Tesla, Alphabet earnings weigh on markets: Morning Brief

On today's episode of Morning Brief, Hosts Seana Smith and Madison Mills break down the market open and check in on Big Tech earnings.

Spot ether ETFs have reportedly accrued $10.2 billion in assets across just nine funds since firms began trading the ethereum-exposed (ETH-USD) products on Tuesday. Jared Blikre takes a look at cryptocurrency trends before turning his attention to the commodities space, including copper (HG=F) and crude oil (CL=F, BZ=F) prices. Meanwhile, the Nasdaq Composite (^IXIC) is facing downward pressure Wednesday morning following earnings data out from two Magnificent Seven members: EV maker Tesla (TSLA) and Google parent company Alphabet (GOOGL, GOOG). Commonwealth Financial Network CIO Brad McMillan points to "a threat of more pressure" ahead for the Magnificent Seven. He cites high valuations based on earnings growth as a key concern. "If you don't see that earnings growth, and clearly we didn't see that with either of those two companies, that means that valuation has to come into question," McMillan tells Yahoo Finance.

Shares of Tesla (TSLA) are sinking after investors were left unsatisfied with its second quarter earnings report. Tesla CEO Elon Musk announced that the company will reveal its robotaxis on October 10 after previously delaying the event. Tesla also announced that affordable EVs will start being produced in the first half of 2025. Qualifying electric vehicle buyers currently have the benefit of a $7,500 tax credit in the US, giving incentive to purchase one, but recent comments from former President Donald Trump suggest he would roll back Biden administration policies and curtail investments in EVs. On the company's earnings call, Tesla CEO Elon Musk — who has voiced his support of Trump — claims that the impact of these rollbacks wouldn't impact the company that much, but rather it would hurt the competition more. TD Cowen managing director and senior research analyst Jeffrey Osborne believes Democrats would be better for the EV company, explaining, "There's just a lot more subsidization, and an easier transition path. I think there would be a lot of confusion in the market if the 2027 EPA targets were rolled back under a Trump administration."

Alphabet shares are down because, despite beating on most metrics, YouTube ad revenue surprisingly fell short of estimates. The Google parent company spent $2.2 billion building AI models, up from $1.1 billion last year. This spending concerned some investors who are skeptical about whether these AI initiatives will be able to generate revenue. RBC Capital Markets internet analyst Brad Erickson weighs in on Alphabet's CapEx, saying, "Certainly they have the balance sheet and that cash flow to fund this. There is always going to be some concern. And this is just kind of more of a near-term thing." Erickson adds: "Is the company sort of structural return on invested capital declining? Yeah, I think you can you can probably make that argument. But to his [Pichai's] point, if this opportunity does turn out to be as big as many think over time, these investments will have proven correct."

Oil prices (BZ=F, CL=F) broke out of their three-day losing streak Wednesday morning due to falling US crude supply. Truist Securities energy research managing director Neal Dingmann explains, "At least for the remainder of this year, we see prices remaining around this level, the $80 level. I think what's caused, by the way, the last selloff is just a little bit of abatement of the geopolitical risk. But when you look up in the election and especially when you know, again, let's assume... former President Trump would take office in January... I think you would have immediately much less energy restrictions." He adds: "And the reverse if, Kamala Harris is elected and the Democrats stay in office and a lot of energy restrictions are maintained, I think you have an angst that production will potentially even fall from from current levels as sustainable... and as a result, I think that could cause prices to go up even over $90 a barrel."

This post was written by Melanie Riehl