The Dow Jones rose sharply in morning trading, along with the S&P 500 and Nasdaq, signaling a recovery in the market after major indexes fell last week to their worst levels since the late 2020 dip over the weekend.
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Tesla (TSLA), Li Auto (LI), home builder Lennar (LEN), Diamondback Energy (FANG) and Kellogg (K) were among those who made the news before the opening.
Electric vehicle giant Tesla will cut 10% of its paid jobs over the next three months, CEO Elon Musk said on Tuesday. Meanwhile, China’s electric car rival Li Auto has unveiled a new hybrid sports utility vehicle, the L9. Xpeng (XPEV) signaled a sharp resumption of supplies in June, as the recent end of Covid’s blockade in China and new subsidies for electric vehicles are good news for Xpeng, as well as for Li Auto, Nio (NIO) and Tesla.
Shares of Tesla rose shortly after the opening, after almost hitting a low since late May last week. Shares of Li Auto, Xpeng and Nio focused on solid profits, continuing a strong rebound. China’s EV and battery giant BYD (BYDDF), which achieved record car sales in April and May despite restrictions from China’s Covid, are still out of trade. But BYD shares have a new buying point just below record highs.
Kellogg split into three companies
Kellogg said early Tuesday that it would split into three independent companies focused on global snacks, American cereals and plant-based products.
Shares of Kellogg jumped 3% to 69.52, around its 50-day line, after briefly jumping above that key level and breaking a downtrend. Kellogg shares have a buying point of 75.76 in a flat base, which forms just above the double-bottom base.
Snack giant Mondelez (MDLZ) will buy energy bar specialist Clif Bar for $ 2.9 billion. MDLZ shares were equal.
Sweets and snacks are boosted by economic and social trends
Dow Jones today
The Dow Jones jumped 1.8%. The S&P 500 jumped 2.5% and the Nasdaq 3%.
The Dow Jones industrial average sank 4.8 percent in stock trading last week. The S&P 500 fell 5.8%. The Nasdaq index fell 4.8%.
The yield on 10-year government bonds increased by 5 basis points to 3.29%. The reference yield rose 8 basis points to 3.24% last week, but withdrew from an 11-year high of 3.48%.
Crude oil prices rose 2%, raising intermediate futures for crude oil in West Texas above $ 110 a barrel. WTI fell more than 9% last week to $ 109.56 a barrel, leading to a drop in oil stocks.
Bitcoin moved above $ 21,000 after falling to an 18-month low of $ 17,601.58 on Saturday.
Lenar’s profits
Prior to the opening, Lenar reported better-than-expected earnings and revenue in the second quarter. Earnings per share jumped 59% and earnings rose 30%. This is happening because rising mortgage rates seem to be freezing the demand for housing. Shares of Lennar rose 5%.
At 10 a.m. ET, the National Association of Realtors reported that sales of existing homes fell 3.4 percent in May to an annual rate of 5.41 million, but that’s better than expected. Later this week, KB Home (KBH) will report quarterly results, with the Ministry of Commerce publishing data on new home sales in May on Friday.
JetBlue Ups Spirit Airlines again
JetBlue (JBLU) again raised its offer for Spirit Airlines (SAVE) to $ 33.50 per share, compared to $ 31.50 per share. The Spirit Air board remained supportive of a much lower bid than Frontier Air (ULCC), saying regulators were likely to block the JetBlue-Spirit deal. Shareholders will vote on the Frontier-Spirit agreement on June 30.
Shares of JBLU rose 1%. Shares of SAVE jumped 8% to almost 23. Frontier Air rose 3%.
Diamondback dividend share increase
Diamondback Energy raised its quarterly dividend by 7% to 75 cents a share starting in the second quarter. The shale operator also approved the return of at least 75% of the shareholders’ free cash flow, starting in the third quarter, compared to its previous pledge of at least 50% of the free cash flow. FANG shares rose 7%.
Join the IBD experts as they analyze the actions that can be taken in the stock market rally on IBD Live
Job cuts at Tesla
Elon Musk said in the Qatari capital Doha on Tuesday that Tesla would cut 10% of its staff in three months, predicting a recent recession as more likely than not. But hourly production workers need to increase, he said.
Job cuts have been under way for the past week. Two former Tesla employees fired this month sued the U.S. electric car giant on Sunday, saying they had not received 60 days’ notice under federal mass layoff rules.
Musk said supply chain problems were Tesla’s biggest concern. Although supply problems may have limited Tesla’s production growth over the past year, they have had a devastating impact on the automotive industry’s overall production. Ending the shortage of chips could cause a large increase in production in the industry, especially electric vehicles, which puts pressure on prices for Tesla and other carmakers.
Tesla shares jumped 9%. Shares of TSLA fell 6.7% last week to 650.28, almost hitting a low since late May.
Five best Chinese stocks to watch now
Chinese electric car manufacturers
Li Auto has introduced the L9, a higher-end SUV hybrid than Li’s existing model, the Li One. Deliveries of the L9 will begin in August, with Li Auto recently predicting that deliveries of the L9 will reach 10,000 by September.
LI shares are on IBD Leaderboard.
Last week, Nio unveiled the ES7, another all-electric SUV and one of three new electric cars it launches this year.
Xpeng said it delivered a total of 200,000 EVs. That means it has delivered at least 8,359 vehicles in June so far.
Xpeng shipped 10,125 vehicles for May, recovering from Covid’s hit in April, but still well below recent record highs.
All three Chinese EV startups may be on track for monthly sales of 20,000 or more later this year, with no significant production or supply chain problems expected.
Meanwhile, electric car giant BYD, slightly affected by Covid’s blockade in China, may be on track for monthly sales of 200,000 or more by the end of the year. Sales of BYD EV and plug-in hybrids will easily surpass Tesla’s sales for electric cars only in the second quarter.
BYD was the IBD’s stock of the day on Friday
Tesla vs. BYD: Which EV giant is better to buy?
China EV shares
Shares of Li Auto jumped 9%. Shares rose for six consecutive weeks, vying on the right side for very deep consolidation. The official buying point is 37.55, but LI shares could use a long handle.
The relative strength of Li Auto shares has risen close to record levels since the end of 2020.
Shares of Nio jumped 9%. Shares of XPEV rose 5%. Both have also recovered strongly over the past few weeks, but remain well below their 200-day moving averages.
Shares of BYD rose 2% to 38.25. Shares fell 4.1 percent last week to 37.45, ending a five-week winning streak. According to MarketSmith’s analysis, this forms a weekly handle on its 48% deep base with 39.81 buying points. The shares were inactive early on Tuesday.
Market Analysis
Even if the major indexes open higher and close with strong profits, this will mark only the second day of experience in the stock market rally for the S&P 500 and Nasdaq and the first day for the Dow industrialists.
Investors will want to see more strength, including the next day, to confirm the new uptrend before stepping aside. Even then, there should be no crazy hassle to add exposure, especially when there aren’t many stocks in the buy position.
Read the Big Picture every day to stay in line with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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