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APRIL 19, 2023

BIG BANK EARNINGS

Morgan Stanley had a successful first-quarter despite volatile markets. The trading operation made $5.31 billion in revenue, exceeding analyst estimates, largely due to strong numbers in fixed income. The wealth-management business also exceeded expectations, making $6.56 billion in revenue, up 11% from the previous year. Morgan Stanley now manages a total of $4.6 trillion, with $110 billion in net new assets. However, Morgan Stanley’s provisions for credit losses quadrupled to $234 million, raising concerns about potential losses in commercial real estate and macroeconomic factors. Despite this, the bank’s overall revenue for the quarter was $14.5 billion.

OTHER MAJOR EARNINGS REPORTS

United Airlines reported a loss of $194 million for the first quarter of the year, but managed to record an increase in revenue compared to last year, despite several challenges such as higher fuel and labor costs. United’s CEO, Scott Kirby, expressed confidence in the second quarter, sharing the company’s plan to expand services to Australia and New Zealand by 40% next winter. However, there is an ongoing deadlock between pilots and the Air Line Pilots Association regarding contract agreements, which could potentially disrupt United’s operations.

Meanwhile, Netflix managed to beat Wall Street earnings estimates for first-quarter but disappointed investors with a weaker-than-expected forecast for second-quarter, demonstrating the difficulties of pursuing growth in the saturated streaming industry. Furthermore, Netflix added 1.75 million streaming subscribers in first-quarter, missing analyst estimates of 2.06 millions additions. Despite these mixed results, the company remains optimistic, aiming to meet its full year 2023 financial objectives. Netflix is also hoping to avoid a strike with Hollywood studios and has plans to expand its offerings, including live streaming and a new ad-supported service.

TESLA CUTS PRICES FOR POPULAR MODELS

Tesla’s shares fell following the announcement of the second U.S. price cut in less than a month. The company lowered the price of each version of their Model Y sports utility vehicle by $3,000 and cut the cost of the base Model 3 by 4.7%. Despite concerns from analysts, Tesla’s profit margin allows more flexibility for price adjustments, unlike other EV makers like Ford or Lucid Group. Tesla’s price cuts have made its two primary vehicles significantly cheaper than their starting prices at the beginning of the year. CEO Elon Musk stresses the need for affordability to make a greater impact on the market, but analysts remain concerned about the potential impact on profit margins leading up to the company’s first-quarter earnings report.

LAYOFFS AT META AND DISNEY

Meta and Disney have both made announcements about serious cuts in their workforce. On Wednesday, Meta, formerly known as Facebook, will embark on a company-wide layoff which will include Facebook, WhatsApp, Instagram, and their virtual reality section, Reality Labs. Meanwhile, Disney is looking to shed thousands of jobs across their TV, film, and theme park departments. In particular, the entertainment division will suffer a reduction of around 15% of their current workforce.

CLOSING OF TAX SEASON DRAWS ATTENTION TO U.S. DEBT LIMIT CONCERNS

The Treasury Department has almost completed the tax season and is about to calculate the tax revenue for the year 2022, as well as the year’s estimated payment. This cash is essential because, since January, the U.S. has reached its debt ceiling and cannot borrow without Congress raising or suspending the limit. Despite uncertainties, experts predict that tax collections will not exceed expectations as they did during the previous filing season.

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