Two out of three benchmark US stock indexes ended last week in the red as concerns over the coronavirus spread continued to cast a shadow over investor sentiment. Even solid results posted by some major players, such as Apple and Tesla, did not manage to maintain sustainable growth in stocks.
The spread of the coronavirus in China and across the world has created a lot of uncertainty. Over 80 people have died in China, which has more than 2,800 confirmed cases. In the US, a fifth case was confirmed last week and the Center for Disease Control announced the first case of person-to-person transmission. At the same time, the World Health Organization declared the coronavirus a global health emergency but did not suggest restrictions on international trade and travel. In this way, the impact of the virus on the global economy remains unclear.
Corporate earnings were also in the spotlight last week. By January 31, 45% of S&P 500 companies reported their fourth-quarter results, according to FactSet. Among these, 69% posted better-than-expected earnings and 65% beat revenue expectations. Most companies that beat earnings expectations are from the Technology and Consumer Discretionary sectors.
In other news, the US economy grew by 2.1% last quarter, in line with expectations and the previous quarter’s numbers. Moreover, the Fed kept the federal funds rate target unchanged at between 1.50% and 1.75%. It also reiterated its view that current monetary policy is “appropriate to support the sustained expansion of economic activity” and did not provide any hints regarding further rate adjustments.
Meanwhile, in China, the Central Bank announced a plan to inject around $174 billion into markets through reverse repo operations on Monday, to ensure sufficient liquidity supply. This is the largest single-day reverse repo operation that was conducted in China.
Brexit also made headlines as the UK finally managed to leave the EU after more than three years of uncertainty, missed deadlines, and political division that cost the careers of two Prime Ministers. Until the end of 2020, the UK, which enters a transition phase, and the EU will try to negotiate a trade deal.
Amid all these developments, the NASDAQ Composite edged up by 0.13%. On the other hand, the S&P 500 and the Dow Jones Industrial Average slid by 0.56% and 0.98%, respectively.
In the meantime, Financial Advisors focused on corporate earnings and maintained tech giants on their radars as they released their financial results. According to TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, the most searched tickers among Financial Advisors last week were Apple Inc (NASDAQ: AAPL), Tesla Inc. (NASDAQ: TSLA), Amazon.com, Inc. (NASDAQ: AMZN), Facebook, Inc. (NASDAQ: FB), and The Boeing Co. (NYSE: BA). While for the first three companies, the results were met with a big thumbs up for investors, Facebook’s shares tumbled amid concerns over tepid user growth and Boeing not only missed top- and bottom-line estimates but also posted its first annual loss in over two decades.
However, Tesla was a big winner last week. Amid a blowout fourth-quarter report, the stock of the EV maker surged by more than 20%, breaking $600 mark. The company reported Non-GAAP EPS of $2.14, beating the estimates by $0.38. Its revenue of $7.38 billion inched up by 2.1% on the year and was $300 million higher than expected. Tesla also announced that it delivered 19,475 Model S and Model X vehicles during the fourth quarter, while deliveries of Model 3 amounted to 95,620 units.
In addition, Tesla said that it started to ramp-up production for the Model Y in January. Together with Model 3, the installed production capacity for both vehicles is 400,000 units per year. The company expects to increase the combined capacity to 500,0000 by mid-2020 as it continues to add additional machinery. First Model Y vehicles will be delivered by the end of the first quarter of 2020, Tesla added. Overall, Tesla expects to deliver more than 500,000 vehicles this year.
Moreover, Tesla is increasing local production of battery packs in Shanghai and will start deliveries from the Berlin Gigafactory in 2021.
As the company’s stock surged, analysts also kept up their price targets. Canaccord and Baird raised their targets to $750 from $515 and to $650 from $525, respectively. Wedbush, which has a $900 target on the stock, said that the stock will continue to move upward as the company is ramping up production and the demand in China remains strong.