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Musk’s ‘super bad feeling’ hits Tesla and drags down Wall Street

Elon Musk shakes the markets again. The executive and main shareholder of Tesla He has assured in an email sent to the directors of the company that he has a “super bad feeling” on the economy and need to reduce staff in about 10%according to ‘Reuters’, which had access to the document.

The shares of the car giant They plummet 9% this Friday on Wall Street and drag other companies like Manzana (-4%), microsoft (-2%), Amazon (-3%) and technology companies in general. The Nasdaq Composite down 2.8%, while the Dow and S&P down 0.8% and 1.6%, respectively. Musk’s decision would the dismissal of almost 10,000 employees taking as a reference the workforce of 100,000 people that Tesla has at the end of last quarter.

From Musk’s hunch to Dimon’s hurricane

The headline of Musk’s letter also calls for blocking additions to the company. The email, titled “pause all hiring worldwide”was sent to company executives on Thursday and underlined an increasingly gloomy economic outlook due to the inflationthe supply crisis and the war in Ukraine.

Tesla, in addition, faces the impact of the almost continuous closure of its factory in China during the current quarter due to lockdowns by Covid in that country. Their gigafactory there it produces half of the group’s vehicles and represents a quarter of its income. The company will compensate for this decline after opening two plants in Austin (Texas) and Berlin (Germany), although their start-up is still ongoing.

Musk’s position coincides with what was expressed this week with the president of JPMorgan, Jamie Dimond, which predicted a worsening of the economy and graphically described it in meteorological terms. “It’s a big hurricane. Right now, it’s a little sunny, things are going well, and everyone thinks the Fed can handle this. Yet that hurricane is out there, on its way, coming our way.. We just don’t know yet if it’s minor or Superstorm Andrew or something, but you’d better prepare,” he told a Bloomberg conference on Wednesday.

Other companies like microsoft either Manzana have warned of a deterioration in their accounts for the current quarter as a result of the currency effect -its income abroad decreases when converted into dollars- and by the production problems that have caused the recent closures and confinements in China. The iPhone manufacturer foresees a reduction in production compared to its initial plans and an impact of up to 8,000 million dollars, as announced a couple of months ago.

Fed, soft or hard landing?

The Main Wall Street indices fall sharply this year due to the unprecedented turn of the Fed’s monetary policy, which is preparing the largest monetary adjustment in decades with successive rises in interest rates to contain inflation. Fears that this movement will lead to a recession are becoming palpable among large companies. The valuations of many of them publicly traded they have slumped since November after hitting records in 2021.

“The risk factors have been accumulating, adding more stress to the market environmenteither. At the same time, those responsible for monetary policies consider that the accommodative measures that were put in place to deal with the economic consequences of the pandemic are not only no longer justified, but also threaten the objective of price stability in the medium term. of the central banks”, comment Mabrouk Chetouane Y Nicholas Malagardisfrom Natixis IM.

For its part, the US labor market continues to reinforce the Fed’s thesis that it has to speed up interest rate hikes to contain inflation and cool down markets such as real estate that are suffering from a price bubble. The US economy added 390,000 jobs in May, better than expected despite fears of an economic slowdown and an accelerating pace of inflation.

The markets remain expectant in the face of a scenario in which inflation continues to rise, growth falls and a tight labor market in which wages are rising. “The long-awaited soft landing ultimately depends on three factors: the expectations of inflationthe cycle economic and current monetary conditions. The bad news in this regard is thathe Fed’s track record does not look very promising: every time the central bank has raised rates to reduce inflation by more than 4 percentage points, The economy has entered a recession.they add