5 Things to Know Before the Stock Market Opens Thursday

Here are five key things investors need to know to start the trading day:

Tesla was in the spotlight yesterday as the first of the Magnificent Seven to unveil its earnings for the quarter. However, the report left investors wanting. While revenue surpassed the previous year, breaking a two-quarter decline, earnings per share fell short of Wall Street estimates amidst escalating capital expenditures. This shortfall underscores the challenges Tesla faces in balancing growth with profitability as it ramps up production and invests in future technologies.

The earnings call revealed a strategic pivot, shifting the narrative away from near-term electric vehicle demand. Here’s the breakdown:

• CEO Elon Musk and executives offered limited guidance on the core automotive business, instead prioritizing discussions surrounding Tesla’s endeavors in robotaxis and Optimus humanoid robots. This strategic communication suggests a long-term vision, aiming to position Tesla as a leader in the broader robotics and autonomous mobility landscape. The feasibility and timeline for these ventures remain key questions for investors.
• Musk acknowledged that Tesla’s in-development AI chip will not immediately displace Nvidia’s dominance in the AI silicon market. This admission tempers expectations about Tesla’s immediate vertical integration in AI hardware, signaling an ongoing reliance on external suppliers like Nvidia for critical computing power. The long-term implications for Tesla’s cost structure and competitive advantage remain to be seen.
• Prior to the earnings release, a coalition of unions and activist groups launched the “Take Back Tesla” campaign to challenge Musk’s proposed compensation plan. The group argues that the potentially $1 trillion stock award is excessive and misaligned with shareholder interests. Musk addressed the controversy during the call, labeling opposing proxy advisors as “corporate terrorists,” further fueling the debate surrounding corporate governance and executive compensation.
• Musk’s final remarks regarding control over a future “robot army” added another layer of complexity. Concerns about the ethical implications of autonomous robotics and AI control have been amplified by Musk’s statements, which could weigh on investor sentiment and regulatory scrutiny moving forward.
• Tesla shares are trading down over 3% in premarket, reflecting investor concerns regarding the lack of short-term guidance and the focus on long-term, unproven ventures.

In contrast to Tesla’s mixed reception, Southwest Airlines reported earnings that exceeded expectations on both revenue and EPS. The airline posted a profit per share, defying analysts’ projections of a loss. This strong performance indicates a successful navigation of current economic conditions and strong demand for air travel. However, despite the positive results, shares are slightly lower in premarket trading reflecting some investor caution, potentially due to concerns about rising fuel costs or broader macroeconomic uncertainty.

American Airlines also delivered better-than-expected earnings and provided an optimistic outlook for the remainder of the year, sending shares up nearly 4%. This positive performance suggests that the airline industry may be experiencing a rebound, driven by strong passenger demand and effective cost management strategies. The key to sustaining this momentum will be the airlines’ ability to manage fuel prices, labor costs, and evolving travel patterns.

Alaska Airlines is set to report earnings after the bell today, making it a key data point for assessing the overall health and trajectory of the airline sector.

The White House has intensified its economic pressure on Russia by imposing sanctions on Rosneft and Lukoil, the country’s two largest crude oil companies. This move sent oil prices soaring, with Brent crude jumping over 5%. The severity of these sanctions and their potential impact on global energy markets are being closely monitored.

The Treasury Department attributed the sanctions to Russia’s “lack of serious commitment to a peace process to end the war in Ukraine.” Secretary Bessent warned of potential “further action if necessary,” indicating a willingness to escalate economic pressure if diplomatic progress remains stalled.

This development is reportedly linked to the cancellation of a meeting between President Trump and Vladimir Putin, underscoring the deteriorating relationship between the two nations and the rising geopolitical risks in the energy sector.

In a surprising twist, Meta is reportedly reducing its AI workforce by approximately 600 employees, despite the industry-wide scramble for AI talent. This decision suggests a reassessment of Meta’s AI strategy and a potential shift in resource allocation.

Sources familiar with the matter cited bloated teams as the reason for the cuts, while assuring that TBD Labs, which houses many of Meta’s new AI hires, remains unaffected. This suggests a focus on streamlining existing operations and consolidating resources around core AI initiatives.

Meanwhile, a group of prominent figures, including Virgin Group founder Richard Branson and Apple co-founder Steve Wozniak, are advocating for a pause in the development of “Superintelligence,” a hypothetical form of AI capable of surpassing human intelligence in all aspects. This call for caution reflects growing concerns about the potential risks and ethical implications of advanced AI, and highlights the need for robust safety measures and regulatory oversight.

The Starbucks Workers United union is set to commence voting on a strike authorization, signaling a potential escalation in labor disputes. The union also plans to organize rallies and pickets across the country, amplifying their demands for improved pay, better working hours, and resolutions to outstanding labor issues.

Negotiations between the union and Starbucks have stalled, with both sides blaming each other for the breakdown. The union claims higher pay and improved hours, a Starbucks spokesperson stated the Union, “chose to walk away from the bargaining table. If they’re ready to come back, we’re ready to talk.”

The impending strike vote adds uncertainty to Starbucks’ financial outlook, especially with earnings scheduled for release next week. A potential strike could disrupt operations, impact customer experience, and strain the company’s relationship with its workforce.

— *CNBC contributed to this report. *