stocks jump; Tesla cuts jobs, Kellogg comes after separation

The Dow Jones, along with the S&P 500 and the Nasdaq Composite, rose sharply at the open, signaling a market recovery after major indices fell to their lowest levels since late 2020 last week. Treasury bond and crude oil futures yields rose as bitcoin tumbled after a strong weekend.


Tesla (TSLA), Li car (LI), house builder lennar (LEN), Diamondback Energy (CATCH) and Kellogg (K) were among those making headlines ahead of the opening.

Electric vehicle giant Tesla will cut 10% of its workforce over the next three months, CEO Elon Musk said on Tuesday. Meanwhile, Chinese EV rival Li Auto will unveil a new sport-utility hybrid vehicle, the L9, on Tuesday. Xpeng (XPEV) signaled a strong rebound in deliveries in June as the recent end of China’s Covid-19 lockdown and new subsidies for electric vehicles are good news for Xpeng and Li Auto, no (NIO) and Tesla.

Tesla stock rose solidly shortly after the open, having almost undercut its late-May lows last week. Stocks of Li Auto, Xpeng and Nio headed for solid gains and continued a strong recovery. Electric and battery giant from China BYD (BYDDF), which posted record vehicle sales in April and May despite restrictions in China, is not trading yet. But BYD stock has a new handle buy point just below record highs in deep base.

Kellogg split into three companies

Kellogg said early Tuesday that it will be split into three independent companies that will focus on global snack foods, U.S. cereals and plant-based products.

Kellogg’s stock rose more than 4% to 70.52, rallied above the 50-day moving average and broke a downward sloping trendline. This offers an early start. Kellogg stock has a buy point of 75.76 in a flat base formed just above a double bottomed base.

snack giant Mondelez (MDLZ) buys energy bar specialist Clif Bar for $2.9 billion. MDLZ stock gained higher.

Sweets and snacks are being boosted by economic and societal trends

Dow Jones today

The Dow Jones rose 1.6% versus fair value. The S&P 500 rose 2.15% and the Nasdaq rose 2.4%.

The Dow Jones Industrial Average fell 4.8% in trading last week. The S&P 500 index fell 5.8%. The Nasdaq Composite fell 4.8%.

The 10-year government bond yield rose 7 basis points to 3.31%. The benchmark yield rose 8 basis points to 3.24% last week but retreated from an 11-year high of 3.48%.

Crude oil prices rose 2%, taking West Texas Intermediate crude oil futures above $110 a barrel. WTI fell more than 9% last week to $109.56 a barrel, sending oil stocks plummeting.

Bitcoin surged above $21,000 after falling to an 18-month low of $17,601.58 on Saturday.

lennar earnings

Ahead of the opening, Lennar reported better-than-expected earnings and sales in the second quarter. Earnings per share rose 59% and revenue rose 30%. That’s because rising mortgage rates seem to dampen demand for housing. Lennar stock rose slightly.

At 10 a.m. ET, the National Association of Realtors will release May Existing Home Sales data. later this week, KB Home (KBH) will report quarterly results, with the Department of Commerce to release May new home sales data on Friday.

JetBlue reinforces Spirit Airlines again

JetBlue (JBLU) increased its bid for Spirit Airlines (SAVE) once again at $33.50 per share versus $31.50 per share. Spirit Air’s board of directors maintains its support for a significantly lower bid border air (ULCC) and said regulators would likely block a JetBlue Spirit deal. Shareholders will vote on the Frontier Spirit agreement on June 30.

JBLU stock fell 1%. SAVE stock rose 5% to over $22 per share. Frontier Air rose.

Diamondback Stock Dividend Hike

Diamondback Energy increased its quarterly dividend by 7% from the second quarter to 75 cents per share. The shale operator also approved returning at least 75% of free cash flow to shareholders beginning in the third quarter, up from its previous commitment of at least 50% of free cash flow. FANG stock rose 5.5%.

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Tesla job cuts

Elon Musk said Tuesday in Doha, the capital of Qatar, that Tesla will cut 10% of its salaried workforce over a three-month period, forecasting a near-term recession more likely than unlikely. But hourly production workers should increase, he said.

Jobs have already been cut in the past week. Two former Tesla employees who were laid off this month sued the US EV giant on Sunday, saying they were not given a 60-day notice period under federal rules on mass layoffs.

Musk said supply chain issues are Tesla’s top concern. While supply issues likely limited Tesla’s production growth over the past year, they’ve had a devastating impact on the auto industry’s overall output. An end to the chip shortage could lead to a sharp increase in industrial production, especially electric vehicles, and put downward pressure on prices for Tesla and other automakers.

Tesla stock is up 7%. TSLA shares slipped 6.7% last week to 650.28, nearly undercutting their late May lows.

The five best Chinese stocks to watch right now

Electric vehicle manufacturers in China

Li Auto will unveil the L9 later today. It promises to be a higher-end SUV hybrid than Li’s existing model, the Li One. L9 shipments begin in August, with Li Auto predicting L9 shipments will hit 10,000 by September.

Last week, Nio unveiled the ES7, another all-electric SUV and one of three new electric vehicles launching this year.

Xpeng said it had delivered a total of 200,000 electric vehicles. This means that at least 8,359 vehicles have been delivered in June so far.

Xpeng delivered 10,125 vehicles throughout May, recovering from a Covid-hit April but still well below recent records.

All three Chinese EV startups could be on track for monthly sales of 20,000 or more later this year, assuming there are no significant production or supply chain issues.

Meanwhile, EV giant BYD, which has been little affected by China’s Covid lockdowns, could see monthly sales of 200,000 or more by the end of the year. Sales of BYD electric vehicles and plug-in hybrids will far outpace Tesla’s pure electric vehicle sales in the second quarter.

Tesla vs BYD: Which EV Giant is the Better Buy?

China EV shares

Li Auto’s stock rose 6%. Stocks are up for six straight weeks, entering the right side of a very deep consolidation. The official buy point is 37.55 but LI stock could use a long grip.

Li-Auto stock’s relative strength line has surged near its late-2020 record highs.

Nio stock plummeted 5.5%. XPEV stock gained 5%. Both have also rallied strongly over the past few weeks, but remain well below their 200-day moving averages.

BYD shares gained 2% to 38.20. Shares fell 4.1% to 37.45 last week, ending a five-week winning streak. That has forged a weekly handle on its 48% low basis with a buy point of 39.81, according to MarketSmith analysis. Shares were inactive early Tuesday.

market analysis

Even if the major indices open higher and close with strong gains, this would only be the second day of a stock market rally attempt for the S&P 500 and Nasdaq and the first day for the Dow Industrial.

Investors will want to see more strength, including a follow-through day to confirm the new uptrend, before moving off the sidelines. Even then, there shouldn’t be a frenzy to increase exposure, especially when there aren’t many stocks in long positions.

Read The Big Picture every day to keep up to date 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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