What Investors Missed in the Market Last Week

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The markets welcomed some positive news last week, as the U.S. created 222,000 new jobs in June. That tally was the largest in four months and the second largest year to date. The icing on the cake came in the form of May and April jobs results that were stronger than previously reported. While this is obviously good news for the economy in general, it also continues to send the signal to investors that the Federal Reserve will continue on its path to push interest rates gradually higher.

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There were also some big movers and headlines in the markets week week. Here are some of the highlights. 

When friends become enemies

After a couple of months of rumors, it's finally official: Qualcomm (NASDAQ: QCOM) announced last week that it filed a patent-infringement suit against Apple (NASDAQ: AAPL), its largest customer. In fact, Apple accounts for as much as 30% of Qualcomm's earnings per share, according to Macquarie Capital. While most investors knew suspected was coming, the International Trade Commission will probably start digging into the dispute next month, with the case likely to be tried in 2018.

Here's what Don Rosenberg, Qualcomm's executive vice president and general counsel, had to say.

Qualcomm's inventions are at the heart of every iPhone and extend well beyond modem technologies or cellular standards. The patents we are asserting represent six important technologies, out of a portfolio of thousands, and each is vital to iPhone functions. Apple continues to use Qualcomm's technology while refusing to pay for it. These lawsuits seek to stop Apple's infringement of six of our patented technologies. 

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Here's a closer look at those six important technologies.

Qualcomm is requesting a cease-and-desist order, which would block the sales of infringing iPhones that have already been imported to the U.S. market. Fortunately for Apple investors, these spats take time to be heard, and this one shouldn't negatively affect the launch of the company's 10th-generation iPhone launch.

When it rains...

This week brought a fairly rare occurrence for Tesla's (NASDAQ: TSLA) stock price -- a 13% decline. Not that it's unusual for such a high-flying stock to make big swings, but Tesla's stock has mostly been immune to negative press. But even Tesla couldn't escape this week without shedding some value, after the company announced Monday that it delivered roughly 47,100 electric sedans and SUVs during the first-half of 2017, a figure that was toward the lower end of its forecasts.

Later in the week, Tesla added that about 3,500 vehicles were in transit to customers at the end of the second quarter and that the shortfall was due to new battery packs that constrained manufacturing. But those comments failed to ignite a recovery for the week. Further, registrations of Tesla vehicles in California fell 24% in April from the prior year, according to IHS Markit.

The major issue investors have with the decline is simple: fears of cannibalization. The concern is that demand for Tesla's Model S sedan, which carries a much higher price tag and a list of premium options, could wane ahead of the mass-market-focused -- and much cheaper -- Model 3.

When it rains, it pours, and Tesla's week also included a report from the Insurance Institute for Highway Safety that said Tesla's Model S sedan failed to achieve its top crash rating.

But we have to be fair to this young automaker. Even with this week's decline included, shares of Tesla are still up 46% year to date and have made many investors a hefty return from its humble beginnings. Yet Tesla's market cap of $51 billion hardly trails General Motors' (NYSE: GM) $52 billion, which is quite a feat.

Twilight-zone industry

Speaking of automakers, the U.S. auto industry posted its sales data last week, and everything that came out seemed backwards from what would have been expected. At a time when Detroit's full-size trucks and SUVs were once again the solid backbone of industry gains, Ford Motor Company (NYSE: F) and General Motors lagged behind its Japanese rivals in year-over-year gains, even as sales of passenger cars slid.

More specifically, Ford's sales declined 5.1% compared with the prior year's June and failed to follow up its only gain of the year in May with any momentum. General Motors' deliveries also fell a similar 4.7%, albeit partly because of a desired decline in less profitable rental fleet sales -- and both automakers trailed the industry's 2.9% decline. Meanwhile, its Japanese counterparts all managed to post gains in the low-single-digit range, transferring some of the U.S. market's market share in their favor.

In terms of the overall market, the seasonally adjusted annualized sales rate (SAAR) checked in at 16.54 million in June, the lowest pace of 2017 and slightly below estimates. Further, if you're counting streaks, June was the fourth straight month with a SAAR below 17 million, after a prior run of six straight above that mark.

It's been clear for a while now that the auto industry is peaking, so now the focus must turn to inventory management, incentive-spending restraint, and fresh vehicle portfolios to maintain market share and pricing power -- no easy task on the road ahead.

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Daniel Miller owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Apple, Ford, Qualcomm, and Tesla. The Motley Fool has a disclosure policy.