Nasdaq futures fall 1% as Tesla earnings disappoint

On Thursday, Nasdaq futures declined 1% as investors became concerned about the prospects for U.S. interest rates and Tesla shares fell after the electric vehicle manufacturer reported its lowest quarterly gross margin in two years.

The major U.S. stock indices have held firm this week as mixed bank earnings allayed fears of a banking crisis spillover, but swiftly increasing rates and recession worries have clouded their outlook.

After dramatic price cuts for its vehicles caused its first-quarter gross margin to fall short of market forecasts, Tesla Inc.’s stock fell 7.4% in premarket trading. Elon Musk, the company’s CEO, also said that it will prioritise sales growth over profit.

Traders are reassessing the outlook for U.S. interest rates after data pointed to a slowing U.S. economy that was not weak enough to push the Federal Reserve to start cutting rates as early as this year.

Comments from Fed policymakers this week have also supported bets of further tightening by the U.S. central bank.

The Fed will deliver a final 25-basis-point rate hike in May and then hold rates steady for the rest of the year, according to economists in a Reuters poll, which also showed a likely short and shallow recession in 2023.