Tesla hits speed breaker despite upbeat Q3

The news shaping the markets today

Around 50,000-60,000 civilians, along with Russian-appointed officials, have started moving out of Ukraine’s southern Kherson region. The US dollar index traded slightly higher this morning.

Australia’s unemployment rate came in unchanged at 3.5% in September. Although the latest reading matched market expectations, the AUD/USD forex pair remained under pressure.

Japan’s trade deficit widened to ¥2,094.0 billion in September, from ¥636.9 billion in the year-ago month. The country recording the 14th straight month of trade deficit sent the JPY/USD pair lower in forex trading this morning.

Russia’s producer prices increased 3.8% year-over-year in September, remaining unchanged from the previous month. The RUB/USD forex pair traded lower on the news.

Canada’s producer prices rose by 0.1% in September, versus market expectations of a 0.9% decline, which sent the CAD/USD pair lower in forex trading this morning.

What’s happening: Shares of Tesla declined in after-hours trading on Wednesday, following the release of the company’s third-quarter results.

What happened: The electric vehicle maker reported better-than-expected earnings for its latest quarter on Wednesday.

Although Tesla delivered record figures for some of its important metrics, some failed to impress investors.

How were the results: The Austin, Texas-based company reported strong sales growth for the third quarter, but the figure missed market views.

• Revenues grew 56% year-over-year to $21.45 billion but fell short of the consensus estimate of $21.96 billion.
• Adjusted earnings came in at $1.05 per share, up around 70% from the year-ago period, and topping market expectations of $1 per share.

Why it matters: Tesla generated record revenues, operating profits and free cash flows in the third quarter. However, the EV maker said it saw a negative impact of $250 million on earnings due to unfavourable foreign exchange with the US dollar recording sharp gains versus major currencies.

Tesla produced 365,923 vehicles during the quarter, up 54% from a year ago. Deliveries climbed 42% year-over-year to 343,830 units. The company also said all its factories had record production during the third quarter.

Tesla ended the quarter with 728 stores, service locations, and 4,283 Supercharger stations.

The company’s automotive gross margins narrowed to 27.9% in the third quarter, from 30.5% in the year-ago period, missing market expectations.

“We remain focused on increasing vehicle production as quickly as possible by increasing our weekly build rate in Fremont and Shanghai and progressing steadily through the production ramps in Berlin and Texas,” Tesla said in a statement.

CEO Elon Musk said during the earnings call that demand remained high in the fourth quarter, with production expected to hit 50% growth. However, he added that logistical challenges are likely to continue, resulting in the growth of deliveries being just under 50%.

How shares responded: Tesla’s shares fell 6.3% to $208.10 in after-hours trading on Wednesday, following the release of quarterly results. The stock has lost around 32% over the past six months.

What to watch: Investors will continue monitoring the company’s production and delivery targets, with deliveries of Tesla Semi expected to commence in December. Investors will also keep an eye on Musk’s pending acquisition of Twitter.

The markets today

Crude oil will be in focus today ahead of the EIA’s (Energy Information Administration) data on nat-gas stockpiles

Context: Crude oil settled higher on Wednesday amid prospects of tight supplies around the world.

Details: Crude prices tumbled to a two-week low on Tuesday on reports of US President Joe Biden looking to release 15 million barrels of oil from the SPR (Strategic Petroleum Reserve) in a bid to ease high gasoline prices in the country.

Although oil prices have declined over the past two weeks, they remain elevated and higher than last month. A surprise decline in US crude inventories reported on Wednesday fuelled global supply concerns and provided support to oil prices.

Data released by the EIA showed crude oil inventories contracting by 1.725 million barrels in the week ended October 14, compared to market expectations for a gain of 1.38 million barrels. Gasoline stockpiles declined by 0.114 million barrels last week, while distillate inventories rose by 0.124 million barrels.

The decision by OPEC+ (Organization of the Petroleum Exporting Countries and its allies) to lower oil output by 2 million bpd (barrels per day) and a pending ban by the EU (European Union) on Russia’s crude also supported oil prices. The ban on Russia’s crude is set to come into effect in December.

WTI crude for November delivery rose $2.73 to close at $85.55 per barrel on Thursday. Brent crude futures for the December settlement added $2.38 to $92.41 per barrel.

In another energy trading, wholesale gasoline for November delivery gained 10 cents to $2.65 a gallon, while November natural gas declined 29 cents to $5.46 per 1,000 cubic feet.

What to watch: Traders await the release of data on natural gas stockpiles from the EIA today. US natural gas supplies have risen by 125 bcf during the week ended October 7 and are expected to rise another 105 bcf in the recent week.

Other Markets: European trading indices closed lower on Wednesday, with the FTSE 100, DAX 40, CAC 40 and Stoxx 600 down by 0.17%, 0.19%, 0.43% and 0.53%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s producer price inflation, France’s business confidence and business climate indicator, Indonesia’s central bank interest rate decision, Eurozone’s current account, Italy’s construction output and current account, South Africa’s value of recorded building plans passed, Turkey’s gross foreign exchange reserves, government debt and Central Bank of Turkey’s interest rate decision, India’s money supply M3, US initial jobless claims, Philadelphia Fed manufacturing index, continuing jobless claims, existing home sales, CB leading index, and government budget, as well as Argentina’s leading economic index, the balance of trade and economic activity estimator.