Fed decision, Tesla earnings — What you need to know in markets on Wednesday

Markets Reporter
Yahoo Finance

In a busy week of earnings and economic news, two of the biggest lightning rod organizations in the business and economics field will make major announcements — Tesla (TSLA) and the Federal Reserve.

At 2 p.m. ET, the Fed will release its latest policy statement, which is not expected to see any changes to its target benchmark interest rate range of 1.5%-1.75%. Fed chair Jay Powell will not hold a press conference following the decision and no updated economic projections will be released.

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And so while Wednesday’s Fed announcement should not be a major market-moving decision, the minutes of this meeting released in a couple weeks should be closely watched as economic developments since the Fed’s last meeting — notably an increase in trade tensions — have clouded the economic outlook somewhat.

Federal Reserve Chairman Jerome Powell leaves after IMFC plenary the IMF/World Bank spring meeting in Washington, U.S., April 20, 2018. REUTERS/Yuri Gripas
Federal Reserve Chairman Jerome Powell leaves after IMFC plenary the IMF/World Bank spring meeting in Washington, U.S., April 20, 2018. REUTERS/Yuri Gripas

In its report on manufacturing activity in April, the Institute of Supply Management indicated the concerns about trade continue to weigh on business plans with one executive saying that, “Business planning is at a standstill until [trade issues] are resolved.” Meanwhile, concerns over the rising cost raw materials, shipping, and labor continues to weigh on the mind of business leaders. 

And then after the market close, earnings from Tesla will punctuate what should be another busy day of corporate earnings. Wall Street analysts expect the company to report an adjusted loss per share of $3.42 on revenue of $3.32 billion, according to estimates from Bloomberg.

But beyond the conventional measures of a company’s performance during a quarter, investors will be focused on updates regarding the company’s new lower-cost Model 3 sedan, which had a production halt late last month, as well as its cash burn and potential capital needs in the coming years. Tesla had forecasted that it would hit a run rate of making 2,500 Model 3’s per week by the end of the first quarter and 5,000 per week by the end of the second quarter.

Last month, CEO Elon Musk said the company would be profitable and cash flow positive in the third and fourth quarters of 2018, saying that there was no obvious reason for the company to raise money now.

Tesla CEO Elon Musk. (AP Photo/Stephan Savoia)
Tesla CEO Elon Musk. (AP Photo/Stephan Savoia)

According to data from Bloomberg, the one-day options-implied volatility for Tesla shares following earnings is 8%, and in its last 12 quarterly reports Tesla shares have risen half the time.

To set the table for the Fed announcement and Tesla’s earnings release, Apple (AAPL) shares are likely to set the tone for markets on Wednesday after the stock rallied as much as 4% after hours following earnings that beat expectations. Apple also announced it would buyback an additional $100 billion worth of stock and increase its dividend to $0.73 per share.

And pointedly responding to growing concerns from suppliers and analysts about the health of Apple’s flagship iPhone X, CEO Tim Cook said in the company’s earnings release that, “Customers chose iPhone X more than any other iPhone each week in the March quarter, just as they did following its launch in the December quarter.”

Other notable earnings reports expected out on Wednesday include results from MasterCard (MA), Molson Coors (TAP), CVS (CVS), Kraft Heinz (KHC), Square (SQ), MetLife (MET), and Sprint (S).

On the economics side, the monthly report on private payroll growth from ADP is expected to show 198,000 private sector jobs were created in April is scheduled for release at 8:15 a.m. ET.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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