets are on a winning streak, so why is Tesla struggling?

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The S&P 500 extended its remarkable winning streak, reaching an all-time high for the fifth consecutive session, fueled by robust U.S. economic growth data for the fourth quarter.

Meanwhile, electric vehicle giant Tesla faced a significant setback as it tumbled in response to a disappointing sales forecast.

This recent surge in the S&P 500 marks the first time in two years that it has achieved record highs, driven by optimism about the economy, lower interest rates, and growing investments in artificial intelligence.

Tesla experienced a sharp decline of 12%, hitting its lowest point since May 2023.

Impacted margins

CEO Elon Musk’s warning of slower sales growth in the coming year, despite price reductions that have negatively impacted margins, contributed to this decline.

As a result, Tesla’s market value dropped to approximately $580 billion, falling below Eli Lilly (LLY.N) and just above Broadcom (AVGO.O).

Contrary to predictions of a recession following the Federal Reserve’s aggressive interest rate hikes, the U.S. economy exhibited faster-than-expected growth in the December quarter, with a full-year growth rate of 2.5%.

Strong consumer spending played a pivotal role in this economic resilience.

Jobless claims

Additional data revealed that initial jobless claims for the week ending January 20 rose to 214,000, exceeding the estimated figure of 200,000.

Investors are eagerly anticipating quarterly results from tech giants such as Apple (AAPL.O), Microsoft (MSFT.O), Amazon (AMZN.O), Alphabet (GOOGL.O), and Meta Platforms (META.O) in the coming week, which will provide insights into whether their high valuations are justified after significant stock surges since 2022.

EV losses

Following Tesla’s quarterly report, other electric car manufacturers also experienced losses. Rivian Automotive (RIVN.O) dropped 2.2%, and Lucid Group (LCID.O) fell by 6.7%.

American Airlines (AAL.O) reported a 10.3% increase as it predicted upbeat annual profits.

Highest consumer financial stress level in three years

Among the S&P 500 companies that have reported earnings thus far, an impressive 82% have exceeded expectations, surpassing the long-term average beat rate of 67%.

Boeing (BA.N) faced a 5.7% decline after the U.S. Federal Aviation Administration prohibited the troubled planemaker from expanding the production of its 737 MAX narrowbody planes.

Advancing stocks outnumbered declining ones within the S&P 500 (.AD.SPX) with a ratio of 4.0 to one. The S&P 500 marked 50 new highs and two new lows, while the Nasdaq recorded 97 new highs and 119 new lows.

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AI pushes the Nasdaq to a record-breaking close

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The Nasdaq achieved a record-breaking close, surpassing its previous record high of 16,057.44, which was established on November 21, 2021.

Artificial assistance

Artificial intelligence-related technology stocks, such as Nvidia (NVDA.O) and Microsoft (MSFT.O), have greatly boosted the index.

The Nasdaq Composite has increased by almost 7.2% this year.

The tech-focused index surged 43% in 2023, and as chipmakers gained traction and confidence increased that the Fed might achieve a soft landing—that is, curb inflation without inciting a recession—stocks surged strongly by year-end.

In contrast, Nvidia increased by 1.9% on Thursday, bringing its total gain from a year ago to around 250%.

Market boom

Every S&P 500 subs sector saw a gain at the end of the month.

Analysts at Deutsche Bank report that the index has now increased for 16 of the past 18 weeks, matching the record most winning weeks last attained in 1971.

Bitcoin also moved closer to its all-time high.

The price of the virtual currency momentarily surpassed $64,000 as spot bitcoin ETFs helped drive it to heights last seen in 2021.

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Disney sign off on mega merger with India’s largest conglomerate

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India’s top conglomerate Reliance Industries and Walt Disney announced the merger of their India TV and streaming media assets, forming an $8.5 billion entertainment juggernaut.

Disney, Reliance sign non-binding agreement for India’s largest media conglomerate

Reliance, led by Asia’s richest man, Mukesh Ambani, will inject $1.4 billion in the merged entity, with the company and its affiliates holding a more than 63% stake, with Disney owning the rest, the companies said in a joint statement.

Mukesh Ambani, Reliance’s multimillionaire CEO

Media rivals

With two streaming platforms and 120 TV channels, the combined company will be a formidable opponent for competitors like Netflix and Sony of Japan in the $28 billion media and entertainment market, which is expected to grow to $100 billion by the end of the decade.

Disney’s lengthy battle to stop users from leaving its collapsing Indian streaming service and the financial burden resulting from billion-dollar payments for Indian cricket rights before the deal, providing yet another illustration of how difficult it can be for Western companies to expand in India.

Ultimate alliance

“The combined entity will create a sports behemoth in India,” stated Jinesh Joshi, an analyst at Prabhudas Lilladher in India.

“This merger will give Reliance great bargaining power when it comes to negotiating advertisement contracts … For Disney, coming together with a bigger player, in terms of (financial) pockets, will give it a cash cushion,” he continued.

According to the corporations, the combined company will serve the approximately 750 million viewers in India as well as the Indian diaspora worldwide.

According to Disney CEO Bog Iger’s statement, “Reliance has a deep understanding of the Indian market and consumer,” and the acquisition will enable “us to better serve consumers with a broad portfolio of digital services, entertainment, and sports.”

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Warner Bros Discovery plans to shutdown popular NZ news network

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One of New Zealand’s two free-to-air television networks claimed it will be shutting down all newsroom operations, television news broadcasts and website from June 30, with the loss of up to 200 media jobs.

The once-thriving network, which had been a staple in the New Zealand entertainment industry, is now facing financial turmoil, sending shockwaves through the media landscape.

Warner Bros Discovery, who own the NZ news network, stated the decision comes following further attempts to reduce costs and that meant major changes including the planned shut down of the newsroom.

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