Tesla and Microsoft, US vs China and jobless claims ahead

23 Jul 2020

Yesterday was primarily interesting for the reports from some of the most overvalued companies in the US stock market (at least, judging by the basic investment metrics): Tesla and Microsoft.

Tesla, as expected by hook or by crook, was able to show profit, or rather its illusion. But this opens the way for it to be included in the SP500 index and is another reason for optimism among buyers. As a reminder, we do not share it in any way and consider Tesla shares a bubble that will surely burst.

As for Microsoft, despite the good numbers, shares at the premarket were under pressure. The reason for disappointment is the decline in the growth rate of revenue from cloud services, which is the main driver of the company's growth as a whole.

Among other news, it is worth noting the continued growth of tensions between the United States and China. This time, the escalation took place not in the economy, but rather in politics. We are talking about the closure of the Chinese Consulate in Houston. Markets are waiting for the reaction from China. It is obvious that the development of the situation will invariably move from the sphere of politics to the plane of the economy. All in all, there is little cause for optimism.

As for the United States, the focus is not so much on the problematic relations with China, but on the fate of the new package of economic stimuli, which should replace the package under the CARES act. Democrats and Republicans are still far from a compromise and exchange threats and curses at each other through the press. Meanwhile, the clock is ticking, counting is already going on for days.

The current week is extremely poor for important macroeconomic statistics. Nevertheless, today is an exception in this regard - weekly data on jobless claims in the last 3-4 months has caused increased interest in the financial markets. So far, the situation in the labor market does not confirm the hopes of optimists in any way: 1.3 million new applications for unemployment benefits and 18-20 million people receiving them on an ongoing basis indicate that there is no confident recovery yet. Given the number of companies that have filed and continue to file for bankruptcy, it is not yet possible to expect a sharp improvement in the situation.