Ford Stock Sinks as Global Semiconductor Shortage Bites into Fiscal Year Outlook

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Stock Market Talking Points:

  • US indices closed lower on Wednesday as markets digested FOMC commentary and tech earnings
  • Federal Reserve Chair Jerome Powell reiterated the Fed’s accommodative stance, rates remain unchanged
  • Ford Motors posted strong earnings, but slashed FY outlook as semiconductor shortages impact production

US equities closed lower on Wednesday, as Federal Reserve Chair Jerome Powell offered no surprises while fielding questions from the press. The Federal Open Market Committee (FOMC) left interest rates unchanged and remained committed to $120 billion in monthly asset purchases. Chair Powell indicated that the economy remains “quite a distance” from Fed targets, and it is still too early to foster any discussion of tapering asset purchases.

Ford Motors reported positive revenue and EPS surprises for Q1, however, guidance related to the global semiconductor shortage sent shares tumbling 3% lower after the bell. Ford announced that it expects to lose 50% of Q2 planned production as a result of the chip shortage, and the company expects to produce 1.1 million fewer units this year.

Ford 15 Minute Chart

Chart created with TradingView

On the earnings call, Ford executives highlighted that the company’s chip shortage is related to a fire at one of Ford’s suppliers in Japan. CFO John Lawler stated that while the pain associated with the shortage is expected to reach its peak in Q2, Ford is projectinga significant reboundin the latter half of 2021.

The broad chip shortage has been felt globally with numerous industries being forced to shut down factories and production lines. Automakers have been hit especially hard, with resulting bottlenecks severely limiting the supply of new cars. However, as Ford executives highlighted, lower supply has boosted profit per vehicle, allowing automakers to do well despite the troubles. This is reflected in Ford’s share price, which prior to earnings was up 41% YTD.

Despite the crippling shortage of chips, chipmakers continue to thrive. AMD smashed estimates for the first quarter, and offered improved guidance for the rest of the year. The company posted revenues of $3.45 billion and adjusted EPS of 52 cents. Wall Street had set expectations of $3.21 billion in revenues and just $0.44 in adjusted EPS.

The strong performances by AMD and its peers has seen the popular semiconductor ETF SMH perform well in 2021, despite the shortage. Often used as a gauge to judge risk sentiment in equity markets, the VanEck Semiconductor ETF is up 13% YTD, sitting slightly below 2021 highs.

VanEck Semiconductor ETF (SMH) Daily Chart

SMH Chart

Chart created with TradingView

— Written by Brendan Fagan, Intern for DailyFX

To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter

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