Before the Bell: Tesla Hammered Again, Southwest Cancels More Flights and Fake Clouds Are Coming

Premarket action Wednesday had all three major U.S. indexes trading slightly higher. The Dow Jones industrials were up 0.31%, the S&P 500 up 0.27% and the Nasdaq 0.17% higher.

Six of 11 market sectors closed lower Tuesday, with consumer cyclicals (−1.64%) and communications services (−1.18%) slipping the most. Energy (1.14%) and utilities (0.62%) posted the day’s best gains. The Dow closed up 0.11%, the S&P 500 down 0.4% and the Nasdaq down 1.38% on Tuesday.

Tuesday’s trading volume was higher than the 30-day average, and action on the S&P 500 index was more than double the daily average, while the Dow and the Nasdaq both had a bump of about 25% to 30% above the daily average. Crude oil rose above $80 a barrel last Friday but has not closed at that level since December 1. Domestic crude traded at around $79 early Wednesday morning.

Home price increases fell again in October, according to S&P CoreLogic Case-Shiller Index data released Tuesday. The 20-city composite index rose by 8.6% year over year in October, but that was below the 10.4% yearly gain posted in September. The national index rose year over year by 9.2% in October, compared to a yearly gain of 19.7% in September.

The weekly report on new claims for jobless benefits comes out Thursday, as do the weekly inventory reports on petroleum and natural gas. New claims for unemployment benefits are expected to rise from 216,000 in the prior week to 224,000. The low levels of initial claims usually indicate a tight labor market that, in turn, leads to more Federal Reserve tightening and a lower appetite for risk assets.

Shares of Tesla Inc. (NASDAQ: TSLA) closed down by more than 11% Tuesday, after posting another new 52-week low at $108.76. The stock traded about 1.7% higher in Wednesday’s premarket, likely due to investors doing some bargain-bin shopping.

Tesla denied a Reuters report from Tuesday morning claiming the company would be closing its Shanghai plant for longer than originally expected. That did not stop the bleeding. A downbeat view of the economy generally often means that consumer cyclicals like cars and appliances do not get a lot of love from investors. A bad report on quarterly sales (or a refusal to release its sales number) could crush the stock even more. And then there is the self-inflicted Twitter debacle.

The better news on Tesla is that Wall Street expects December quarter deliveries of around 420,000 units. If the company misses, shares will tumble; if it beats, they likely will soar. Free cash flow is pegged at $4.0 billion, up from $3.3 billion in the September quarter. That result would push the company’s cash hoard to around $25 billion. Now, if Musk would just hire a top-notch CEO at Twitter …

Southwest Airlines Inc. (NYSE: LUV) did not get much “luv” Tuesday. Shares dropped 6% on heavy volume as the airline canceled about two-thirds of its daily flights. The effect of the winter storm that passed through last week on Southwest’s business has been much more severe than the impact on its competitors.

The president of the airline’s pilots association scorched Southwest in a message to members:

Pride and avarice have replaced our once-vaunted culture. “Pride” in ignoring solutions that have been, and continue to be, offered to support the house of cards that our operation has become. … “Avarice” as evidenced by how our management chooses to continue to reward shareholders instead of stakeholders — the very same stakeholders that the Company relies on to recover the operation during and after every meltdown.

Finally, a start-up called Making Sunsets is about to launch a balloon from a site in Mexico that will scatter reflective material in the earth’s stratosphere to reflect sunlight back out into space. The company claims that one gram of its reflective clouds “offsets the warming that 1 ton of CO2 emissions creates for a year.” The company is marketing “cooling credits” that people or companies can purchase to help support more balloon flights with bigger payloads.

Not everyone supports this kind of geoengineering plan, mostly because not much is known about the real-world effects of fooling with Mother Nature on such a large scale. A 2019 article in the MIT Technology Review gives a short history of what geoengineering is or is not, and a more recent article offers a closer look at Making Sunset’s plan to make more clouds.

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