Tesla’s bounce on quarterly results can teach us something about mega-cap growth names

Published Thu, Jan 26 20232:07 PM ESTUpdated Thu, Jan 26 20233:18 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. The economy finished 2022 in sturdy enough shape to undermine claims of an imminent collapse, though not so strong that the "long and variable lags" camp predicting a nearly inevitable recession ahead will be persuaded otherwise. The fact that the economy has not buckled in time to quickly redeem the faith of high-conviction bears has helped drive a tentatively reassuring cyclical rebound within the market. Consumer finance companies have surged this month. Steel and machinery stocks are registering new highs. Consumer discretionary has been trouncing staples by 15 percentage points since the middle of last year. Yet, we have the radically inverted yield curve, the fearsome declines in ISM and the Leading Economic Index and an ongoing corporate focus on streamlining that could, perhaps, overshoot to a deeper retrenchment. This leaves the market steady but at a crossroads. Certain elements of bull market behavior have clicked into place: The rally has been broad. Some momentum signals have fired. Cyclical and high-beta leadership are surfacing. Dips are getting bought. A classic "October low/midterm-election year/strong January" pattern is set up. On the other hand, we've used up a lot of good news (a potential Federal Reserve pause, lower bond yields, sliding U.S. dollar) just to get the S & P 500 back up to a familiar resistance point, so those figuring the market will be capped or is vulnerable are still not proven wrong. Back on the theme of hard economic data (production, employment, spending) looking better than soft indicators (business surveys, consumer sentiment): Goldman Sachs is breaking it down and giving more credence to the more encouraging hard data. Tesla bouncing on respectable results and reassuring guidance takes some starch out of the bear case, but the nature and magnitude of the rebound — a 9% pop back to a level that's half of where it traded a year ago — shows the stock is somewhat less "special" and more normal than it's ever been. We're arguing what to pay for $4-ish on EPS this year and whether it can get to $6 next, whether vehicle guidance of 1.8 million is solid or maybe has upside. It's not about hope-and-prayer ancillary ventures and world domination and robo taxis. This doesn't make TSLA a buy or a sell in itself, but it's an extreme example of what's already happened in mega-cap growth tech: resetting valuations and projections over well more than a year of price-earnings compression and lower earnings expectations. Still doubtful the Nasdaq 100 -type names are to be the leaders of the next bull market, but it's enough for now if they quit dragging on the indexes every day and select ones start to look like relative bargains. Market breadth is highly mixed. VIX sleepy at 19. With personal consumption expenditures inflation and the Fed meeting ahead, we'll see if holding-pattern action takes hold.