Alphabet and Tesla Set to Report Earnings; Futures Slip on Wednesday

Quick overview

After the previous day’s bullish session, U.S. futures fell back on Wednesday as the market prepares for earnings reports from Tesla (TSLA) and Alphabet (GOOGL).

The Nasdaq dipped 0.6% on Wednesday amid climbing oil prices and slowed trading compared to the previous day.  New tariffs held back market growth since President Donald Trump imposed 50% taxes on numerous Canadian imports.

The Dow slipped down 0.1% and the S&P 500 lost 0.2% as the market settled. The quick upswing on Tuesday has been followed by a more muted start to the day, cutting off hopes of a bull run very quickly. Tesla and Alphabet are both scheduled to release their quarterly earnings this week, and investors may be holding off on making big moves until those reports come out.

Capital Spending Is the Main Issue

Investors and analysts alike will be focused on how much Tesla and Alphabet have been spending to develop their technology and buy resources for their products. Their capex spending is likely to be a point of contention even if their revenue climbs and earnings per share look positive.

Google has been pushing its AI tools incredibly hard, focusing on AI Mode and AI Overviews to drive ad revenue. Shareholders will have to wait to see if that is paying off for them when they look at the numbers this week, but with billions being poured into AI development, there needs to be a strong payoff for shareholders to feel like Google knows what it is doing.

Tesla is running into a similar problem, and their capex spending has been astronomical. They are expected to spend around $25 billion this year alone, and even climbing car sales may not offset the problem they face with small profit margins. If both Tesla and Alphabet experience stock decline due to capex worries, that will set the mood for the rest of the Magnificent Seven earnings and this week’s megacap quarterly reports.

The same capex issue sprung up in the chip sector, hurting strong earnings reports from several major companies earlier in the year. Investors are worried that excessive spending to stay up to date is cutting into profits and undercutting stock value. IBM (IBM) already braced its shareholders with the bad news that spending is excessively high as part of intrinsic market trends and that their quarterly results may not be as positive as previously expected as a result.

Oil moved higher this week following further military strikes between Iran and the United States and their allies. Brent crude climbed 4% and hit $94 per barrel while West Texas Intermediate jumped 3.49% and is now selling at $87 per barrel.

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Timothy St. John

Financial Writer - European & US Desks

Timothy St John is a seasoned financial analyst and writer, catering to the dynamic landscapes of the US and European markets. Boasting over a decade of extensive freelance writing experience, he has made significant contributions to reputable platforms such as Yahoo!Finance, business.com: Expert Business Advice, Tips, and Resources - Business.com, and numerous others. Timothy's expertise lies in in-depth research and comprehensive coverage of stock and cryptocurrency movements, coupled with a keen understanding of the economic factors influencing currency dynamics. Timothy majored in English at East Tennessee State University, and you can find him on LinkedIn.

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