Stocks Hold Near Highs Despite Bond, China Turmoil As Tech Giants Lead

The stock market rally traded near record highs, shrugging off Thursday’s retreat. The S&P 500 and Nasdaq did hit all-time levels, while the Dow is getting close. Tech megacaps such as Apple (AAPL) powered higher, with surging as the Pentagon canceled a $10 billion JEDI cloud-computing contract to Microsoft (MSFT). Treasury yields fell to fresh five-month lows, while a China crackdown vs. Didi Global (DIDI) and other recently listed Chinese companies slammed Chinese stocks. An OPEC+ impasse left traders unsure on crude oil prices. Tesla (TSLA) announced a cheaper Model Y for China, amid signs that it’s close to exporting the crossover to Europe.


Stock Market Rally Holds Steady

The Dow Jones, S&P 500 and Nasdaq rose slightly for the week, shrugging off Thursday’s brief tumble. The S&P 500 hit an all-time high on Friday, while the Nasdaq and Dow set closing bests. Big-cap techs such as Apple (AAPL) and (AMZN) rose strongly, masking some underlying weakness. Treasury yields continued to fall sharply before paring losses somewhat on Friday. China’s Didi Global (DIDI) crackdown roiled Chinese stocks.

China Crackdown

Shares in New York-listed Chinese stocks fell as Beijing stepped up pressure on Didi Global (DIDI) and other recent initial public offerings. The move raised more questions over whether Chinese companies will ultimately delist from U.S. exchanges amid increased accounting and regulatory scrutiny. China’s cybersecurity regulator instructed online apps stores to remove Didi Chuxing’s ride-hailing app. China ordered jobs-search app Kanzhun (BZ) and logistics platform Full Truck Alliance (YMM), two other new U.S.-listed Chinese companies, to stop new user registrations. A new data security law will take effect in China on Sept. 1. Didi stock, YMM, BZ all sold off, while many other U.S.-listed Chinese stocks sold off amid growing regulatory fears.

OPEC+ Fails To Reach Deal

OPEC+ members failed to reach an agreement to boost their production quotas as the group failed to give in to the UAE’s demands to recalculate its quota. The UAE also opposes extending the overall agreement to the end of 2022. While there is a looming crude oil supply crunch as demand quickly rebounds, but traders see a high risk of various OPEC+ members scrambling to boost their output. Crude oil fell from six-year highs to start the week, but then rebounded.

Pentagon Cancels JEDI Cloud Contract

The Defense Department canceled its litigation-snarled cloud-computing contract known as JEDI. Microsoft (MSFT) won that $10 billion contract in October 2019, but Amazon (AMZN) contested it in court, claiming interference by the Trump administration. The Pentagon has decided to seek bids for a new cloud computing services contract called the Joint Warfighter Cloud Capability. Amazon rose sharply to record highs. Microsoft continued to climb, hitting fresh highs as well.

Automakers’ Next Supply Crunch Could Be Even Worse

Tesla Model Y Exports To Europe

Tesla Model Y deliveries will soon begin in Europe, according to the company’s European website, suggesting that the Shanghai plant will export made-in-China Model Y crossovers, in addition to existing Model 3 exports. The EV giant had planned to wait on European Model Y deliveries for the Berlin factory but it’s not likely to open before year-end at the earliest. Tesla also unveiled a cheaper, lower-range Model Y for China. Industry data suggested Tesla sales picked up in June, but Q2 local sales fell 16% vs. Q1, even with Model Y sales still ramping up.

Stellantis Steps Up EV Investments

Stellantis (STLA) caught up with General Motors (GM) and Ford (F), announcing big EV investments and targets in a shift away from gas and diesel vehicles. Stellantis, which combines Fiat Chrysler and Peugeot, will spend $35.5 billion to develop electric vehicles — including EV versions of Ram trucks, Jeep SUVs and Dodge muscle cars — through 2025. By 2030, Stellantis seeks to have 70% of its European sales and 40% of its U.S. sales be electric, including hybrid EVs. STLA stock fell as the automaker warned of financial headwinds from the EV shift, but weekly losses were light. Its first fully electric trucks will arrive years after counterparts from GM and Ford.

Nio (NIO) plans 4,000 battery swap stations in China and Europe by 2025, up from around 300 day, amid intensifying competition with Tesla TSLA, the global EV leader.

News In Brief

Taiwan Semiconductor (TSM) reported June revenue of 148.47 billion Taiwanese dollars ($5.3 billion), up 22.8% vs. a year earlier. The world’s largest chip foundry sees Q2 sales in line with analyst views.

Levi Strauss (LEVI) posted EPS of 23 cents, crushing views for 9 cents and reversing a year-earlier 48 cent loss. Revenue leapt 156% to $1.28 billion, modestly beating. Levi raised 2021 forecasts, citing strong denim demand in the U.S. and China. Also hiked quarterly dividend by 33% to 8 cents a share.


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