Tesla Announces Plan to Cut 7 Percent of Its Workforce, Leading to Stock Plummet
Elon Musk, in a characteristically blunt email to employees, warned that the current quarter would not be as strong as the previous one and that "the road ahead is very difficult."
The prospects of a trade deal with China are trumping signs of trouble from two of the highest profile companies in the market.
Netflix and Tesla both gave somewhat sober views of their outlook and saw their stock prices suffer. The broader stock market, however, shrugged off those warnings after China reportedly offered to address the more than $300 billion annual trade surplus with the U.S. by simply importing more U.S. goods -- a lot more. Stock indexes were up nearly two percent in the morning and mostly held their gains in the afternoon.
The Dow and S&P 500 indexes closed the day up 1.38 percent and 1.32 percent respectively, while the Nasdaq Composite index rose 1.03 percent. The Entrepreneur Index™ was up 0.21 percent today.
Tesla was slammed today after the company announced it would cut seven percent of its workforce to reduce costs. CEO Elon Musk, in a characteristically blunt email to employees, warned that the current quarter would not be as strong as the previous one and that "the road ahead is very difficult." Investors took him at his word, driving the stock down 12.97 percent -- the biggest decline on the Entrepreneur Index™ today. It is down nine percent so far this year.
Netflix too disappointed some very high expectations. The leader in the video streaming business beat earnings estimates by 25 percent and added more subscribers than expected but missed on revenue targets. It also gave slightly weaker than expected guidance for the first quarter. With the stock up more than 50 percent since Christmas Eve, investors took some profits. The stock was down 3.99 percent.
The rest of the market rode the optimism around the trade talks, with strength across all sectors. All thirteen tech stocks on the Entrepreneur Index™ were up other than Netflix. Chipmakers NVIDIA Corp. (3.43 percent) and Analog Devices, (2.87 percent), had the biggest gains in the sector.
Economy-sensitive stocks Fedex Corp. and Ford Motor Co. were up 2.1 percent and 2.63 percent respectively. Clothing makers Ralph Lauren Corp. (3.42 percent) and Under Armour Inc. (2.3 percent), also had strong gains. Tyson Foods rose 2.64 percent, truck-maker PACCAR Inc. was up 2.67 percent and medical device maker Boston Scientific Corp. gained 2.39 percent. Investment bank Jefferires Financial Group was also up 2.41 percent.
Only three other stocks on the Entrepreneur Index™ declined today. Homebuilder D.R. Horton Inc. was down 1.14 percent, while Chipotle Mexican Grill fell 0.85 percent and shopping center REIT Kimco Realty Corp. lost 0.06 percent.
The stock market logged its fourth consecutive week of gains and has now clawed back more than half of the 20 percent plus it lost through Christmas Eve. The rumors surrounding the U.S.-China trade talks will likely continue to move stock prices next week -- one way or the other.
The Entrepreneur Index™ collects the top 60 publicly traded companies founded and run by entrepreneurs. The entrepreneurial spirit is a valuable asset for any business, and this index recognizes its importance, no matter how much a company has grown. These inspirational businesses can be tracked in real time on Entrepreneur.com.