The stock market rally had a volatile week and closed with modest losses.
After the NASDAQ reached its record high on Tuesday, the technology sector backed market rally sold off sharply Thursday, fueled by the likes of Apple (NASDAQ:AAPL), Intel (NASDAQ:INTC), Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA) stocks.
The indexes extended losses on Friday, upset by the U.S. Congress delayed stimulus program rollout. The NASDAQ suffered its first back-to-back daily and weekly losses for at least two months. Many big winners from the coronavirus market rally suffered serious losses to support levels. Gold prices took a stratospheric leap last week and rocketed to all-time highs today.
On Wednesday, Tesla (NASDAQ:TSLA) reported blockbuster second-quarter earnings that exceeded Wall Street's expectations. The electric car manufacturer also showed its fourth consecutive quarterly profit, despite grim predictions about the heavy impact of COVID-19 on the company’s sales. It was the last milestone required to meet to be considered for inclusion in theS&P 500 index.
Now that Tesla has met the S&P 500's eligibility requirements, it will be added to a pool of other eligible candidates and considered for inclusion when an opportunity presents itself. So, we can’t say it’s a 100% done deal. From a fundamental perspective, Tesla’s valuation is outrageous: P/E of 715, price-to-book of 30, Debt-to-EBITDA of over 4 and net margin of under just 1.5% (one and a half percent) make it a prohibitive buy from any perspective. However, despite all common sense, Tesla is in a very good position of short-term growth on the expectation of inclusion to the S&P 500 index. The target price is also quite obvious –somewhere under $1800 dollars, the mark the stock once visited.
Global payments processor Visa (NYSE:V) reports earnings on July 28, and it will be more than just one more set of quarterly financial numbers. Investors will get a direct insight into how consumer spending is being affected by the pandemic and an uncertain economy. This quarter's revenue for the payments processing giant is expected to drop by roughly 17% to $4.81 billion versus $5.84 billion a year ago. This anticipated fall has a lot to do with lower transaction volume as many stores were closed throughout the quarter. With that said, there is optimism for a potential beat driven by increased digital payment volume as more and more people shopped online. Indeed, dealing with paper money has now become not only unsafe but also unsanitary. So VISA’s performance will be more or less accurately reflecting the real global consumer spending, and households’ entire propensity to consume, and how efficient the world’s largest central banks’ and governments' efforts to offset the COVID-19 impact. So fasten your seatbelts.