Nvidia is up 78% in 2024, while Tesla (TSLA.O) shares have lost over 30% due to margin and demand concerns. Reuters reported Friday that the electric vehicle maker has shelved the low-cost car investors expected to help it become a mass-market automaker.
"These businesses now need to justify these high valuations," said Allspring Global Investments portfolio manager Bryant VanCronkhite. "The market is looking for every company to talk about their demand drivers and articulate what they see coming ahead."
Investors will also look to see if the U.S. economy continues to boost industrial, energy, and other growth-related revenues and earnings. These stocks have outperformed this year in a rally that has expanded beyond technology and growth stocks.
"If the U.S. economy bounces, you want exposure to industries with real economy end-markets," said Harbor Capital Advisors head of US equities Justin Menne, who is overweight energy stocks.
Charles Schwab chief investment strategist Liz Ann Sonders predicts “punishment” for underperforming firms. "What will be critical beyond the beat rate will be the margin stories," stated.
As always, investors will focus on the Fed. A strong earnings season and company price pressures suggest the economy is too strong for the central bank to decrease rates without risking inflation.
March U.S. employment data supported that. Last month, nonfarm payrolls rose 303,000, exceeding estimates. Futures markets predict 70 basis points of Fed rate decreases this year, down from 150 in January.
However, reduced earnings may imply economic weakness. Investors think that could help the Fed loosen monetary policy. "That bad news could be good for the market because it leads to those Fed rate cuts everyone wants," said Hennion & Walsh Asset Management chief investment officer Kevin Mahn.
Follow for more updates