Dow Jones jumps: Tesla rises despite job cuts; Kellogg pops on the fracture plane

Dow Jones rose sharply in morning trading, along with the S&P 500 and Nasdaq Composite, signaling a market recovery after the major indices fell last week to the worst levels since the end of 2020. Government bonds and crude oil futures rose, while Bitcoin picked up after a powerful weekend trip.


Tesla (TSLA), Li Auto (LI), homebuilder Lennar (LEN), Diamondback energy (CATCH) and Kellogg (K) was among those who made news before the opening.

Electric car giant Tesla will cut 10% of its paid jobs over the next three months, CEO Elon Musk said on Tuesday. Meanwhile, Chinese electric car rival Li Auto unveiled a new hybrid sports car, the L9. Xpeng (XPEV) signaled a strong improvement in June deliveries, as the recent end of China’s Covid shutdowns and new EV subsidies are good news for Xpeng as well as Li Auto, Nio (NIO) and Tesla.

The Tesla stock shot up just after opening, almost undermining its lowest levels at the end of May last week. Li Auto, Xpeng and Nio shares were on their way to solid gains, and continued a strong rise. China EV and battery giant BYD (BYDDF), which set record car sales in April and May despite China’s Covid restrictions, is not yet traded. But the BYD share has a new buying point just below record highs in a deep base.

Kellogg was divided into three companies

Kellogg said early Tuesday that it would split into three independent companies, focusing on global snacks, American cereals and plant-based products.

The Kellogg stock fell 3% to 69.52, around the 50-day line after skipping this key level and breaking a downward trend line. The Kellogg share has a buying point of 75.76 in a flat base that formed just above a double bottom base.

Snack giant Mondelez (MDLZ) will buy energy bar specialist Clif Bar for $ 2.9 billion. The MDLZ stock was flat.

Sweets and snacks get a boost from economic, social trends

Dow Jones today

The Dow Jones jumped 1.8 percent. The S&P 500 rose 2.5% and the Nasdaq rose 3%.

The Dow Jones Industrial Average fell 4.8% in last week’s trading. The S&P 500 index fell 5.8 percent. The Nasdaq composite retreated 4.8%.

The 10-year government interest rate increased by 5 basis points to 3.29%. The reference rate rose 8 basis points to 3.24% last week, but retreated from an 11-year high of 3.48%.

Crude oil prices rose 2%, lifting West Texas Intermediate crude oil futures above $ 110 per barrel. The WTI fell more than 9% last week to $ 109.56 a barrel, causing oil stocks to plummet.

Bitcoin moved above $ 21,000 after crashing to an 18-month low of $ 17,601.58 on Saturday.

Lennar’s income

Prior to the opening, Lennar reported better-than-expected earnings and revenue in the second quarter. Earnings per share increased by 59%, and earnings increased by 30%. This is because the high mortgage rates seem to reduce housing demand. Lennar shares rose 5%.

At 10 a.m. ET, the National Association of Realtors reported that sales of existing homes in May fell 3.4% to an annual rate of 5.41 million, but it was better than expected. Later this week, KB Home (KBH) will report quarterly results with the Ministry of Trade, which will issue May sales data for new homes on Friday.

JetBlue Ups Spirit Airlines again

JetBlue (JBLU) raised its bid for Spirit Airlines (SAVE) once again, at $ 33.50 per share, up from $ 31.50 per share. Spirit Air’s board has maintained its support for a much lower offer from Frontier Air (ULCC), says regulators are likely to block a JetBlue-Spirit deal. Shareholders will vote on the Frontier-Spirit agreement on 30 June.

JBLU shares rose 1%. SAVE shares jumped 8% to almost 23. Frontier Air rose 3%.

Diamondback stock dividend increase

Diamondback Energy increased its quarterly dividend by 7% to 75 cents per share, from the second quarter. The slate operator also agreed to return at least 75% of free cash flow to shareholders from the third quarter onwards, compared with its previous promise of at least 50% of free cash flow. The FANG share rose 7%.

Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live

Tesla job cuts

Elon Musk said in the Qatari capital Doha on Tuesday that Tesla will cut 10% of employees within three months, and estimates a short-term recession as more likely than not. But hourly production workers should increase, he said.

Job cuts have already been underway in the last week or so. Two former Tesla employees fired this month sued the American electric car giant on Sunday, saying they were not given 60 days notice according to federal rules for mass redundancies.

Musk said supply chain problems are Tesla’s biggest concern. While supply problems have probably limited Tesla’s output growth somewhat over the past year, they have had a devastating effect on the overall automotive industry’s output. An end to chip shortages could lead to a large increase in industrial production, especially in electric cars, and push up prices for Tesla and other car manufacturers.

Tesla shares rose 9 percent. The TSLA share rose 6.7% last week to 650.28, almost below the lowest levels at the end of May.

Five best Chinese stocks to see now

China’s electric car manufacturers

Li Auto unveiled the L9, a more exclusive SUV hybrid than Li’s existing model, the Li One. L9 deliveries will start in August, and Li Auto recently predicted that L9 deliveries will reach 10,000 by September.

The LI stock is on the IBD Leaderboard.

Last week, the Nio ES7 unveiled, another all-electric SUV and one of three new electric cars it launches this year.

Xpeng said it had delivered 200,000 electric cars. This means that it has delivered at least 8,359 vehicles in June so far.

Xpeng delivered 10,125 vehicles throughout May, recovering from a Covid-hit April, but still well below recent record levels.

All three China EV startups could be on track for monthly sales of 20,000 or more later this year, provided there are no significant production or supply chain issues.

Meanwhile, the EV giant BYD, little affected by China’s Covid shutdowns, may be on track for a monthly sale of 200,000 or more by the end of the year. Sales of BYD EV and plug-in hybrid will easily top Tesla’s sales of electric cars only in the second quarter.

BYD was Friday’s IBD Stock Of The Day

Tesla vs. BID: Which EV giant is the best buy?

China EV shares

Li Auto shares rose 9%. The shares have risen for six weeks in a row, and moved up on the right side of a very deep consolidation. The official buy point is 37.55, but the LI stock can use a long handle.

The relative strength limit for the Li Auto share has shot up close to record levels at the end of 2020.

The nine-share fell 9 percent. XPEV shares rose 5%. Both have also recovered sharply in recent weeks, but remain well below the 200-day moving average.

The BYD share rose 2% to 38.25. Shares fell 4.1% last week to 37.45, ending a five-week winning streak. It created a weekly handle on its 48% deep base with a buy point of 39.81, according to MarketSmith analysis. The shares were inactive early Tuesday.

Market analysis

Although the large indices open higher and close with strong gains, it will only mark the second day of a stock market rally attempt for the S&P 500 and Nasdaq, and the first day for the Dow industries.

Investors will want to see more strength, including a follow-up day to confirm the new trend, before stepping out of the sidelines. Even then, it should not be a crazy fight to add exposure, especially with not many stocks in position to buy.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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