Weekly equities forecast: Tesla, Lloyds & Barclays earnings preview

• Tesla reports Q1 earnings on Tuesday, April 23, after the close.
• Lloyds reports on Wednesday, April 24, ahead of the open
• Barclays reports on Thursday, April 25, ahead of the open.

The S&P 500 fell 0.6% across the week after Federal Reserve speakers, including Fed Chair Jerome Powell, dampened rate cut expectations and as geopolitical tensions weighed on market sentiment. Fed Chair Powell warned that rate cuts may need to be delayed, and other Fed policymakers said that there was no urgency for the bank to loosen monetary policy.

Looking ahead, next week sees the focus on US GDP data and core PCE, the Fed’s preferred gauge for inflation, for clues over the future path for US interest rates. A strong economy and hotter inflation could raise questions over the Fed’s ability to cut rates.

Meanwhile, earnings season will ramp up with earnings from Tesla, PepsiCo, UPS, Boeing, and American Airlines, among many others.

Tesla Q1 earnings

The EV maker posted a decline in Q1 deliveries to 386,810. This marked an 8.5% year-on-year decline amid declining EV demand despite price cuts across the quarter. Declining demand, intensifying competition, and a challenging macro backdrop of high rates for longer are setting Tesa up for a disappointing quarter.

EPS is expected to be $0.55, down from $0.85c in the same quarter a year earlier, on revenue of $22.73 billion, down from $23.33 billion a year earlier and $25.17 billion in the previous quarter.

The results come after Tesla announced it will cut 10% of the global workforce to cut costs and drive efficiencies. Tesla appears to be moving away from the idea of bringing the EV to the average driver and instead focusing on chasing the Robo-taxi dream. However, no developments are expected until after the summer.

The stocks have traded down 35% this year, considerably underperforming the S&P 500.

The chart shows that while Tesla has been trading inversely to the S&P 500, this has flipped, and the correlation has turned positive over the past week.

FTSE look ahead

The FTSE fell over 1.3% last week as risk sentiment fell, hitting risk assets across financial markets. The index was also pulled lower by falling oil majors as oil prices dropped 4% and after mixed data, with inflation cooling by less than expected and retail sales stalling. The market is trying to assess when the BoE could start to cut rates. August or September could be the start of lower rates.

Looking ahead, UK bank's earnings and PMI data will be key drivers, as well as any geopolitical developments in the Middle East.

Lloyds Q1 results

Lloyds is the first of the big UK banks to report earnings. Net interest income is expected to fall compared to the same period last year, dropping to 2.93% from 3.22%. While rates were being hiked this time last year, the focus is now on when rates will be cut, which explains the fall in NII.

Loan defaults will be another focus. Bad loan charges are expected to be in the region of £280 million. With the UK recession scheduled to have been short-lived, there could be signs of resilient borrowers. Looking ahead, loan volumes could start to recover as the housing market shows tentative signs of improving.

Investors will watch out for further comments surrounding the FCA investigation into motor financing. Lloyds has set aside £450 million to deal with the charges.

The chart highlights the strong correlation between the FTSE and Lloyd's share price.

Barclays Q1 results

Barclays and its sector peers trade near a 6-year high ahead of earnings, jumping 20% after announcing a reorganization in February, so the bar is high. Revenue estimates have been trimmed in the run-up to the release, and earnings are likely to be lower than the bumper 2023 numbers. Barclays is expected to report a pre-tax profit of £2.2 billion, down from £2.6 billion reported in Q1 2023.

In February, Barclays said it aimed to save £1 billion by making the bank more efficient. The cost-cutting comes alongside the restructuring, which plans to emphasize its investment banking arm less. However, this division could rebound if US banks' earnings are considered lead indicators.