1. A down day for the major indexes, with tech going lower and worries about higher interest rates.

The only two sectors in the green were real estate and utilities, signaling caution as investors awaited Tesla’s earnings after the bell.

2. Tesla’s earnings beat

The electric vehicle (EV) giant’s adjusted earnings per share of $0.72 topped the $0.58 expected. Tesla jumped 9% after-market, but is still down year-to-date.

However, automotive revenue rose just 2% YoY to $20 billion, roughly flat since 2022. Energy generation and storage revenue rose 52% YoY to $2.38 billion, and other revenue jumped 29% YoY to $2.79 billion.

3. The euphoria meter

A long-term tracker of equity market sentiment is still at a record high, as shown below. The reading signals that “the stock market is highly vulnerable to any type of disappointment or adverse shocks/surprises,” wrote Callum Thomas from TopDown Charts.

4. Utility stocks are riding the artificial-intelligence wave

The Utilities ETF’s are seeing strong inflows while utility stocks in the S&P 500 have climbed 29% year-to-date, vying with technology as the market’s top-performing industry.

“The data center demand theme kicked off in earnest this time” UBS analysts, William Appicelli, a UBS analyst, wrote in a research note. He expect firms to more clearly outline how rising power demand from data centers will provide for future earnings growth.

Utility stocks were also among the most bought by hedge funds last week, according to Goldman Sachs’s prime brokerage unit.

5. Power is a bottleneck for data centers

Corporates expect their electricity requirements to grow by ~9% on average in the next 3 years (~3% CAGR), with similar growth levels both in the US & in Europe.

These corporates in the US and in Europe place more importance on security of supply and time to get access to power than the cost of electricity itself when making procurement decisions. They are willing to pay a significant price premium for power that is green, firm, rapidly accessible and/or offers cost visibility.

6. Almost halloween and there is “zombie inflation”.

The 10 year benchmark is 60 basis points higher than last month. Inflation is not really dead?

7. Tesla’s income statement for Q3 FY24

We would like to see “robotics”.

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