Tesla electrified by tie-ups with major automakers

Stocks rallied on investor optimism that the brunt of the Fed hiking is behind us. Weekly initial unemployment claims jumped beyond economists’ expectations, further fueling the hiking pause narrative.

That’s bull! Yes, folks, it’s official the S&P500 has re-entered a bull market after slumbering with the bears since last June… right around this time… that’s 248 trading days, I reckon. A bull market is a technical definition given to an index when it manages to close at least +20% higher than a recent low. You can see it clearly on the following chart of the S&P500.

That is great news after a year of turmoil and painful drops. The Fed’s FOMC members buzzed around the markets like angry hornets and relentlessly hiked interest rates making it difficult for even the best stocks… or bonds to remain buoyant. But that is behind us now… at least the market thinks so. The market also thinks that AI is the next coming of the Internet, like Web 3.0… or is it 4.0? I lost track. As I wrote yesterday, this recent rally in the indexes has been very narrow in breadth, being fueled by just a handful of stocks. That is why you most likely don’t feel like we are in a bull market despite its clear demarcation on the graph above ^. Unless you own a lot of those handful of stocks you are probably having FOMO, or Fear Of Missing Out. What do people typically do when they hear that we have just entered a bull market and their portfolio is lagging the S&P? They jump in indiscriminately! I hate to be the guy to remind you that, while yes, AI is a big deal and some companies will certainly be long-term winners in the new and exciting field, inflation is still sticky, and the possibility of a recession still looms large. Market-based odds are in favor of a Fed pause next week, but until the Fed officially announces a pivot or permanent hiking moratorium, anything goes. I am going to leave you with a chart and a few words of sage advice. First the advice. Be thoughtful in your investing, diligence is more important than ever, and continue to think long-term. This economics chapter is far from over. Now the chart from my friends at Bloomberg. You will see that most bull markets since 1981 were extinguished in recessions, so with a potential for a recession still on the table, it would be wise to tread lightly.

WHAT’S SHAKIN’ THIS MORNIN’

Tesla Inc (TSLA) shares are higher by +6.30% in the premarket after General Motors announced that it would adapt its EVs to Tesla’s 12000 Superchargers. That is good news for GM EV buyers who will have access to the sprawling charger network and great news for Tesla which stands to reap the charging revenues from GM EV owners. Ford announced a similar alliance previously. Potential average analyst target upside: -17.1%. WHY IS THIS NUMBER NEGATIVE? Because the stock is currently trading higher than median average price targets of analysts. While that can be interpreted as the stock being overpriced, it does not mean that the stock will not continue to climb as analysts, like Wells Fargo, potentially raise price targets.

Adobe Inc (ADBE) shares are higher by +3.55% after it announced the launch of new generative AI features which will focus on copyright protection. The “A” and the “I” in the announcement certainly helped the premarket rally but it was also pushed higher by an upgrade to OVERWEIGHT by Wells Fargo. Potential average analyst target upside: -1.9%%. WHY IS THIS NUMBER NEGATIVE? Because the stock is currently trading higher than median average price targets of analysts. While that can be interpreted as the stock being overpriced, it does not mean that the stock will not continue to climb as analysts, like Wells Fargo, potentially raise price targets.

YESTERDAY’S MARKETS

Stocks rallied yesterday on optimism that the Fed will pause its hiking next week. The S&P500 rose by +0.62% into bull market territory, the Dow Jones Industrial Average climbed by +0.50%, the Nasdaq Composite Index jumped by +1.02%, and the Russell 2000 declined by -0.41%. Bonds gained and 10-year Treasury Note yields slipped by -7 basis points to 3.71%. Cryptos broke even and Bitcoin added +1.07%. The S&P500 ESG Index gained +0.70%.

NEXT UP

• No numbers today, but next week will feature Consumer Price Index / CPI, Producer Price Index / PPI, Retail Sales, Industrial Production, University of Michigan Sentiment, and regional Fed Reports. The FOMC will meet next week and announce its policy decisions on Wednesday. Check back on Monday for times and details.