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Tesla Inc. stock edged higher Thursday, but Wedbush analyst Dan Ives minced no words to decry what he called an ongoing Twitter Inc. “funding nightmare,” accusing Chief Executive Elon Musk to treat the electric-vehicle maker as an ATM machine.
“The nightmare of Musk owning Twitter has been an episode out of the Twilight Zone that never ends and keeps getting worse,” said Ives, a noted Tesla bull, in a note Thursday.
Musk…
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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/tesla-rivian-lucid-stock-ev-demand-51671055341
Eventually supply and demand realities catch up with everyone—even
Tesla
Morgan Stanley analyst Adam Jonas looked into 2023 and sees some concerning signs for electric-vehicle makers.
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Tesla Inc. Chief Executive Elon Musk just sold nearly $3.6 billion more of the company’s stock, according to a filing with the Securities and Exchange Commission released late Wednesday.
Musk sold just under 22 million shares worth $3.58 billion in aggregate from Dec. 12 to Dec. 14, the latest filing shows. Tesla shares TSLA fell in all three of those trading sessions, dropping 12.4% in total over the three-day stretch to finish Wednesday at $156.80.
This…
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CNN
—
The US Department of Energy’s Loan Programs Office will announce Monday that it is issuing a $2.5 billion loan to help start three lithium battery manufacturing hubs in Ohio, Tennessee and Michigan.
The DOE loan programs office will loan the money to Ultium Cells LLC, a joint venture of General Motors and South Korean battery manufacturer LG Energy Solutions making batteries to power electric vehicles. General Motors has pledged to go all-electric by 2035, phasing out conventional gas and diesel-powered engines.
In a statement, US Energy Secretary Jennifer Granholm said the DOE loan would “jumpstart the domestic battery cell production needed to reduce our reliance on other countries to meet increased demand.”
“DOE is flooring the accelerator to build the electric vehicle supply chain here at home – and that starts with domestic battery manufacturing led by American workers and the unions that support them,” Granholm said.
Granholm is traveling to Michigan on Monday, where she’ll appear with Gov. Gretchen Whitmer and prominent lawmakers including Sens. Gary Peters and Debbie Stabenow.
In President Joe Biden’s first year in office, he set a target to have EVs make up half of all new vehicles sales in the US by 2030.
After the climate law Congress passed this summer, it’s yet another sign that auto companies are racing to start onshoring electric vehicle production. In order to take advantage of a federal EV tax subsidy in the Inflation Reduction Act, electric vehicles and much of their battery components be sourced, processed and assembled in North America.
LG Energy Solutions is also set to partner with Japanese automaker Honda on a $3.5 billion joint venture battery factory in southern Ohio.
In October, Biden introduced the American Battery Materials Initiative, which the White House has called “a new effort to mobilize the entire government and securing a reliable and sustainable supply of critical minerals used for power, electricity and electric vehicles.” At the same time, the Administration pledged $2.8 billion from the bipartisan infrastructure law passed last year to 20 manufacturing and processing companies for projects in 12 states.
DOE estimates the three Ultium Cells facilities would create over 11,000 jobs. The Warren, Ohio, Ultium facility will be represented by the United Auto Workers, after the plant voted to unionize on Friday.
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Electric vehicle maker Rivian Automotive on Monday said it won’t go forward with a plan to make electric vans in Europe with Mercedes-Benz, just three months after agreeing to the pact.
“As we evaluate growth opportunities, we pursue the best risk-adjusted returns on our capital investments. At this point in time, we believe focusing on our consumer business, as well as our existing commercial business, represent the most attractive near-term opportunities to maximize value for Rivian,” said RJ Scaringe, CEO of Rivian.
Rivian
RIVN,
shares had jumped 11% when the Mercedes deal was first announced.
Rivian shares over this year have tumbled 74%.
Mercedes-Benz
MBG,
says it will continue to pursue the electrification of its vans. It said the ramp-up plan for its EV manufacturing site in Jawor, Poland is not affected.
“We will continue with full speed and determination to scale up electric vehicle production in our first dedicated electric van plant – designed for maximum flexibility and productivity. Exploring strategic opportunities with the team at Rivian in the future remains an option, as we share the same strategic ambition: accelerating the EV adoption with benchmark products for our customers,” said Mathias Geisen, head of Mercedes-Benz Vans.
Mercedes shares slipped 1%.
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New York
CNN Business
—
Ridehailing giant Uber is now offering Las Vegas riders the option on its app to hail a self-driving taxis developed by another company, according to a press release Wednesday. While the autonomous vehicles are currently only available for ride hailing in Las Vegas, there are plans to expand to Los Angeles “at a later date,” according to the release.
The robocars, made by driverless technology company Motional, are sent with two “vehicle operators” behind the wheel to monitor the technology and provide added support to riders. Uber said it plans on launching a fully driverless service with Motional in 2023.
Users requesting a ride will be offered an autonomous vehicle if one is available before the trip is confirmed. If a customer opts in, a self-driing Hyundai Ioniq 5 mid-sized hatchback, modified by Motional, will be sent to pick them up.
Motional has been offering robotaxi services in Las Vegas since 2018 through Uber rival Lyft, though rides before 2020 were offered under parent-company Aptiv.
Uber and Motional first announced their non-exclusive 10-year agreement in October, two years after the ride-hailing company sold off its own self-driving unit, Advanced Technologies Group, to San Francisco-based startup Aurora. The sale came after a a five-year run of developing self-driving vehicles that was marred by litigation and a fatal crash.
Waymo, Google’s self-driving company, sued Uber in February 2017 alleging trade secret and intellectual property theft, with Waymo eventually receiving about $245 million in Uber stock as part of settlement and Uber agreeing not to use proprietary information from Waymo. The ridehailing company suffered another blow to its self-driving program a month later when one of its test vehicles in Tempe, Arizona, struck and killed a pedestrian. An Uber test driver behind the wheel, who was supposed to monitor the vehicle and intervene if needed, was watching a television show on her phone.
Through its partnership with Motional, Uber is attempting to shift its business model away from being solely reliant on its vast fleet of independently contracted drivers, a business model that has posed legal issues for the company in recent years. The Biden administration is currently proposing a new labor rule that could classify millions of these gig workers as employees — a move that would challenge the low-cost labor models behind Silicon Valley heavyweights like Uber.
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Headwinds for
Tesla
—and its stock—appear to be growing. The latest may be among the biggest concerns of all for the company.
Bernstein analyst Toni Sacconaghi wrote Tuesday that
Tesla
(ticker: TSLA) “increasingly appears to have a demand issue.”
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Monday served as another smackdown for investors who are banking on a Goldilocks economy and a less aggressive Fed.
Some are now not ruling out a Grinch-like turn from the central bank — a 0.75% hike next week instead of the 0.50% markets have been pinning hopes on — following strong data on services, jobs and wages.
It all goes along with the theme of 2022 — expect the unexpected. The relief of moving out of a crippling pandemic was quickly replaced by the biggest war on Europe’s shores in decades, that sparked worldwide inflation surges.
What comes next is anyone’s guess and that brings us to our call of the day via Saxo Bank’s annual “Outrageous Predictions” for 2023.
While some of these will sound crazy, note that the Saxo team, led by Chief Investment Officer Steen Jakobsen, have nailed a few wild prophecies in the past decade. Those include: a Brexit prediction in 2015, a 25% drop for the S&P 500 from its 2007 high in 2008, a tripling of Bitcoin’s value forecast in 2017.
The focus for 2023’s prediction is that “a return to the disinflationary prepandemic dynamic is impossible because we have entered into a global war economy, with every major power across the world now scrambling to shore up their national security on all fronts; whether in an actual military sense, or due to profound supply-chain, energy and even financial insecurities that have been laid bare by the pandemic experience and Russia’s invasion of Ukraine,” says Jakobsen.
As for those predictions, here we go:
The rest of their predictions are here, such as the formation of an EU Armed Forces in 2023 and an “UnBrexit” referendum.
Read: Why Monday’s stock-market rout should be a wake up call for investors
Stocks
DJIA,
SPX,
COMP,
are drifting into the red, with Treasury yields
TMUBMUSD10Y,
TMUBMUSD02Y,
steady, the dollar
DXY,
lower and oil
CL.1,
BRN00,
also down.
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
BioVie stock
BIVI,
is climbing after positive results from the clinical-stage biopharmaceutical company on a drug for Parkinson’s and Alzheimer’s.
NRG Energy
NRG,
agreed to buy Vivint Smart Home
VVNT,
in a $5.2 billion deal. Vivint shares are soaring.
MEI Pharma
MEIP,
shares are tumbing after drugmaker said it would stop developing cancer treatment zandelisib outside of Japan and announces job cuts. Herbalife shares
HLF,
are down 10% after an offering of convertible notes
Powell Industries
POWL,
stock is up 9% after the electrical equipment maker’s well-received results and new orders. Within software Sumo Logic
SUMO,
and GitLab shares
GTLB,
are surging on upbeat results and forecasts.
Layoffs extending beyond tech? PepsiCo
PEP,
is reportedly cutting hundreds of workers at its North American headquarters.
Home builder Toll Brothers
TOL,
will report results after the close.
The October trade deficit jumped 5.4% to $78,2 billion.
The U.S. and EU are reportedly considering fresh steel and aluminum tariffs on China to fight carbon emissions.
“Nothing to be glad about.” An empty, lonely and cold formerly occupied Ukraine city.
Morocco’s World Cup team leans on its secret weapon of parents in the stands.
Why human composting could be the next big thing.
Headed into the holidays, consumers are using savings and credit, says a team of Jefferies analysts led by Corey Tarlowe. “The savings rate continues to trend lower and credit card balances are growing +15% Y/Y. We believe these trends indicate that the consumer is stretched.”
Against this backdrop, they like Costco
COST,
Dollar General
DG,
Target
TGT,
and Walmart
WMT,
These were the top-searched tickers on MarketWatch at 6 a.m.:
| Ticker | Security name |
|
TSLA, |
Tesla |
|
GME, |
GameStop |
|
AMC, |
AMC Entertainment |
|
NIO, |
NIO |
|
BBBY, |
Bed Bath & Beyond |
|
AAPL, |
Apple |
|
APE, |
AMC Entertainment Holdings preferred shares |
|
COSM, |
Cosmos |
|
AMZN, |
Amazon.com |
|
MULN, |
Mullen Automotive |
Tributes pour after “Cheers” star Kirstie Alley dies at 71.
Happy 190th birthday to the world’s oldest tortoise.
A green Grinchy dog for Christmas? Not everyone’s heart grew three sizes.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton
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Question: By the end of 2022, I will have made $350,000 before taxes as the sole breadwinner and head of household. This is a great starting point and I’m very aware how blessed we are to be in this position, but I’m always looking ahead on how to improve. I currently have $88K left in student loans (originally close to $150K) and very little credit card debt (less than $2K with more than $25K available). I have two auto loans totaling $170K for two electric vehicles at 5% interest.
I’ve recently been offered a $200K HELOC at 9%, which would help me bring down some of my monthly payments and do some small home repairs and improvements, but I want to make the right moves. And I’ve also been presented with a few long-term real estate investment opportunities that are rental properties out of state and are currently bringing it 10-12% ROI. But my biggest concern is that after taxes, 401(k) contributions, bills, savings and mortgage ($4,500), on paper I’m paycheck to paycheck. I’d like to use this HELOC to consolidate debt while also participating in some of these investment opportunities. I’m the first of my generation to own a home and the first to earn this much annually and don’t want to mess this up. How, specifically, can a financial adviser help me? (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)
Answer: You have a few questions to tackle here, so let’s go one by one. The first being the HELOC. Yes, HELOCs can be a good way to consolidate debt, but the rate you’re being offered isn’t favorable, as average HELOC rates are a little over 6%. “I would ask if 9% is the best rate you can get, because it appears a bit high,” says Chris Chen, certified financial planner at Insight Financial Strategists. What’s more, “I would like you to consider the potential impact that our Fed policy and inflation are having on interest rates, as HELOCs usually have variable interest rates and we’re in an environment with rising rates. You may start at 9% and end up significantly higher,” says Chen.
What’s more, your student loans, car loans and mortgage are all likely less than 9%, so it’s not likely that consolidation via a HELOC would save you money. “You may want to start somewhere different, like the snowball method, where you focus on one loan, usually the smallest one, and direct all of your resources to pay off that loan while maintaining payments on the others,” says Chen. This method could work to finish off your student loans and maybe one of your car loans, to start with.
Have an issue with your financial adviser or have questions about hiring a new one? Email picks@marketwatch.com.
As for those real estate investments, what do you really know about those returns? “With regards to real estate investments, I assume that the 10% to 12% ROI you speak of is the income that you would be getting from the investment. If so, that’s very high and often when you get a return that is significantly higher than the norm, there’s something else that makes the investment less desirable. Be careful,” says Chen. (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)
Certified financial planner Kaleb Paddock says you may actually want to work with a money coach before you work with a financial adviser. Whereas a financial adviser assists with developing investment strategies and long-term financial plans, a money coach offers a more educational experience and focuses on shorter term goals for money management. “A money coach will help you with paying off all of your debts, maximize your cash flow and help you create systems and processes to direct your money proactively,” says Paddock.
While having a high income is great, there’s a concept called Parkinson’s Law, which essentially states that your spending will always rise to meet your income no matter how high that income rises, explains Paddock. “Working with a money coach will help you defeat Parkinson’s Law, eliminate your debt and then enable you to supercharge your investing and life planning with a financial adviser,” says Paddock.
A financial adviser could help too, and Danielle Harrison, certified financial planner at Harrison Financial Planning, says to look for one who does comprehensive financial planning and can help you create a more holistic plan for your money. “They can assist you in the creation of both short and long-term goals and then help you by giving guidance on the financial decisions and opportunities you are presented with,” says Harrison.
A financial adviser would also help you take a long-term approach to your money and help you create a spending plan where you don’t feel like you’re living paycheck to paycheck on a $350,000 salary. “Everyone has blind spots when it comes to their finances, so finding a competent financial partner can be invaluable,” says Harrison. (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)
Have an issue with your financial adviser or have questions about hiring a new one? Email picks@marketwatch.com.
*Questions edited for brevity and clarity.
The advice, recommendations or rankings expressed in this article are those of MarketWatch Picks, and have not been reviewed or endorsed by our commercial partners.
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The U.S.-listed shares of China-based electric vehicle maker XPeng Inc. skyrocketed Wednesday, as investors cheered changes in China’s COVID policy while shrugging off weak third-quarter results and a downbeat outlook.
The stock
XPEV,
charged up 45.0% in midday trading, enough to pace all gainers on the New York Stock Exchange. It was also headed for the biggest one-day gain since going public in August 2020, surpassing the previous record advance of 33.9% on Nov. 23, 2020.
The rally comes even after XPeng reported a wider-than-expected loss for the third-straight quarter, missed on revenue for the first time and said it expected fourth-quarter revenue to fall 40% to 44% from a year ago while the FactSet consensus called for just a 4.4 decline.
Instead, investors seemed China appeared to move toward easing its zero-COVID policy, amid growing social unrest and a slowing economy. China’s government said Tuesday that it would renew its push to vaccinate the elderly, and said it would amend COVID control measures.
XPeng’s stock rally also comes at a time when investor sentiment had soured. Earlier this week, Jefferies analyst Johnson Wan downgraded the EV maker, citing recent “missteps” by the company at a time that the “honeymoon stage” for EVs in China was coming to an end.
In addition, short interest, or bearish bets on XPeng’s stock, was 5.7% of the public float, or freely tradable shares, based on the latest available exchange data. That compares with short interest as a percent of float for China-based rivals Nio Inc.
NIO,
at 4.1% and Li Auto Inc.
LI,
at 4.7%.
For Tesla Inc.
TSLA,
which generated $5.13 billion in revenue from China in its latest quarter, or about 24% of total revenue, short interest as a percent of float was 2.9%.
XPeng’s stock has soared 60.7% in November but has still tumbled 41.7% over the past three months. In comparison, the Invesco Golden Dragon China exchange-traded fund
PGJ,
has shed 11.7% the past three months while the S&P 500 index
SPX,
has slipped 1.1%.
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Investors are waking up to big trouble in big China. Stock futures and oil prices are falling after angry anti-COVID zero protests swept the country.
“This is a sudden powerful new distraction for markets when this week was supposed to be about incoming U.S. data,” sum up strategists at Saxo Bank. They say watch companies exposed to China, “given forward earnings are likely to be downgraded following further China lockdowns and protests.”
Before China grabbed the spotlight, holiday weekend sales, jobs and inflation data that due this week, as well as remarks by Fed Chairman Jerome Powell were the big focus.
Other questions are now swirling. Will China-related falls in oil prices lend to the peak inflation theory? And what about China’s post-COVID economic rebirth?
Onto our call of the day, which says it’s time to short long bonds because of sticky food inflation — thanks to China. It comes from Russell Clark, a former hedge-fund manager who has spent the last 20 years focusing on that market, macro and short selling.
He notes investors have been scooping up the the iShares 20 years+ Treasury Bond ETF
TLT,
a liquid exchange-traded fund that buys long-dated bonds, even as with U.S. inflation hovering at 1970 highs.
“The reason that people are getting bullish bonds I believe is that the yield curve has inverted. And every time that has happened, you have a recession and you want to get out of equities and into bonds,” says Clark. A yield curve inversion occurs when long-term interest rates drop below short term rates. The inversion of 2 and 10-year Treasury yields is at its steepest since the 1980s.
Clues may lie in Japan’s poorly performing bond market. “Not only has it been prescient in leading the U.S. bond yields lower from 1999 onward, in 2020 the JGB market was also prescient in signaling the future U.S. treasury sell off,” he says.
And what Japan is likely seeing that U.S. investors aren’t right now is China-driven food inflation. That’s something the Fed will find it tough to ignore, he said.
Since the since the 1980s, food commodity prices have followed raw commodity prices higher, If the Fed wants to work that down, it will raise interest rates. For example, falling natural-gas prices
NG00,
would help ease fertilizer costs for farmers.
Clark points out that China is the world’s biggest food importer, with much higher prices than the U.S.
“Pork, which is the most consumed meat in China, is now 3 times more expensive than the U.S. market, and has recently doubled in price. As Japan is also a large importer of pork, perhaps this was the reason the JGB market sold off before the U.S.,” he said.
Beef is also a major import for China, and yes, prices are much higher than that of the U.S.
“In essence, I am saying that China is exporting food inflation to the rest of the world, and I don’t see that ending at the moment. JGBs seem to agree – and when I look at the index value of US Food CPI on a log basis, I keep thinking that is says interest rates are going higher not lower,” said Clark.
He sees food inflation looking secular, rather than cyclical, due to the demands of an increasingly urbanized China. “Secular food inflation implies POLITICAL pressure to have higher interest rates. US treasuries look a short to me, just as everyone has gotten long,” he said.
Stock futures
ES00,
NQ00,
are falling, and Treasury yields
TMUBMUSD10Y,
TMUBMUSD02Y,
and oil
CL.1,
also are falling. The Japanese yen
USDJPY,
is seeing some safe-haven bids. The Hong Kong Hang Seng Index
HSI,
closed down 1.5%.
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An apartment-building fire in a locked-down city that killed 10 appeared to spark protests across China, calling for the President Xi Jinping to step down and zero-COVID policies to stop. A BBC reporter was arrested and beaten. Meanwhile, lockdowns mean China farmers are destroying crops they can’t sell.
And similar unrest at China’s Zhengzhou Foxconn
2317,
factory is expected to cause a shortfall of 6 million Apple
AAPL,
iPhone Pros this year.
Pinduoduo shares
PDD,
are soaring after the China-based mobile marketplace reported profit and revenue beats.
MGM Resorts
MGM,
Las Vegas Sands
LVS,
and Wynn Resorts
WYNN,
higher in premarket after Macao tentatively renewed their casino licenses.
Retailers are in focus after Black Friday online sales topped a record $9 billion. That’s as some wonder if Cyber Monday is still a thing.
St. Louis Fed President James Bullard will sit down for an interview with MarketWatch on Monday, at 12 noon Eastern. New York Fed President John Williams address the Economic Club of New York at the same time. Fed’s Powell will speak on Wednesday, along with several other Fed officials this week.
A busy data week starts Tuesday with home-price indexes and consumer confidence data. GDP, the PCE price index for October — a favored gauge of the Federal Reserve and November employment data are also on tap this week.
‘I believe the economy is the biggest bubble in world history,’ warns ‘Rich Dad, Poor Dad’s Robert Kiyosaki.
Iran was calling for the U.S. to be expelled from the Qatar World Cup.
Lab study shows next COVID strain will be more deadly.
These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:
| Ticker | Security name |
|
TSLA, |
Tesla |
|
GME, |
GameStop |
|
AMC, |
AMC Entertainment |
|
AAPL, |
Apple |
|
COSM, |
Cosmos Holdings |
|
AMZN, |
Amazon.com |
|
BBBY, |
Bed Bath & Beyond |
|
MULN, |
Mullen Automotive |
|
APE, |
AMC Entertainment Holdings preferred shares |
|
DWAC, |
Digital World Acquisition Corp. |
Chinese woman on a mission to visit everyone else’s lonely elderly relatives.
‘Gaslighting’ is Merriam Webster’s word of the year. No, really.
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Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton
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Car buyers just can’t catch a break these days. Vehicle prices climbed sharply during the pandemic, and now the cost of financing a new set of wheels is going up.
Even if prices ease, interest rates on car loans likely will climb higher, at least for a while, making this an inopportune time to replace a vehicle, financing experts say.
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CNN
—
Ford has announced another SUV recall, this time impacting about 520,000 Ford Escape and Bronco Sport compacts in the United States. Potential cracks in the vehicles’ fuel line could cause fires to break out under the hood of some cars, according to Ford and the National Highway Traffic Safety Administration.
A total of 634,000 of the SUVs are being recalled for the problem worldwide, the company said.
Specifically, fuel injector can crack in some Escapes from model year 2022 through 2023 and 2021 through 2023 Bronco Sports that are equipped with the 3-cylinder 1.5-liter turbrocharged engine. This could allow fuel, or fuel vapor, to leak over hot parts of the vehicle and start a fire.
Ford is not suggesting that owners stop driving their vehicle. The company said that it expects the problem to occur in only a very small percentage of vehicles. The company said it is aware of 20 fires that seem to be related to this new issue.
Some of these same SUVs were involved in an earlier recall that also involved a possibility of fire. That recall, announced in March, involved a potential leak that could allow oil to get to places in the car where it might catch fire.
The majority of vehicles involved in that earlier recall have had the needed work to fix that issue, according to the company. That doesn’t mean they’re protected from the issue in this latest recall, however.
Under the new recall, Ford dealers will install a software update that will detect a possibly cracked injector. If an injector crack is detected, a warning light will show in the vehicle’s dashboard and engine power will be reduced. This will allow the driver to find a safe place to pull over, stop and call for service, Ford said.
Ford dealers will also install a tube that will drain leaked fuel down onto the ground and away from hot surfaces in the vehicle. The needed work will be performed at no cost to the SUVs’ owners.
Ford said it is arranging for dealers to offer free pick up and drop off of the vehicles for the needed repair work. Owners can also bring their vehicles in to dealerships themselves.
The Ford Bronco Sport shares much of its engineering with the Ford Escape. It is unrelated to the larger Ford Bronco, a more truck-like SUV that is a competitor to the Jeep Wrangler.
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Stocks will start the Black Friday half-session near 10-week highs, having rebounded partly on hopes the Federal Reserve will be slowing the pace of interest rate rises as it waits to see how much previous tightening has impacted the economy.
Investors are thus looking ahead to when the Fed eventually pivots and borrowing costs can start coming down again. For now, they are displaying few concerns about how much damage any economic slowdown may do to corporate earnings.
It’s all too rosy, reckons Peter Boockvar, chief investment officer of Bleakley Financial Group. In an interview with Magnifi+, an AI investing and trading platform, the veteran analyst warns that stocks will grind lower next year, and we have not seen the bottom of a bear market still in its middle phase.
“Bear markets usually come in three stages. The first one is we take a lot of the frothy excesses and euphoria out of the market in terms of the sexy names that we saw in 2021 and we take a PE ratio down. We’ve done that, we went from 22 times earnings, call it 16 to 17,” says Boockvar.
In the second phase, he adds, investors start calculating the economic and company earnings consequences of the ongoing rises in interest rates…”and then the third phase is everyone throws in the towel. No one wants to own a stock again, and that’s your bottom and that’s when you need to be buying stocks hand over fist.”
“I feel like we’re really just only beginning to start that second phase,” he said.
Still, there will be opportunities. It all depends on your time scale, according to Boockvar.
“If you have a big purchase that you have to make within the next year or two, whether it’s a kid going college or it’s a wedding, a bar mitzvah or some other expense like a home that you have put aside money for, it should not be in the stock market. It should be in the bank it should be in short-term T-bills. It should be in cash equivalents because the next couple of years are going to be challenging for those with shorter-term time horizons,” he said.
So, what assets is he interested in? Bonds are attractive, but it’s important to stick to quality.
“You have investment-grade bonds that are yielding 6% and you can do that without taking much duration risk by buying shorter-term durations….And you can buy a short-term, two-year treasury and get a yield of four and a half percent and get some attractive Munis too. So fixed-income land, with shorter durations, I believe, is more attractive. Longer-term trade durations, I’m still more suspect on,” says Boockvar.
And in equities? “Value stocks are much more attractive than growth, the tech stocks. I think commodity stocks are much more attractive than they’ve been over the past five years. Certainly energy, precious metals, even industrial metals like copper stocks.”
If the dollar has peaked and pulls back as the Fed gets closer to the end of its hiking cycle, then Boockvar likes the look of foreign markets, particularly in Asia, and gold and silver once the central bank begins cutting rates.
Finally, the one thing he’s certainly not keen on are techs former darlings. “Just buying Google
GOOGL,
and Amazon
AMZN,
and Apple
AAPL,
while they’re all great companies, that ship has sailed and the baton in terms of market leadership is going to be passed to other parts of the market,” says the analyst.
Stocks were in line to start the last trading of the week on the front foot, with S&P 500 futures
ES00,
up 0.2% to 4039 and 10-year Treasury yields
TMUBMUSD10Y,
were little changed at 3.709%. U.S. crude futures fell 0.7% to $79.50 a barrel.
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It’s a half-day of trading for Wall Street as many traders also extend their Thanksgiving break. Expect very thin volumes.
Still, analysts and investors are on the lookout for guidance on how the Black Friday sales are going. How is the U.S. consumer holding up in the face of high inflation and sharp increases in borrowing costs? Shares in Amazon
AMZN,
and Walmart
WMT,
were relatively steady.
Shares in Tesla
TSLA,
are up about 2% in premarket action despite news the car company is recalling around 80,000 cars in China.
Activision Blizzard shares
ATVI,
are off more than 3% after a report late on Wednesday that the Federal Trade Commission might block Microsoft’s purchase of the videogame maker.
Fed’s Bullard set to talk inflation, interest rates in MarketWatch Q&A Monday. Sign up here to watch the program and pose a question.
China’s central bank eased monetary policy as the country struggles with further COVID-19 outbreaks.
China is investing billions in Pakistan buts its workers there are under attack.
In the court of Mar-a-Lago, ‘King’ Trump still reigns supreme.
Activists aggravate art insurers climate headache.
Here’s an interesting observation on stock volatility from Benedek Vörös, director of Index Investment Strategy at S&P Dow Jones Indices.
“It has been a turbulent year, but a degree of relative calm has returned to U.S. equity markets in the past few weeks, and participants in the options market look even more relaxed than their cash counterparts,” Vörös writes in his latest bulletin. “VIX, having averaged 3 points above the 21-day realized S&P 500 volatility over the past year, has slipped 6 percentage points below it as of yesterday’s close. Historically, that has had some predictive power for lower volatility to come.”
Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.
| Ticker | Security name |
|
TSLA, |
Tesla |
|
GME, |
GameStop |
|
AMC, |
AMC Entertainment |
|
NIO, |
NIO |
|
COSM, |
Cosmos Holdings |
|
AAPL, |
Apple |
|
APE, |
AMC Entertainment preferred |
|
BBBY, |
Bed Bath & Beyond |
|
AMZN, |
Amazon.com |
|
MULN, |
Mullen Automotive |
Japan fans show the world how it’s done.
Coin study suggests ‘fake emperor’ was real.
Someone’s been going on a gold-buying bender.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton
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For a few years now some car companies have been experimenting with an idea ripped straight out of video games. Someone somewhere figured that hey, if people are willing to pay for a game then spend more money inside the game they already bought, then they might do the same for cars—a far more expensive and lucrative business.
BMW, for example, offers a subscription service where for $18 a month you can get heated seats, or pay to unlock adaptive cruise control. Tesla has a pricey ($99-$199 a month!) subscription service for its self-driving software in some cars, and Volkswagen, Toyota and GM have all trialled similar subscription-based unlocks or features as well.
Making headlines this week, though, is an example that’s the most outrageous since Tesla used to lock battery range behind a paywall. Mercedes has announced a digital purchase for its all-electric vehicles called an “Acceleration Increase,” which costs $1,200 a year and when bought, “can improve an EQ vehicle’s acceleration by 0.8 to 1.0 seconds.”
While cars have always featured expensive add-ons—it’s a pillar of the whole business model—those have previously been tangible purchases. If you paid for bigger wheels you got bigger wheels. Parting with a few thousand extra for leather seats got you fancy leather seats.
What’s happening with these car subscription services, though, is far more ominous. You’re not really getting anything. Instead, thanks to advances in the operating systems and communications found in modern cars, what you’re buying is a vehicle with certain features limited or locked off, which can then be then enabled remotely.
It’s the same argument video games went through over a decade ago—and which we have collectively just shrugged at and moved on from—when people found out the DLC they were buying was already on the disc they bought. It’s the same story here; the motors in these Mercedes vehicles could always go that fast, and locking certain elements of their performance away behind a digital paywall is taking the absolute piss.
One common factor among all the very worst of these examples is that they’re limited to expensive, luxury vehicles, targeting rich people who probably don’t give a shit about spending (what’s for them) a few extra bucks a month, when they’ve dropped $100,000 or more on a car. The danger, of course, is that if those rich people start buying this stuff, and it becomes a successful business model, then it won’t be too long before we start seeing it in a Toyota Corolla and…oh. Great.
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Luke Plunkett
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Tesla Inc. shares on Monday were poised to end at a fresh two-year low, with shares of other electric-vehicle makers also underperforming the broader equity market as worries about China’s COVID-19 lockdowns re-emerged and oil futures prices dropped to their lowest level since January.
Shares of Tesla
TSLA,
extended their losing streak to a fourth session and were on track for their lowest close since Nov. 20, 2020, when they closed at $163.20. The stock was the 10th worst performer in the S&P 500 index
SPX,
and fourth worst in the Nasdaq 100
COMP,
— and the most active stock on both exchanges.
American depositary shares of several China-based EV makers, including Nio Inc.
NIO,
and XPeng Inc.
XPEV,
also underperformed the broader market. In contrast, shares of General Motors Co.
GM,
and Ford Motor Co.
F,
merely edged lower.
The energy sector was taking a broad beating as well, with the SPDR Energy Select Sector ETF
XLE,
looking at a four-week low.
Related: GM’s EV roadmap is ‘ambitious,’ but Wall Street doesn’t give it full credit just yet
Tesla’s underperformance as compared with the broader indexes holds on a monthly and yearly basis as well. The stock is down more than 25% so far in November and 52% this year.
If the trend continues, this would be the worst yearly performance for the stock on record.
The S&P has lost about 17% year to date and has clawed back to a 2% gain so far in November.
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CNN
—
Toyota unveiled an all-new version of its famous Prius hybrid car Wednesday just ahead of the Los Angeles Auto Show. It’s lower, longer and sleeker looking, with just less than a 10% improvement in the model’s vaunted fuel efficiency. Bigger gains come in terms of power and performance.
The hybrid Prius, which produces electricity to recharge its own batteries while it drives, will produce up to 196 horsepower, 62% more than the current model’s 121 peak horsepower. It will also manage to get about 57 miles per gallon of gasoline, according to Toyota’s estimates, compared to 56 mpg in the 2022 model year Prius Eco L.
As with the current Prius, the new version will be available with all-wheel-drive with a separate electric motor powering the back wheels.
Toyota also revealed a new version of the plug-in hybrid Prius Prime. The Prime uses more powerful batteries that, in addition to being charged by the car itself, can also be charged through a plug. With its batteries fully charged, the new Prius Prime will go at least 50% farther without burning any gasoline as today’s Prius Prime does, according to Toyota. That means it should be capable of 37.5 miles or more of electric-only driving – compared 25 in today’s Prius Prime model – after which it will operate as a standard hybrid switching between gas and electric power. It will be able to produce up to 220 horsepower, 100 horsepower more than today’s Prius Prime.
The roofline is two inches lower than the current model and the car is also an inch wider. More expensive Prius XLE models get bigger 19-inch wheels for a flashier look. Inside, the new Prius has a gauge screen in front of the driver, as in most cars, rather than in the middle of the dashboard as in past Prius models. There is a large center touchscreen, as well.
The added power comes from new lithium-ion batteries as well as a slightly larger gas engine. The new battery pack is smaller and lighter than the ones used before but still more powerful, according to Toyota.
When it first came to the United States as a 2001 model, the Prius – the name is Latin for “go before” – helped introduce America to the idea of fuel-efficient hybrid driving. The basic idea is that the car can be driven by electric motors sometimes, especially at lower speeds or when high power isn’t needed, allowing the gas engine to be used as efficiently as possible.
The 2001 Prius got a combined 41 miles per gallon using modern EPA rating standards. (It was rated at 48 miles per gallon when it came out but the EPA used a more forgiving rating system at the time.) With its gas engine and electric motor, it managed just 70 horsepower. Both horsepower and efficiency improved over the subsequent four generations of the car. The Honda Insight hybrid was available in America a year before the Prius and got significantly better fuel economy, but the Prius was a more popular and practical car, and it became the standard bearer for hybrids.
Toyota executives have insisted that hybrids, which are less expensive and easier to own than fully electric cars, provide a better opportunity than EVs to reduce global vehicle emissions. Almost every vehicle in Toyota’s line-up is now available with hybrid power. There are hybrid versions of the Corolla and Camry sedans and Highlander and Rav4 SUVs. Even the huge Tundra pickup and Sequoia SUV are available as hybrids, and the Sienna minivan is sold in the US only as a hybrid.
While Toyota has introduced more hybrid models, Prius sales have gone from representing 9.5% of Toyota’s US sales ten years ago to just 1.4% now, according to data from Edmunds.com.
Toyota has been seen as a laggard in fully electric cars. The automaker only recently introduced its first mainstream fully electric vehicle long after others like GM, Ford, and Volkswagen Group had been offering them. The Toyota BZ4X electric SUV was developed in cooperation with Subaru which sells an almost identical model. Shortly after it went on sale, though, the BZ4X had to be pulled from the market over safety concerns. It was found that the wheels could loosen and even fall off. That issue is now being fixed following months of investigation to find the root causes. Reuters has reported that Toyota is now rethinking its EV strategy.
Along with the Prius, Toyota also unveiled the Toyota BZ Compact SUV concept. Toyota has said it plans to one day offer 30 different purely electric vehicle and to be carbon neutral by 2050 with a mix of electric and “alternative fuel” models.
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The European Union reached a deal Thursday to effectively ban new gas-powered cars beginning in 2035.
It’s a move seen as a key part of a broader plan to reduce carbon emissions across economic sectors — and a major policy achievement to carry into high-profile United Nations climate-change talks in Egypt early next month.
Speculation about a deal, which had been heavily debated, was reported earlier this week and confirmed Thursday via a tweet from the spokesperson for the rotating presidency of the bloc, currently held by the Czech Republic.
Broadly, the agreement is part of a plan that requires a 55% cut in emissions across transportation, buildings, power generation and other sources this decade. That halfway mark is seen as a major milestone as the EU aims to reach net-zero emissions by 2050.
The announcement comes as the U.N. climate arm has released a series of updated reports this week. One chastised the “highly inadequate” steps to date by rich nations to cut emissions of Earth-warming greenhouse gases, such as those from burning fossil fuels. The window to act is closing but is not quite shut yet, according to the Emissions Gap report from the U.N. Environment Programme. “Global and national climate commitments are falling pitifully short,” U.N. Secretary-General Antonio Guterres said Thursday. “We are headed for a global catastrophe.”
The EU is the world’s largest trade bloc, and its moves could push other major economies to also set firm cutoff dates for gasoline
RB00,
and diesel engines. Volkswagen AG
VOW,
and Daimler Truck Holding AG
DTG,
are already moving deeper into electric vehicles. Volkswagen this week said it would stop selling internal-combustion-engine cars in Europe between 2033 and 2035.
Other major economies, including the U.S., have set similar goals, but the U.S. has not set any federal-level restrictions on vehicle manufacturing. Some individual automakers, including General Motors
GM,
have set their own timelines. And California approved plans in August to mandate a gradual phasing out of vehicles powered by internal-combustion engines, with only zero-emission cars and a small portion of plug-in gas/electric hybrids to be allowed by 2035.
As the world’s fifth-largest economy, California can create ripple effects with its moves. At least 15 other states have signed on to California’s existing zero-emission vehicle program or have shown interest in and are working toward codifying the change. Among them, Washington, Massachusetts, New York, Oregon and Vermont are expected to adopt California’s ban on new gasoline-fueled vehicles.
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New York
CNN Business
—
Ford is essentially pulling the plug on an effort to develop its first full self-driving car, and it’s going to cost the automaker $2.7 billion to walk away.
The company announced Wednesday it would no longer provide financial support for Argo AI, a self-driving car technology company it invested $1 billion in back in 2017.
Instead of having Argo develop self-driving car technology for cars without steering wheels, brakes or accelerator pedals — what is known in the industry as Level 4 or L4 technology — Ford will instead pursue in-house development of a lower level of automated driving technology.
The level it will now pursue on its own, known as Level 3 or L3, allows a driver to not pay attention to the road in certain conditions, such as on the highway, but it would expect a driver to be aware enough to quickly take control of the car if needed.
The decision will mean that Argo AI will shutdown. And the drop in value of Ford’s investment in Argo caused it to take a $2.7 billion charge in the just-completed third quarter. That resulted in an $827 million loss in the period.
Even excluding the special charges for Argo and other items, Ford reported adjusted earnings per share of 30 cents, a slide from the 51 cents it earned on that basis a year ago, but a slight improvement over the 27 cents forecast by analysts surveyed by Refinitiv.
Ford reported automotive revenue of $37.2 billion, a jump of $4 billion from a year ago and $1 billion more than the analysts’ forecasts. The revenue was helped by a $3.4 billion from higher pricing on vehicles.
Ford did have some problems in the quarter beyond the charge it took for closing down Argo. It said supply shortages left it with about 40,000 vehicles in its inventory at the end of the quarter that were built but awaiting needed parts before they can be shipped to dealers.
It also was hit with $1 billion in higher-than-expected supplier payments, and a $1.5 billion increase in commodity costs.
And it had a smaller profit and profit margin in its core North American market due to those higher commodity costs, and a loss in China, due to costs associated with the development of electric vehicles.
While higher pricing on vehicles helped its European unit post a narrow profit in the quarter compared to a narrow loss a year ago, CEO Jim Farley did concede, “Our performance in China and Europe is not nearly as healthy as we’d like it to be.”
But, in good news, Ford raised its goal for full-year cash that will be generated by the business to be between $9.5 billion and $10 billion — up from $5.5 billion to $6.5 billion — on strength in the company’s automotive operations.
Shares of Ford
(F) were down 1% in after-hours trading following the earnings news.
But in the end, the big news of the earnings report was a major change in direction on self-driving vehicles.
The company insists it still expects to offer full self-driving vehicles in the future, just not soon enough to make the investment such technology will require today. It said it decided it is better to invest in driver assistance technology that is closer to being implemented on vehicles today, and that customers want from their new cars, rather than a fleet of robo-taxis with no drivers at all aboard.
“We’re optimistic about a future for L4 ADAS [advanced driver assistance systems], but profitable, fully autonomous vehicles at scale are a long way off and we won’t necessarily have to create that technology ourselves,” said Farley.
Farley said he expects to be able to find jobs for many of the Argo employees at Ford, having them switch gears to develop L3 driver assistance features.
“That’s really the decision, in many ways, that is driving what we’re doing here at Argo… we are deeply passionate about the L3 mission,” said Doug Field, Ford’s chief advanced product development and technology officer.
He said there is only so much talent available to develop the different driver assistance and self-driving features.
“So this is the way we want to use that talent,” he said.
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