Investing.com -- Tesla faces turbulent times ahead after weak first-quarter numbers, Intel has disclosed a large loss at its chip-making unit, while Taiwan's massive earthquake could hit TSMC's chip production. Wall Street looks set to open slightly lower, consolidating ahead of the latest speech by Fed Chair Jerome Powell.
1. Tesla faces tough times ahead
Tesla (NASDAQ:TSLA) released a weak first-quarter vehicle production and deliveries report on Monday, prompting a sharp selloff, and more of the same is likely going forward.
The EV manufacturer revealed deliveries fell 8.5% from the year-ago quarter and approximately 20% from the fourth quarter representing the first year-over-year decline since the second quarter of 2020, when COVID was rampant.
Tesla stock fell around 5% on Monday, continuing the recent decline which has seen the company’s shares drop over 30% so far this year.
This was “an unmitigated disaster 1Q that is hard to explain away,” said analysts at Wedbush, in a note.
“We view this as a seminal moment in the Tesla story for Musk to either turn this around and reverse the black eye 1Q performance. Otherwise, some darker days could clearly be ahead that could disrupt the long-term Tesla narrative,” said Wedbush.
Tesla cited production issues with Model 3 Highland and in other areas for its shortfall, said analysts at Bernstein, in a note, “but production was not the issue - demand was.”
“We believe units are likely to decline YoY again in Q2 - and could potentially for the year,” Bernstein added.
Analysts at Wells Fargo (NYSE:WFC) agreed, stating that “given the weak Q1 start, we remain skeptical deliveries can grow in 2024 (or 2025).”
2. Futures consolidate ahead of Powell speech
U.S. stock futures edged lower Wednesday, continuing to consolidate after a strong start to the year ahead of a flurry of Fed speakers, including Chair Jerome Powell.
By 03:45 ET (08:45 GMT), the Dow futures contract was 25 points, or 0.1%, lower, S&P 500 futures dropped 5 points, or 0.1%, and Nasdaq 100 futures fell by 34 points, or 0.2%.
The major indices posted a losing session on Tuesday, with the Dow Jones Industrial Average dropping almost 400 points, or 1%, the broad-based S&P 500 index falling 0.7% and the tech-heavy Nasdaq Composite slipping just under 1%.
The recent weakness followed sticky inflation data from last week as well as some strong economic data, which had investors concerned the Federal Reserve will delay cutting interest rates into the second half of the year.
That said, some consolidation was also probably due after the benchmark S&P 500 index recorded its best first quarter since 2019.
There is more economic data to digest Tuesday, including the ADP private payrolls report and the ISM services index, but investors are likely to concentrate their attention on a slew of central bank speakers, including Federal Reserve Chair Jerome Powell.
Powell said on Friday that the latest U.S. inflation data is "along the lines of what we would like to see” - comments that were largely in line with his remarks after the Fed's policy meeting last month which had the markets expecting a rate cut in June.
3. Earthquake could hit TSMC production
Taiwan was hit with a 7.5 magnitude earthquake earlier Wednesday, the most powerful to strike the island in at least 25 years, killing four people and injuring dozens more.
The natural disaster prompted Taiwan Semiconductor Manufacturing (NYSE:TSM) to evacuate some factory areas, potentially heralding production delays at the world’s largest contract chipmaker.
TSMC supplies many major companies–including Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), and Qualcomm (NASDAQ:QCOM)–with semiconductors to use in their products, and thus could be seen as a choke point in the global supply chain.
Shares of TSMC, which has a more than 60% share of global contract chipmaking and a monopoly over advanced microprocessors, were down 1.4% in early trade.
While any supply disruptions caused by this earthquake may be temporary, they can illustrate the importance of the island, which China regards as a province, to the global economy.
4. Intel discloses hefty loss for chip-making unit
Intel (NASDAQ:INTC) stock traded sharply lower premarket after the chipmaker late Tuesday disclosed deepening operating losses for its semiconductor manufacturing business.
Intel said the foundry unit had $7 billion in operating losses for 2023 on sales of $18.9 billion, a wider loss than the $5.2 billion in 2022 on $27.5 billion in sales.
This is the first time that Intel has disclosed revenue totals for its foundry business alone.
“Intel Foundry is going to drive considerable earnings growth for Intel over time. 2024 is the trough for foundry operating losses,” CEO Patrick Gelsinger said on a call with investors on Tuesday, expecting to eventually break-even “midway” between this quarter and the end of 2030.
Intel stock fell over 4% premarket.
5. Crude steadies near recent highs
Oil prices steadied near five-month highs Wednesday, as traders digested signs of shrinking U.S. inventories and more potential supply disruptions.
By 03:45 ET, the U.S. crude futures traded 0.1% lower at $85.09 a barrel, while the Brent contract climbed 0.1% to $88.97 per barrel.
Data from the American Petroleum Institute on Tuesday indicated that U.S. crude inventories shrank nearly 2.3 million barrels in the week to March 28 - more than expectations for a draw of 2 million barrels.
While the reading comes after an outsized, 9.3 million barrel build in the prior week, it is also the third weekly draw in inventories over the past four weeks.
Official data from the Energy Information Administration are due later in the session.
The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, will hold an online meeting of its Joint Ministerial Monitoring Committee later in the session, with the producer group widely expected to keep production unchanged.
Fears of a broader conflict in the Middle East–after Iran vowed retaliation against Israel for strikes on the Iranian embassy compound in Damascus–presented the possibility of more supply disruptions in this oil-rich region, helping crude surge to levels last seen in late-October.