Stocks jump; Tesla Cuts Jobs, Kellogg Jumps on Breakup

The Dow rose sharply in morning trade, along with the S&P 500 and Nasdaq composite, signaling a market rebound after major indexes fell last week to their worst levels since the end of 2020. Treasury yields and crude oil futures rose, while Bitcoin rebounded from a sharp weekend dive.


You’re here (TSLA), Li-Auto (LI), home builder Lennar (LEN), Diamondback Energy (FANG) and Kellogg (K) were among those making the news ahead of the opening.

Electric vehicle giant Tesla will cut 10% of its salaried jobs over the next three months, chief executive Elon Musk said on Tuesday. Meanwhile, Chinese EV rival Li Auto is set to unveil a new hybrid sport utility vehicle, the L9, on Tuesday. Xpeng (XPEV) reported a strong pickup in deliveries in June as the recent end of Covid lockdowns in China and new subsidies for electric vehicles are good news for Xpeng as well as Li Auto, Nio (NIO) and Tesla.

Tesla stock jumped shortly after the open, after nearly breaking its late-May lows last week. Shares of Li Auto, Xpeng and Nio were heading for solid gains, continuing a strong rebound. The Chinese electric vehicle and battery giant BYD (BYDDF), which hit record vehicle sales in April and May despite China Covid restrictions, is not yet trading. But BYD stock has a new buy point just below record highs in a deep base.

Kellogg splits into three companies

Kellogg announced Tuesday morning that it would split into three independent companies, focusing on global snacks, American cereals and plant-based products.

Kellogg stock jumped 2% to 68.88, below the 50-day line after briefly bouncing above the 50-day moving average and breaking a descending trendline. Kellogg stock has a buy point of 75.76 in a flat base that has formed just above a double bottom base.

Snack giant Mondelez (MDLZ) will buy energy bar specialist Clif Bar for $2.9 billion. MDLZ stock fell slightly.

Sweets and snacks are driven by economic and societal trends

Dow Jones today

The Dow Jones jumped 1.7%. The S&P 500 jumped 2.4% and the Nasdaq jumped 3%.

The Dow Jones Industrial Average fell 4.8% in stock trading last week. The S&P 500 index fell 5.8%. The Nasdaq composite fell 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 fell from an 11-year high of 3.48%.

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

Bitcoin rose 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 revenue in the second quarter. Earnings per share jumped 59% with revenue up 30%. This comes as soaring mortgage rates appear to be dampening 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, Knowledge base home (KBH) will release its quarterly results, with the Commerce Department releasing May new home sales data on Friday.

JetBlue improves Spirit Airlines again

JetBlue (JBLU) raised its bid for Spirit Airlines (SAVE) again, at $33.50 per share, down from $31.50 per share. Spirit Air’s board remained steadfast in its support for a much weaker supply of air border (ULCC), saying regulators would likely block a JetBlue-Spirit deal. Shareholders will vote on the Frontier-Spirit deal on June 30.

JBLU stock rose slightly. SAVE stock jumped nearly 8% to nearly 23. Frontier Air rose 3%.

Dividend increase on Diamondback shares

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

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Job cuts at Tesla

Elon Musk said in Doha, the capital of Qatar, on Tuesday that Tesla would cut 10% of its salaried workforce over three months, forecasting a near-term recession as more likely than not. But hourly production workers are expected to increase, he said.

Job cuts have already been underway over the past week. Two former Tesla employees fired this month sued the U.S. electric vehicle giant on Sunday, claiming they had not received 60 days’ notice under federal rules for mass layoffs.

Musk said supply chain issues are Tesla’s biggest concern. While supply issues have likely limited Tesla’s production growth somewhat over the past year, they’ve had a devastating impact on overall auto industry output. Ending chip shortages could spur a surge in industry output, especially in electric vehicles, putting pressure on prices at Tesla and other automakers.

Tesla stock jumped 8%. TSLA stock slipped 6.7% last week to 650.28, nearly undercutting its late May lows.

Five best Chinese stocks to watch now

Electric vehicle manufacturers in China

Li Auto will unveil the L9 later today. It promises to be a more premium hybrid SUV than Li’s existing model, the Li One. L9 deliveries will begin in August, with Li Auto predicting L9 deliveries will reach 10,000 by September.

The LI share is on the IBD ranking.

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

Xpeng said it delivered a total of 200,000 electric vehicles. That means it has delivered at least 8,359 vehicles in June so far.

Xpeng delivered 10,125 vehicles for the whole month of May, recovering from a Covid-hit April but still well below recent record highs.

The 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, electric vehicle giant BYD, little affected by Covid lockdowns in China, could be on track for monthly sales of 200,000 or more by the end of the year. Sales of BYD EVs and plug-in hybrids will easily overtake Tesla’s EV-only sales in the second quarter.

BYD was Friday’s IBD stock of the day

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Electric vehicle stocks in China

Li Auto’s stock jumped 9%. Stocks have surged for six consecutive weeks, rebounding on the bright side of a very deep consolidation. The official buy point is 37.55, but LI stock could use a long grip.

The relative strength line of Li Auto stock has climbed near its all-time highs at the end of 2020.

Nio stock jumped 9%. XPEV stock gained 6%. Both have also rebounded strongly in recent weeks, but remain well below their 200-day moving averages.

BYD stock rose nearly 3% to 38.46. Shares fell 4.1% last week to 37.45, ending a five-week winning streak. This forged a weekly handle on its 48% deep basis with a buy point of 39.81, according to MarketSmith analysis. Stocks were inactive early Tuesday.

Market analysis

Even if the major indexes open higher and close with strong gains, it would only mark the second day of an attempted stock market rally for the S&P 500 and Nasdaq, and the first day for the Dow Jones Industrialists.

Investors will want to see more strength, including a follow-up day to confirm the new uptrend, before exiting the sidelines. Even then, there shouldn’t be a mad rush to add exposure, especially with few stocks in a long position.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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