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Stock Market News: Delta Heads Skyward; Tesla Hopes for New Tax Credits

By Dan Caplinger - Apr 10, 2019 at 11:33AM

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The stock market started the day mixed as investors wait for monetary policy insight.

Wednesday morning was generally quiet on Wall Street, with many market participants waiting to see what the minutes from the latest meeting of the Federal Open Market Committee will say about the likely direction of U.S. interest rates for the rest of 2019. As of just after 11 a.m. EDT, the Dow Jones Industrial Average (^DJI -0.42%) was down 15 points to 26,135. However, the S&P 500 (^GSPC 0.16%) was higher by 5 points to 2,883, and the Nasdaq Composite (^IXIC 1.75%) picked up 39 points to 7,948.

Earnings season is just about to begin, and Delta Air Lines (DAL 1.02%) got an early start by announcing its latest results. Elsewhere, Tesla (TSLA 2.55%) investors turned their attention to Washington, with the hope that lawmakers will extend additional valuable tax credits to buyers of electric vehicles above and beyond what they've already done in past years.

Delta's ready for takeoff

Delta Air Lines saw its stock rise about half a percent following the airline's release of first-quarter financial results. The company said that its earnings per share jumped 28% from year-earlier levels on an adjusted basis, with total adjusted revenue rising at a healthy 7.5% clip.

Airplane with Delta markings sitting on a polished hangar floor with view of cloudy sky.

Image source: Delta Air Lines.

Delta cited several contributing factors to its positive performance. Nonfuel unit expenses were down for the third quarter in a row, showing the airline's commitment to cost containment. Delta's efforts to take advantage of value-added opportunities showed up clearly in its top-line figures, where 55% of revenue came from non-ticket sources or from premium offerings. Corporate revenue in the U.S. market was especially strong, and Delta also said that its extended card agreement with American Express added about a percentage point to its 2.4% rise in unit revenue.

Delta sees clear skies ahead. "With the momentum in our business and our American Express contract renewal," said CEO Ed Bastian, "we have increased confidence in achieving our full-year plan." That includes positive guidance for the second quarter, including 6% to 8% sales growth, 1.5% to 3.5% gains in revenue per available seat mile, and earnings of $2.05 to $2.35 per share. Many investors continue to see Delta as the leader of the airline pack, and today's results provide evidence of the company's strength.

A less taxing Tesla?

Shares of Tesla rose 1% as investors tried to assess the potential for what could be a nice boost to its electric vehicle business. Reports surfaced this morning that lawmakers on Capitol Hill will propose new legislation that would expand the electric vehicle tax credit that Tesla buyers have been able to use to offset the cost of their vehicles.

Currently, the electric vehicle tax credit pays $7,500 to purchasers until a manufacturer sells 200,000 vehicles. At that point, the credit starts to phase out over a 15-month period. Tesla has already seen some of that impact, as its credit fell to $3,750 at the beginning of the year. By the end of 2019, the current law would eliminate the credit entirely for Tesla buyers.

The new legislation seeks to offer additional tax credits of $7,000 for up to 400,000 more vehicles per manufacturer. The current $7,500 figure would still remain in place for manufacturers that haven't yet hit the initial 200,000 limit, and the new $7,000 credit would phase out over nine months instead of 15. That makes the bill attractive not just for Tesla but for just about every automaker serving the U.S. market, most of which already have electric vehicle development plans in place.

Investors weren't happy with Tesla's most recent news on deliveries, and the fact that tax credits have been on the decline has weighed on even the most optimistic of Tesla's fans. Adding new credits would breathe new life into Tesla's value proposition for buyers and potentially reinvigorate interest in electric vehicles across the auto industry.

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Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$699.20 (2.55%) $17.41
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
$29.82 (1.02%) $0.30
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$30,967.82 (-0.42%) $-129.44
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,831.39 (0.16%) $6.06
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,322.24 (1.75%) $194.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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