Wall Street finished higher to kick off the second half of the year in thin liquidity one day before the US Independence Day. Tesla’s shares jumped 7% to the highest since September 2022 after the company reported greater-than-expected car delivery numbers in the second quarter. The Stella movement lifted other EV maker stocks, such as Rivian, NIO, and Lucid, up 17.5%, 3.4%, and 7.3%, respectively. However, the ISM manufacturing PMI contracted for the eighth consecutive month, the longest stretch since GFC in 2008, pointing to a darker economic outlook.
While the market move disconnected from the economic trend, the US bond yields continued to rise, with the yield on the 2-year Treasury up 6 basis points, inches away from the 5% key psychological level. And the inversion between the 2-year and 10-year is close to the deepest level since the recession in the early 1980s, which was also caused by Fed’s aggressive rate hikes fighting inflation.
Despite rising rates, the US dollar fell against most of the other G-10 currencies, suggesting markets are not convinced by the Fed higher for longer rate guidance. A notable trend is that the small-cap markets started to outperform after the US big banks passed the stress test last week, also indicating the Fed’s rate hike cycle may be near.
In Asia, broad markets were higher amid better-than-expected China’s Caixin manufacturing PMI. RBA’s rate decision will be on close watch today. Futures are pointing to a lower open across Asian equity markets. The ASX 200 futures were down 0.01%, the Hang Seng Index futures fell 0.32%, and the Nikkei 225 slid 0.18%.
- 9 out of 11 sectors in the S&P 500 finished higher, with Consumer Discretionary leading gains, up 1.07%, due to a surge in Tesla shares, while Technology ended in the red, down 0.31% as the rally in tech lost steam. Healthcare was the biggest laggard, down 0.82%.
- Tesla’s shares surged 6.9% amid a record second-quarter delivery number of 466, 140, beating market expectations of 445,925. Sales were mostly propelled by discounts and the US tax credit in the first half of the year. The delivery number indicates an 83% increase year on year.
- The Chinese EV maker, Xpeng’s shares soared more than 10% on Hong Kong Stock Exchange, and 2.3% in the US markets following the second-quarter car delivery number. The company delivered 23,205 cars, or a 27% growth from the prior quarter, topping the EV maker’s own forecast of between 21,000 and 22,000 units.
- Crude oil prices fell ahead of the OPEC+ meeting amid US’s depressing manufacturing PMI data, though more output cuts could be on the table if the price slump continues. The cartel’s leader, Saudi Arabic indicated its one-million-barrel-per-day cut could be extended to August and more if necessary.
- Bitcoin tests the pivotal resistance of just above 31,000. The largest market cap cryptocurrency may head off 33,000 if this level can be broken through.
ASX and NZX announcements/news:
- No major announcement.
- RBA Cash Rate Decision.