Stocks rise as Tesla soars 10 per cent higher: Big Oil sits on $200b of profits

 

Stocks rose Thursday as traders combed through the latest batch of corporate earnings and fourth-quarter gross domestic product that came in above expectations.

The US economy logged better than expected growth in the final quarter of 2022, even as the Federal Reserve’s aggressive campaign to raise borrowing costs began to weigh more heavily on business activity. The world’s largest economy expanded 2.9 per cent on an annualised basis between September and December.

Focus now shifts to next week’s Federal Reserve policy meeting, where the central bank is widely expected to announce a 25 basis point increase as it battles high inflation. Investors will be on the lookout for clue into how much further the Fed intends to hike before it cuts rates.

Markets were relatively flat in the US during the Australia Day holiday.

Overnight Nasdaq Composite jumped 1.8 per cent. The Dow Jones Industrial Average traded 0.6 per cent, higher, while the S&P 500 added 1.1 per cent.

A mixed earnings season trudged on, with strong results from Tesla giving the tech-heavy Nasdaq and electric vehicle stocks a boost. Tesla CEO Elon Musk said that thus far in January, the company has seen the strongest orders year-to-date in its history. Added that it is seeing orders at almost twice the rate of production. Also noted demand for Teslas will remain strong despite a likely contraction in the broader auto market.

The results cap a wildly uneven year for Tesla. The stock price sank 65 percent last year — wiping out about $685 billion in market value — amid investor concerns about a global economic slowdown, the end of cheap car financing and a loss of market share in key markets like China. Shareholders also worried whether Musk would sell more of his stake in the carmaker to prop up Twitter. But Tesla pointed to its results as proof that it’s pursuing a successful strategy. It reported $3.7 billion in profit and $21.3 billion in car sales for the quarter. Shares in Tesla closed up 10 per cent.

The EU has asked European banks to accelerate funding for critical minerals suppliers urging European financiers this week to provide more funding to suppliers of minerals needed for the energy transition, as the European Union prepares its Green Deal industrial plan. The EU is expected to unveil its Critical Raw Materials Act on March 8 to secure the bloc's supply of critical raw materials including lithium, cobalt, nickel, manganese, and graphite needed for electric vehicles.

All S&P 500 sectors except for consumer staples finished higher in last night’s trading session. Energy was the standout however, up 3.3 per cent.

And there’s no end in sight for Big Oil’s cash bonanza. When the western supermajors report their earnings over the next couple of weeks the top five producers — ExxonMobil, Chevron, BP, Shell and TotalEnergies — are expected to unveil a record-smashing $200bn in combined profits for 2022, underscoring the scale of the windfall after Russia’s full-scale invasion of Ukraine. Oil producers have led the market for two straight years (after a decade of underperformance) and are, so far, up this year too.

It will be interesting to note how much of big oils profits will be dedicated to their green projects outside of buy backs & higher dividends. The US’s Washington’s new incentives for renewables, hydrogen, biofuels and carbon capture in the Inflation Reduction Act will only accelerate big oils acquisitions in the energy transition space

Futures

The SPI futures are pointing to a 0.4 per cent gain.

Currency

One Australian dollar at 8:10 AM is trading at 71.16 US cents.

Commodities

Gold lost 0.7 per cent. Silver gained 0.4 per cent. Copper gained 0.9 per cent and oil gained 1.2 per cent.

Figures around the globe

Across the Atlantic, European markets closed higher. London’s FTSE added 0.2 per cent, Frankfurt gained 0.3 per cent while Paris closed 0.7 per cent higher.

In Asian markets, Tokyo’s Nikkei fell 0.1 per cent, Hong Kong’s Hang Seng gained 2.4 per cent while China’s Shanghai Composite was closed.

On Wednesday, the Australian sharemarket closed 0.3 per cent lower to close at 7,468.

Dividends payable

Australian Unity Office Fund (ASX:AOF)
RAM Essential Services Property Fund (ASX:REP)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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