Did you know that the S&P 500 typically experiences a market correction, defined as a 10% drop from recent highs, nearly every year?

This fact highlights how market movements tend to be regular, and knowing about that regularity is key to understanding the market.

In today’s edition of Equity Eats, we dive into three topics:

• Every Time The Market Drops A Little, We Ask If The Correction Is Upon Us: First, we’ll explore the signs that come before market corrections and learn why holding your positions might still be a wise choice 🤔

• Tesla’s Struggles: Next, we’ll examine Tesla's production hurdles and its implications for the future of electric vehicles 📉

• Taiwan’s Earthquake And The Market Impact: Finally, we’ll assess the impact of Taiwan's recent earthquake on the global semiconductor landscape 🔍

These insights are designed to improve your investment decisions.

Every Time The Market Drops A Little, We Ask If The Correction Is Upon Us 🤔

Each time the market pulls back just a little, we ask if a correction—defined as a 10% or greater drop—is beginning.

It wouldn’t be a surprise if one were on the way.

After all, a correction has occurred in most years dating back to 1980 📅

The S&P 500 is up about 26% since a low point hit in late October.

Perhaps the stock market has come too far, too fast.

With the index trading at 21 times 12-month forward earnings, any disappointments when earnings season starts next week could cause stocks to fall.

According to some technicians, the S&P 500 has fallen close to its 20-day moving average of 5178, a signal that it’s losing momentum, and could continue to fall.

They argue that the weight of the technical evidence indicates the S&P 500 is vulnerable to a 5-10% pullback/correction in the coming weeks or months.

So what should investors do now? Nothing ❌

Buying more might not be a great idea—yet—but holding on to the index is.

The economy is still growing and companies can still grow profits.

The Fed almost certainly won’t be hiking rates.

The stock market may just have to dip in the near-term, before resuming a long-term advance 📣

Tesla’s Struggles 📉

All is not right at Tesla and its concerning first-quarter delivery numbers confirm it.

Tesla delivered just under 387,000 units in the first quarter, down about 9% year over year.

The number missed the lowest Street estimates by some 20,000 vehicles.

“Shockingly disappointing,” “unmitigated disaster,” “weak,” and “surprising” were words analysts chose to describe the quarter 😱

But the reason behind the miss is what appears truly shocking.

“The discrepancy between deliveries and production implies about 46,000 in incremental inventory, which confirms that beyond the known production bottleneck, there may also be a serious demand issue,” according to Deutsche Bank analyst Emmanuel Rosner.

In January, Tesla acknowledged that something wasn’t quite right, that it was stuck “between two major growth waves.”

The first wave began with the expansion of the Model 3 and Y platform.

The second, it hopes, will be driven by the lower-priced Tesla that investors typically call the Model 2.

To address the problem, the first thing Musk can do is accelerate the development of the Model 2 program.

However, the car isn’t due to hit the streets until late 2025 at the earliest ⏳

When it arrives, it will enter a global market with a lot of sub-$30,000 all-battery electric vehicles made by China’s BYD, Xiaomi, and others.

That can’t happen overnight.

To plug the gap, Tesla may need to launch an organized advertising effort to help boost sales.

Selling EVs to car buyers has become a lot harder, and the early EV adopters are long gone.

So are the days when Tesla could sell all it could make with no ads.

Advertising costs money, but so do price cuts.

And Tesla’s recent price cuts have cost the company some $20 billion a year in sales 💲💲💲

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Taiwan’s Earthquake And The Market Impact 🔍

Taiwan’s biggest earthquake in 25 years caused a sell-off in the country's semiconductor stocks.

US listed shares of Taiwan Semiconductor Manufacturing, one of the largest makers of chips in the world and a major supplier to Apple and Nvidia, was down modestly on the news.

The company said it evacuated factories after the quake but workers are now returning 🚶

The tremor, which killed at least seven people and injured more than 700, happened Wednesday morning local time and occurred just off the eastern coast of the island.

Beyond the destruction it caused, the earthquake is the latest threat to global supply chains following the bridge accident in Baltimore that closed a major port 😱

It may also add to pressure on companies trying to shift production out of Taiwan to diversify supply chains as the US and China impose restrictions on exports.

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