S&P 500 Losses as Tesla-led Acceleration Offsets Weak spot in Cyclicals

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By Yasin Ebrahim – The S&P 500 cut losses Monday as a Tesla-led surge in consumer discretionary offset weakness in cyclical stocks including banks amid further cues from the bond market pointing to a potential recession.

The rises 0.43%, the slipped 0.06%, or 19 points, the rose 1%.

Consumer discretionary was pushed higher by an 8% surge in Tesla (NASDAQ:) after the electric automaker said it planned to split its stock to pave the way to pay dividends to shareholders.

The rally in Tesla comes just days ahead of the EV automaker’s update on second-quarter deliveries.

“We believe by the end of 2022 Tesla will now have the capacity/run rate for overall ~2 million units annually from roughly 1 million in 2021 with Berlin and Austin green-lighted to start production,” Wedbush said in a note.

Cruise line stocks were also doing the heavy lifting, with Carnival (NYSE:) and Norwegian cruise up sharply even as pandemic lockdowns returned to focus after Shanghai initiated its most restrictive lockdown in two years following a surge in cases.

The bond market was quick to price in the potential impact on global growth at a time when investors fear the Federal Reserve’s hawkish path to curb inflation threatens to tip the economy into recession. The five-year Treasury yield briefly rose above the 30-year yield for the first time since 2006.

Bank stocks were sharply lower as a flattening yield tightens net interest margin, limiting the ability to profit from lending. Synchrony Financial (NYSE:), SVB Financial (NASDAQ:), and M&T Bank Corp (NYSE:) were down more than 3%.

Energy was the biggest drag on the broader market as fears that the lockdown in China could hurt demand and fresh Ukraine-Russia peace talks cooled worries about supply-disruptions weighed on oil prices.

“Growing concerns that China’s strict zero-Covid policy will lead to repeated lockdowns in key business centres (…) is unlikely to lead oil demand in China unscathed,” Commerzbank said in a note.

Big tech traded mostly higher shrugging off pressure from falling chip stocks after Goldman Sachs soured sentiment on the sector, downgrading trio of stocks including, Microchip Technology (NASDAQ:), Teradyne (NASDAQ:), Qorvo (NASDAQ:) amid concerns about “challenging” macro backdrop.  

Meme stocks to add to recent gains, with AMC Entertainment (NYSE:) rising more than 39% after the move theater chain touted more “transformational” deals are in the pipeline. GameStop (NYSE:) was up more than 17%.

In other news, Coinbase (NASDAQ:) gained more than 8% as rumors swirled the company was eyeing a deal to acquire 2TM, the parent company of Latin America’s biggest crypto brokerage Mercado . 

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