Wednesday, April 8, 2020

Tesla Zooms Ahead for Third Straight Day

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What’s happening: Tesla shares gained on Tuesday, following reports of the company’s plan to offer a new Model 3 sedan in China.

What happened: Auto stocks delivered a strong rebound, with upbeat market sentiment on Tuesday. Market gains didn’t last long, however, and the major indices closed slightly lower.

On the other hand, there was no stopping Tesla. The electric vehicle major seems determined to not let the coronavirus pandemic put speedbumps in its path of innovation and sales initiatives.

Why it matters: Tesla is reportedly planning to begin offering a made-in-China Model 3 version for its customers in the country. This new longer-range version of the Model 3 is expected to be launched as early as this week.

With Tesla closing its facilities at Fremont and New York, due to shelter-in-place orders by local authorities, the automaker’s Chinese factory is currently the only facility manufacturing vehicles

Despite the hiccups, Tesla has forged ahead. The company reported strong figures for the first quarter, with its 88,400 deliveries handsomely beating expectations.

Tesla’s CEO Elon Musk has also announced plans to reopening its New York giga-factory to make ventilators for critical coronavirus patients who need breathing support. The company will produce ventilators by repurposing its supply of auto-parts, to help meet the country’s shortage of the lifesaving machine.

The Palo Alto, California-based company also announced plans to raise the price of its “Full Self-Driving” add-on feature from July 1. The upcoming add-on feature, which currently costs $7,000, is also able to respond to traffic lights.

To cut costs during the COVID-19 pandemic, the company is furloughing all non-essential employees in the US who can’t work from home or haven’t been assigned any critical work onsite. The furlough will take effect from Monday and is expected to last at least till May 4, when the company expects to resume production. Tesla is also cutting the pay of all its employees by up to 30%, depending on their position in the company. The pay cuts are projected to last until the end of June.

What to watch: Sentiment has been positive for Tesla and investors expect the stock’s positive momentum to continue in today’s session. Markets are hoping that the company’s China factory can help offset the impact of the temporary halt in US production

The Markets Today

     

US stocks will be in focus today, with markets closing slightly lower, giving up Monday’s strong gains.

Context: After delivering a spike on Monday, US stocks were poised to finish Tuesday’s session on a higher note, with investors focusing on positive news from the coronavirus outbreak. This was till the final half-an-hour of trade, when a sharp pullback wiped off all intraday gains.

Details: The Dow had spiked more than 930 points at one point on Tuesday as market sentiment was lifted by news of new coronavirus cases declining from their latest peak. New York Governor Andrew Cuomo said on Tuesday that despite the state recording the highest single-day rise in deaths, fewer patients were being hospitalised now. Europe’s hardest-hit nations, Italy and Spain, also reported a decline in new cases.

Stocks gave up all gains during the last hour of trading yesterday, partly due to profit-taking and partly on news of coronavirus-related shutdowns having an impact on the economy even beyond the second quarter. The major US indices have surged around 20% from their low-level of March 23. However, stocks are still trading in the bear territory, reflected in the 20% decline in the S&P 500 from its record high.

The Dow fell 0.12% to close at 22,653.86 on Tuesday. The S&P 500 was down by 0.16% to 2,659.41, while the Nasdaq 100 slipped 0.33% to end at 7,887.26.

Shares of Greenbrier Companies jumped around 17% on Tuesday after the company reported stronger-than-expected quarterly earnings. Cruise stocks also rose yesterday, with Carnival and Royal Caribbean Cruises shares jumping more than 11% each.

Investors continue to focus on the coronavirus numbers. COVID-19 cases in the US have exceeded 399,900 with around 12,900 deaths. Global confirmed cases are close to the 1.5 million mark.

What to watch: US markets could remain highly volatile during today’s session. US stock futures are trading between gains and losses in the European session. Investors are also awaiting the release of minutes of the Federal Open Market Committee meeting.

Other Markets: European markets were trading lower at 9:00am GMT, with the FTSE 100, German 30 and French 40 down by 1.1%, 0.6% and 1.4%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

News shaping
the markets today

     

What else to watch today

     

Mexico’s industrial production and monetary policy meeting minutes, Russia’s total vehicle sales, Canada’s housing starts and building permits as well as the US MBA mortgage applications.