Stocks on Wall Street climbed on Monday, kicking off a big week filled with a Federal Reserve rate decision, the monthly jobs report, and earnings from more Magnificent Seven tech heavyweights.
The S&P 500 (^GSPC) rose 0.3%, and the tech-heavy Nasdaq Composite (^IXIC) gained roughly 0.4% as Tesla (TSLA) shares surged amid upbeat China news. The Dow Jones Industrial Average (^DJI), which has fewer tech components, was up about 0.1%.
Stocks are eyeing a return to Friday’s sharp gains, which came as strong earnings from Alphabet (GOOG, GOOGL) and Microsoft (MSFT) boosted optimism for a lasting Big Tech-driven rally. Quarterly reports from Apple (AAPL) and Amazon (AMZN) due this week will put those hopes to the test again, with AI costs and prospects under the microscope.
Among techs, Tesla CEO Elon Musk’s surprise visit to China on Sunday brought immediate benefits for the EV maker, which cleared two big barriers to rolling out its Full Self Driving software in the country. Tesla shares rose more than 11% after it reached an FSD-linked deal with Baidu (BIDU) seen as potentially helping stem its sales slump in a huge market. The Chinese internet giant’s US-listed stock was up almost 7%.
At the same time, investors are counting down to the Federal Reserve’s policy decision at the end of its two-day meeting on Wednesday. Confusion reigns over whether the cooling in inflation has stalled and what any persistence in price pressures implies for interest-rate cuts.
While the central bank is expected to hold rates steady at a 23-year high, debate is raging over the timing and even likelihood of a cut in 2024. In focus is whether Fed policymakers will backtrack on their earlier projection for a significant easing in borrowing costs. Traders have already scaled back their bets, and the April jobs report that rounds off the week could move the needle again.
In big individual movers on Monday, Philips (PHG) US-listed shares rocketed up over 36% after the medical device maker said it had agreed a $1.1 billion deal to settle claims linked to a breathing device recall. The settlement was significantly lower than expected.
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Important point on Tesla from EvercoreISI
The analyst note of the morning — at least for me — is the 61 page deep dive on Tesla (TSLA) from Evercore ISI analyst Chris McNally.
McNally cut his price target to $145 from $155 (stock is indicating up 7% pre-market on Musk’s AI win in China over the weekend, which is also lifting shares of new partner Baidu), citing a host of concerns — notably the inability of Tesla to hit its sales for 2024.
In the report, McNally makes a great point on Tesla being unable to expand its market because of a lack of models. He uses BMW as an example of a car company selling multiple models to attract numerous types of consumers.
Tesla could learn a few things from BMW. (EvercoreISI)
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