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Markets Modestly Up on Relief Rally; Tesla, United, Sands Mixed in Q2

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Well lookee here — another trading session closing in the green. If we didn’t know better, we might assume market participants are looking past a short-term recession into stronger economic conditions ahead: the Dow is +0.16%, the S&P 500 +0.59% — both up in three of the last four trading days — and the Nasdaq +1.58%, for its fourth up session in the last five.

But, of course, we do know better. It’s nice more money is being put to work in quality equities — a huge switch from a month ago, when no place was safe — but we still have a long slog through demand destruction, higher interest rates trying to chip away at 40-year-high inflation, and Q2 earnings season — while so far better than expected overall — is just getting started; there is plenty of ugly yet to uncover from the past three months.

Earlier today, we saw Existing Home Sales hit their slowest pace in two years: 5.12 million seasonally adjusted, annualized units sold in the month of June, down -5.4% month over month and -14.2% year over year. The median price of sale for an existing home reached $416K, a new all-time record and +13.4% from a year ago. And, of course, this data is based on closings, meaning prior to mortgage rates hitting 6%+. In short, more pain is coming to housing valuations.

Tesla TSLA reported Q2 earnings after the closing bell today, posting $2.27 per share on $16.93 billion in sales — a beat on the bottom line but a miss on the top. Gross Margins slipped to 27.9% from an expected 28.2% and 30% last quarter, 26.2% when subtracting regulatory credits. This is obviously going the wrong direction, but it still represents gross margins not seen anywhere else in the auto industry.

The upcoming conference call, of which it is still unknown whether CEO Elon Musk will join, will likely focus on full-year vehicle deliveries. We already saw Tesla delivered 255K vehicles in the reported quarter. The company also reported converted 75% of its extensive Bitcoin holdings in the quarter, which converted to $936 million. Shares initially gained +4.5% on the news, but are trading flat in the late session at this hour.

United Airlines UAL also posted a mixed Q2, though in reverse: earnings of $1.43 per share missed the $1.86 expected, while $12.11 billion in revenues outpaced the $12.03 billion in the Zacks consensus. It marks the major airline’s first profitable quarter without payroll subsidies since the pre-pandemic days. Total Revenue per Seat Mile ballooned up +24% from the same quarter in 2019, offset somewhat by higher fuel and workforce costs.

Las Vegas Sands LVS also missed on earnings but beat on sales in its Q2 report after the bell today, -34 cents per share on $1.05 billion, with its Singapore business more than doubling expectations in the quarter. The difficulties related to Macau shutdowns on Covid restrictions, but the good news is that adjusted property EBITDA came in 45% higher than consensus. Shares are up +2.5% in late trading.

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