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Tesla expected to post double-digit declines in earnings, sales (1:48) Fed chief Powell speech in focus as central bank independence worries grow. (3:23) Top tail risks and most crowded trades, according got money managers. (5:37)
The following is an abridged transcript:
Earnings season kicks up a notch, with 112 S&P 500 (SP500) companies reporting numbers this week, including five Dow Industrials (DJI).
According to FactSet, so for the Q2 reporting period, (with 12% of the S&P 500 reporting), 83% of those companies have reported a positive EPS surprise and 83% have reported a positive revenue surprise.
Two of the Magnificent 7 are set to report. Google parent Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA) weigh in on Wednesday. There are plenty of other household names due as well, including Verizon (VZ), Coca-Cola (KO) and Intel (INTC).
Alphabet is expected to post EPS of $2.19 on revenue of nearly $94 billion. Going into the print, there have been 25 upward revisions to earnings vs. 11 downward revisions. But the top line is more split, with 17 upward revenue revisions vs. 15 downward revisions.
Needham recently raised its earnings estimates and price target on the stock, saying it expects its strategic position and corporate culture to drive valuation upside. Analysts say Alphabet’s current strategic position is strong because of its digital advertising dominance, YouTube, which is the most-streamed service in the U.S., and GenAI, in which they expect its proprietary LLMs to drive valuation over the next 3-5 years.
But SA analyst Bears of Wall Street, who has a Sell on Alphabet, says the stock “is already overvalued at the current price, even if we exclude the potential fines or the breakup of some parts of its business. If those risks also materialize, Alphabet could lose a fortune and also no longer have important income sources, which would lead to a lower equity value and the subsequent intrinsic value.”
Looking to Tesla (TSLA), the EV maker is expected to report EPS of $0.41 on sales of $22.4 billion. But analyst sentiment is deeply negative, with 24 downward EPS revisions and 26 downward sales revisions, with no upward revisions on either the top or bottom lines.
The double-digit decline in both revenue and EPS is expected amid slowing EV adoption rates, declining sales in key markets and some brand backlash against Elon Musk’s political activities. His ongoing feud with President Donald Trump is causing consternation among investors.
But while the reported Q2 numbers may be underwhelming, the update from Musk on the robotaxi rollout, new product timelines and AI initiatives could drive market reaction.
Also on the earnings calendar:
Verizon (VZ) and Domino’s Pizza (DPZ) report on Monday.
Coca-Cola (KO), Philip Morris (PM), Lockheed Martin (LMT) and General Motors (GM) issue numbers on Tuesday.
Joining Alphabet and Tesla on Wednesday are IBM (IBM) and AT&T (T).
Blackstone (BX), Honeywell (HON), Intel (INTC) and Nasdaq (NDAQ) weigh in on Thursday.
Friday’s sees results from Phillips 66 (PSX) and Centene (CNC).
The economic calendar is fairly light. June durable goods orders will be released Friday, with economists expected a drop of 11% in headline and fall of 0.2% in core orders.
Wells Fargo economists say “conditions are not supportive for an increased appetite for capital expenditures.”
“The manufacturing sector remains in a cautious holding pattern as businesses are confronted with increased uncertainty around trade policy, reemerging cost pressures and a cloudy outlook for economic growth and policy,” they said. “That squeeze is forcing firms to cut costs, delay hiring and tighten capital expenditure plans.”
Traders will also be closely watching when Fed Chairman Jay Powell give opening remarks at a conference for large banks in Washington, D.C. on Tuesday on the miniscule chance he says something about the recent pressure from Trump to cut rates.
Speculation is ramping up that Trump will eventually move to oust Powell in his bid to get rates down and that is sparking worries about losing Fed independence.
This past week, Goldman Sachs CEO David Solomon and BofA CEO Brian Moynihan both stressed the value of central bank independence.
The Wall Street Journal’s Greg Ip wrote this weekend if Trump succeeds in forcing out Powell, that assumption of the Fed acting as a brake on inflation “will be shattered.”
“The Fed would no longer be an independent check on the government, but just another part of that government with inflation subordinated to other priorities, such as the cost of the national debt,” he said.
Currently, prediction market Kalshi puts the chance of Powell being fired at 23%.
Powell will not mention Trump at all in his remarks, but he may stress the need for Fed independence again.
In the news this weekend, Trump has filed a lawsuit against the Wall Street Journal and its owners, including Rupert Murdoch, over the newspaper’s report that he had contributed a racy letter to a birthday album for disgraced financier and sex offender Jeffrey Epstein.
The move represents another escalation in an issue that has generated controversy for Trump over the last two weeks, ever since the DOJ and FBI said on July 7 they had found no evidence to support long-held conspiracy theories about Epstein’s death and his clients.
A Dow Jones spokesperson told Seeking Alpha: “We have full confidence in the rigor and accuracy of our reporting, and will vigorously defend against any lawsuit.”
And Japan’s ruling coalition is on track to lose its majority in the upper house, according to exit polls from Sunday’s election cited by Reuters. The development could spell heightened political instability just as the country nears a critical trade deadline with the United States.
Although the upper house results do not directly determine Prime Minister Shigeru Ishiba’s tenure, the outcome adds further pressure on his already weakened minority government, which lost control of the lower house in a major defeat last October.
For income investors, Caterpillar (CAT) goes ex-dividend on Monday, paying out on August 20.
Dell (DELL) goes ex-dividend Tuesday, with an August 1 payout date.
Lowe’s (LOW) goes ex-dividend on Wednesday, paying out on August 6.
And Pfizer (PFE) goes ex-dividend on Friday, with a Sept. 2 payout date.
And in the Wall Street Research Corner, BofA if out with its July Fund Manager Survey, where bulls are getting jiggy. Sentiment is at a five-month high, fueled by the biggest rise in profit optimism since July 2020.
Those surveyed still see “trade war triggers a global recession” as the biggest tail risk, with 38% naming it their top worry. But that’s a decline from 47% in June, and about 65% in May.
In addition, “inflation prevents Fed rate cuts” was ranked as the second-biggest “tail risk” with 20% of respondents and “U.S. dollar (DXY) slumps on capital flight” was ranked third, with 14%.
On crowded trades, strategist Michael Hartnett notes “short U.S. dollar” is the most crowded trade for the first time in survey history, replacing “long gold,” which was first in June and in April.
“Long magnificent 7” came in at the second-most crowded trade, with 26% of respondents identifying the bullish tech theme. This trade was ranked first from April 2023 through March 2025.
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