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Stocks Shuffle After Low-Velocity Results from Tesla, Green Mountain

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August 6, 2015

Stocks twisted between narrow gains and losses in Thursday’s early action as participants digest continued revenue misses, including from Tesla (TSLA) and Keurig Green Mountain (GMCR). Traders are reluctant to stick out their necks given lingering uncertainty for Federal Reserve interest-rate timing, especially with a potentially telling report looming in Friday’s release of July job-market data. The Dow Jones Industrial Average ($DJI) had logged five straight lower finishes through Wednesday, although the S&P 500 (SPX) and NASDAQ Composite (COMP) closed higher after a choppy session. Trade could slow as today’s session moves along and participants get ready for Friday’s employment report release.

Ahead of that release, Wall Street learned this morning that jobless benefits claims rose for a second-straight week but remain below the level that typically signals stalled hiring.

FIGURE 1: HUGGING THAT LINE.

The S&P 500 (SPX) closed another session shy of the closely watched 2100 line after Wednesday’s choppy session. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Tesla: Big Spender. Tesla's (TSLA) spending on future initiatives dwarfed its higher sales. Tesla is showering money into growth initiatives, including its Model X SUV due later this quarter and a Nevada battery factory slated to open in 2016. The luxury electric car maker, whose shares fell late Wednesday and early Thursday, reported operating loss of $61 million, or $0.48 per share, much better than Street expectations for a loss of $0.60 per share.  Revenue climbed 24% to $955 million, missing Street expectations for $1.17 billion. The company lowered its annual sales outlook and indicated pricing is under pressure due to forex effects and a shift in the mix of Model S sedans it is selling. Tesla lowered its forecast for deliveries to 50,000 to 55,000 for the year and said its gross margins may decline in the third quarter.

Keurig Green Mountain Tumbles. Keurig Green Mountain (GMCR) plunged in early trading after the company reported a year-over-year decline in sales for coffee pods and at-home brewing machines. Adjusted earnings narrowly beat the Street view but revenue of $969.6 million was down 5% year-over-year and below the $1.04 billion that Street analysts were expecting. Pod sales were down 1% year-over-year, while brewing machines and accessories fell 26%. The company also announced a $1 billion stock buyback program and said it planned to cut 5% of its workforce.

Looking Ahead. Economists polled by MarketWatch expect 215,000 new nonfarm hires on July payrolls, just off the 223,000 added in June (other Street economists expect July’s number could be closer to 225K). The Street expects the unemployment rate to hold at 5.3%. Average hourly earnings are expected to tick up 0.2% after a flat reading in June. And next week, the Thursday release of retail sales will headline the economic calendar. The report will likely be scrutinized in the wake of this week’s employment report as it’s vital to see if improved hiring trends are translating to bigger spending. On next week’s earnings docket, plenty of retailers, too: JC Penney (JCP), Macy’s (M), Alibaba (BABA), Walmart (WMT), Home Depot (HD), and Target (TGT).

Good trading,
JJ
@TDAJJKinahan

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