—— Tesla Stock Soars 60% in 3 Weeks; U.S. Inflation Data Offers Relief; Goldman CEO Pay Slashed 30%; NYC Subway Crime Falls; More Americans Behind on Auto Loans; Chevron Profits Hit by Energy Price Drop; BBBY Gets JPMorgan Default Notice
1. Tesla Stock Soars 60% in 3 Weeks
This week, Tesla’s stock rose over 33%, marking its second-highest gain since the 41% surge in May 2013. Compared to its January 3 low of $108.1, the increase now exceeds 60%.
Catherine Faddis, senior portfolio manager at Fernwood Investment Management, said Tesla shares likely hit a bottom, and investors believed the stock had been oversold. With the rebound underway, attention can now shift to Tesla’s operational fundamentals.
On Wednesday, Tesla released its latest earnings report. Elon Musk told investors that since the company lowered its prices two weeks ago, orders have been coming in at twice the production rate, indicating very strong consumer demand.
Previously, Musk’s divided attention and mounting competitive pressure led to a sharp and extended decline in Tesla’s stock price.
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2. U.S. Inflation Data Offers Relief
According to the latest data released today by the U.S. Department of Commerce, the Personal Consumption Expenditures (PCE) price index rose 5% year-over-year in December. While still above the Federal Reserve’s 2% target, it marked the slowest increase since late 2021.
Both the PCE index and the CPI data indicate that inflation is cooling, giving the Federal Reserve more room to maneuver.
Fed Chair Jerome Powell considers the core PCE index, which excludes food and energy, to be a better gauge of inflation. Compared to November, that index rose 0.3%. Meanwhile, inflation-adjusted personal spending fell 0.3% month-over-month.
Currently, most officials expect the Fed to raise rates by 25 basis points next week, though how long the tightening cycle will continue remains a topic of debate.
Markets now expect the Fed to raise rates by 25 basis points next week, but the duration of tightening is still uncertain.
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3. Goldman CEO Pay Slashed 30%
This week, Goldman Sachs reduced CEO David Solomon’s total compensation for 2022, citing declines in both company net profit and stock price last year.
Solomon’s total pay was cut by 30% to $25 million, which includes a $2 million base salary and $23 million in RSUs and other variable incentives.
Over the past three years, Goldman invested tens of billions in building its consumer finance business, ultimately racking up $3.8 billion in pretax losses. Solomon admitted that the expansion was overly aggressive. In 2022, Goldman’s net income fell 48% to $11.3 billion, and its return on equity dropped to 10.2%, below its target of 14%–16%.
Goldman’s stock declined 10% in 2022, slightly outperforming the S&P 500’s 12% drop. In 2021, Solomon earned $35 million, making him one of the highest-paid CEOs in the industry, comparable to Morgan Stanley CEO James Gorman. However, last year, Gorman’s pay was also cut by 10%.
Goldman’s grand plans for consumer finance ended in failure, with losses nearing $4 billion.
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4. NYC Subway Crime Falls
According to the latest data from the Metropolitan Transportation Authority (MTA), the largest U.S. transit system, New York City subway crimes dropped 16% since October, thanks to increased police patrols in stations.
New York Governor Kathy Hochul stated that to attract more commuters to public transit, the government must ensure safety in subway stations.
Mayor Eric Adams of New York City also commented that past high-profile incidents had shaken public confidence. The administration is working hard to stabilize the situation.
In December, MTA announced a 5.5% fare hike and reduced subway service to address declining ridership.
In October, Hochul and Adams jointly announced the deployment of 1,200 additional night-shift officers.
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5. More Americans Behind on Auto Loans
According to Fitch Ratings’ latest data, in December, 5.67% of auto loan borrowers were more than 60 days delinquent, compared to 2.58% in April 2021 and 5.04% during the 2009 financial crisis.
During the pandemic, soaring car prices forced many buyers to take out larger loans. As the economy rapidly cooled over the past year, many borrowers struggled with rising living costs and could no longer repay on time.
Additionally, the average interest rate on auto loans in December reached 8.02%, up from 5.15% a year earlier. Buyers with lower credit scores often face even higher rates.
Currently, the U.S. auto loan delinquency rate has surpassed even the worst levels of the 2009 crisis.
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6. Chevron Profits Hit by Energy Price Drop
According to its latest quarterly report, oil giant Chevron posted a net income of $6.4 billion, significantly lower than the $11.2 billion in Q3 and below Wall Street’s forecast of $8.2 billion.
Chevron cited falling global oil and gas prices as the main reason, along with a $1.1 billion impairment charge related to some of its production operations. Nevertheless, the Q4 net profit was still 25% higher than the same period a year earlier.
On Wednesday, Chevron also announced a $75 billion stock buyback program—equivalent to nearly one-fifth of its market value. It also raised its quarterly dividend by 6% to $1.51 per share. The company plans to repurchase $15 billion of shares this year.
Chevron’s profits reached record highs over the past two years, giving it ample cash to return to shareholders.
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7. BBBY Gets JPMorgan Default Notice
On Thursday, home goods retailer Bed Bath & Beyond (BBBY) announced it received a default notice from JPMorgan, stating it lacked sufficient cash to pay off $1.1 billion in debt—bringing the company to the brink of bankruptcy.
In a filing to the SEC, BBBY disclosed that it had violated loan covenants and JPMorgan demanded immediate repayment of all outstanding principal. As of November 26, BBBY held only $225 million in cash.
A BBBY spokesperson told the Financial Times the company is evaluating all strategic options and will update investors as soon as possible. However, breaking loan covenants could trigger restrictions on parts of the company’s operations.
With only $225 million in cash and $1.1 billion in debt, bankruptcy now seems inevitable for BBBY.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.