Dow Jones rose strongly in morning trade, along with the S&P 500 and Nasdaq composite, signaling a market rebound after the major indexes tumbled last week to their worst levels since late 2020. Treasury yields and crude oil futures rose, while Bitcoin rebounded from a sharp weekend plunge.
Electric-vehicle giant Tesla will cut 10% of its salaried jobs over the next three months, Chief Executive Elon Musk said Tuesday. Meanwhile, Chinese EV rival Li Auto is set to unveil a new hybrid sport-utility vehicle, the L9, on Tuesday. Xpeng (XPEV) signaled a strong recovery in June deliveries, as the recent end of China’s Covid lockdowns and fresh EV subsidies is good news for Xpeng as well as Li Auto, Nio (NIO) and Tesla.
Tesla stock shot up soon after the open, after nearly undercutting its late May lows last week. Li Auto, Xpeng and Nio stock were heading for solid gains, continuing a strong rebound. China EV and battery giant BYD (BYDDF), which hit record vehicle sales in April and May despite’s China Covid restrictions, is not yet trading. But BYD stock has a new handle buy point just below record highs in a deep base.
Kellogg Split Into Three Companies
Kellogg said early Tuesday that it will split into three independent companies, focusing on global snacks, U.S. cereals and plant-based products.
Kellogg stock popped 2% to 68.88, below the 50-day line after briefly bouncing above the 50-day moving average and breaking a downward-sloping trendline. Kellogg stock has a 75.76 buy point in a flat base that formed just above a double-bottom base.
Snack giant Mondelez (MDLZ) will buy energy bar specialist Clif Bar for $2.9 billion. MDLZ stock edged lower.
Dow Jones Today
The Dow Jones jumped 1.7%. The S&P 500 popped 2.4% and Nasdaq surged 3%.
The Dow Jones Industrial Average sank 4.8% in last week’s stock market trading. The S&P 500 index tumbled 5.8%. The Nasdaq composite retreated 4.8%.
The 10-year Treasury yield gained 5 basis points to 3.29%. The benchmark yield climbed 8 basis points to 3.24% last week, but pulled back from an 11-year high of 3.48%.
Crude oil prices climbed 2%, lifting West Texas Intermediate crude futures above $110 a barrel. WTI tumbled more than 9% last week to $109.56 a barrel, sending oil stocks plunging.
Bitcoin moved above $21,000 after crashing to an 18-month low of $17,601.58 on Saturday.
Before the open, Lennar reported better-than-expected earnings and revenue during the second quarter. Per-share earnings leapt 59% with revenue up 30%. That comes as soaring mortgage rates appear to be chilling housing demand. Lennar shares rose 4%.
At 10 a.m. ET, the National Association of Realtors reported May existing-home sales fell 3.4% to an annual rate of 5.41 million, but that was better than expected. Later this week, KB Home (KBH) will report quarterly results with the Commerce Department issuing May new-home sales data on Friday.
JetBlue Ups Spirit Airlines Again
JetBlue (JBLU) raised its offer for Spirit Airlines (SAVE) yet again, to $33.50 a share, up from $31.50 a share. Spirit Air’s board has stuck with its support for a much-lower offer from Frontier Air (ULCC), saying regulators would likely block a JetBlue-Spirit deal. Shareholders will vote on the Frontier-Spirit agreement on June 30.
JBLU stock edged higher. SAVE stock jumped nearly 8% to almost 23. Frontier Air rose 3%.
Diamondback Stock Dividend Hike
Diamondback Energy raised its quarterly dividend by 7% to 75 cents a share, beginning with the second quarter. The shale operator also approved returning at least 75% of free cash flow to shareholders starting in the third quarter vs. its prior pledge of at least 50% of free cash flow. FANG stock rose 7%.
Tesla Job Cuts
Elon Musk said in the Qatar capital of Doha Tuesday that Tesla will cut 10% of salaried staff over three months, projecting a near-term recession as more likely than not. But hourly production workers should increase he said.
Job cuts have already been underway over the past week or so. Two former Tesla employees fired this month sued the U.S. EV giant on Sunday, saying they weren’t given a 60-day notice under federal rules for mass layoffs.
Musk said supply-chain woes are Tesla’s biggest concern. While supply issues likely have limited Tesla production growth somewhat in the past year, they’ve had a devastating impact on overall auto industry production. An end to chip shortages could spur a big increase in industry production, notably in EVs, pressuring prices for Tesla and other automakers.
Tesla stock jumped 8%. TSLA stock skidded 6.7% last week to 650.28, nearly undercutting its late May lows.
China EV Makers
Li Auto will unveil the L9 later today. It promises to be a more-upscale SUV hybrid than Li’s existing model, the Li One. L9 deliveries will start in August, with Li Auto predicting L9 deliveries to will reach 10,000 by September.
LI stock is on IBD Leaderboard.
Last week, Nio unveiled the ES7, another all-electric SUV and one of three new EVs it’s releasing this year.
Xpeng said it had delivered a cumulative 200,000 EVs. That means that it has delivered at least 8,359 vehicles in June so far.
Xpeng delivered 10,125 vehicles for all of May, recovering from a Covid-hit April but still well below recent record levels.
All three China EV startups could be on track for monthly sales of 20,000 or more later this year, assuming no significant production or supply-chain issues.
Meanwhile, EV giant BYD, little impacted by China’s Covid lockdowns, could be on track for monthly sales of 200,000 or more by year-end. BYD EV and plug-in hybrid sales will easily top Tesla’s EV-only sales in the second quarter.
BYD was Friday’s IBD Stock Of The Day
China EV Stocks
Li Auto stock leapt 9%. Shares have surged for six straight weeks, racing up the right side of a very deep consolidation. The official buy point is 37.55, but LI stock could use a lengthy handle.
The relative strength line for Li Auto stock has shot up near its record levels of late 2020.
Nio stock popped 9%. XPEV stock gained 6%. Both also have rebounded strongly in the past few weeks, but remain well below their 200-day moving averages.
BYD stock advanced nearly 3% to 38.46. Shares fell 4.1% last week to 37.45, ending a five-week win streak. That forged a weekly handle on its 48%-deep base with a 39.81 buy point, according to MarketSmith analysis. Shares were inactive early Tuesday.
Even if the major indexes open higher and close with strong gains, it would only mark the second day of a stock market rally attempt for the S&P 500 and Nasdaq, and the first day for the Dow industrials.
Investors will want to see more strength, including a follow-through day to confirm the new uptrend, before getting off the sidelines. Even then, there shouldn’t be a mad scramble to add exposure, especially with not many stocks in position to buy.
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