The stock market rally retreated to start July, with Treasury yields surging on strong economic data. The S&P 500 and Nasdaq fell modestly, while the Dow Jones and Russell 2000 suffered more-serious losses. An expanding U.S.-China chip feud hit many semiconductor stocks. Meta Platforms rose as its new Threads app racked up huge sign-ups to kick off a battle vs. Twitter. Tesla and EV plays such as Rivian and BYD rallied on strong deliveries, while General Motors and other traditional automakers saw solid Q2 sales.
Market Rally Pulls Back
The stock market rally saw losses in the latest week, with the Nasdaq and S&P 500 down modestly and the Dow Jones and Russell 2000 losing a little more. Treasury yields jumped above 4% on strong economic data, though Friday's jobs report was mixed. Tesla rallied on strong Q2 deliveries, along with other EV makers and traditional auto plays.
Jobs Report Mixed
The U.S. economy added 209,000 payroll jobs in June, roughly what was expected before Thursday's ADP blowout. However, just 149,000 of those jobs came from the private sector, 50,000 less than expected and the lowest number since December 2020. Plus, the Labor Department revisions cut a combined 110,000 jobs from the reported gains in April and May. Meanwhile, temporary help services, which economists look to as a potential leading indicator, shed 12,600 jobs. To be sure, there were some offsetting strong points. Hours worked bounced back, suggesting pronounced weakness in prior months may have been a data quirk. Average hourly wages grew 0.4% on the month. Coming along with upward revisions to wage gains in prior months, that left 12-month wage growth at a steady 4.4%, far above the Fed's comfort level. Lastly, the jobless rate ticked back down to 3.6%, with no obvious upward trend. While the June jobs data is clearly strong enough to merit a quarter-point rate hike on July 26, especially with other economic reports generally looking strong, odds dimmed somewhat for additional quarter-point hikes this fall.
Meta's Threads Takes Off
Social media giant Meta Platforms debuted a microblogging service to compete with Twitter. The new service, called Threads, recorded 30 million sign-ups in its first 16 hours of availability. Instagram users can use their existing credentials to log into the Threads app, making for an easy onboarding process. Meta hopes to capitalize on user discontent with Twitter under Elon Musk. Since Musk bought Twitter last October for $44 billion, he has instituted a number of controversial changes. Most recently he capped the number of tweets users could view in a day. Wall Street analysts see the near-term opportunity for Threads as immaterial for Meta, but that would change if it can reach CEO Mark Zuckerberg's goal of 1 billion users.
GM Leads U.S. Auto Sales
General Motors, Toyota and Ford Motor grew new vehicle sales in the U.S. more than expected during the second quarter, as supply issues continued to improve. The annualized pace of June sales reached 15.8 million units, up nearly 5% from May. GM led Q2 sales by a margin. News on the all-important shift to electric vehicles was more mixed. Both GM and Ford reported EV momentum, but the numbers told a somewhat different story. In Q2, GM sold 15,652 electric vehicles, but mostly older Bolts. Quarterly deliveries of Lyriq and Hummer EVs, which use Ultium batteries, did top 1,000 for the first time. Ford sold 14,843 electric vehicles, not including hybrids, but sales of its newer Mach-E fell 21% amid a plant retooling that crimped the number available for sale.
Tesla, EV Rivals Jump On Deliveries
Tesla stock jumped to its best level in nearly 10 months after reporting a record 466,140 EV deliveries in Q2, well above estimates. Rivian soared on strong production and deliveries, as well as news that Amazon will start using its vans in Europe. BYD sold a record 253,045 EVs in June and 703,561 in Q2, with the EV and battery giant announcing plans to build three plants in Brazil and formally launching its Denza N7 crossover. Among China EV startups, Li Auto reported booming sales. Nio and XPeng deliveries grew in June vs. May, with Nio benefiting from new and revamped models and optimism growing about XPeng's G6 crossover, which starts deliveries this month.
Tesla and China's top EV makers including BYD signed a deal pledging to maintain fair competition and avoid "abnormal pricing," signaling a possible end to a damaging price war in the world's biggest EV market
U.S.-China Chip Feud Expands
The Biden administration plans to restrict Chinese companies' access to U.S. cloud-computing services using advanced AI chips, The Wall Street Journal reported Tuesday, citing sources. The WSJ report comes a week after reports that the U.S. will expand AI chip export restrictions to China, affecting Nvidia and others. Meanwhile, China restricted two key metals used in advanced chip manufacturing. That hit Qorvo and some other chip plays, while lifting shares of MP Materials.
News In Brief
AstraZeneca and Daiichi Sankyo stocks plummeted Monday after they jointly announced mixed results for their lung cancer treatment. The treatment led to an improvement in progression-free survival — meaning patients who received the drug lived longer before their cancer worsened than patients who received a standard drug. But the results weren't yet clear for overall survival. Further, some patients died while receiving the experimental drug.
The FDA fully approved Alzheimer's treatment, Leqembi. In response, the Centers for Medicare and Medicaid Services said it would reimburse the cost of the Biogen drug for patients who meet certain criteria.
