Tesla and Rivian shine in lackluster equity markets

A quiet day on Wall Street with most stocks unchanged at mid-day, with EV car makers Telsa and Rivian outperforming on strong delivery stats. Oil prices could be volatile this week with production and delivery cuts promised by Saudi Arabia and Russia.

Bottom-line: Risk-on.

TODAY’S MAJOR NEWS

EV car deliveries rise sharply

Electric vehicle (EV) makers are providing a boost to markets today, with Tesla and Rivian both surging following better than expected deliveries in the second quarter. Their strength is helping to spread optimism across the rest of the tech sector amid limited news elsewhere. Tesla and Rivian share prices were up 6.9% and 17.4%, respectively, in morning trade. Tesla, the number one US manufacturer of EVs, has seen its stock price nearly triple from its early January low, and has already exceeded 2023 expectations significantly. Aggressive price cuts appear to be succeeding in boosting demand: Telsla saw second 466,140 vehicle deliveries in Q2, 8% ahead of the same quarter last year. Tesla's competitor, Rivian, also saw sharp growth in Q2, 59% ahead of the prior quarter.

Traditional manufacturing mired in recession

Today’s survey saw data indicated the weakest the US manufacturing sector since the pandemic-driven dip in the spring 2020 and, excluding April 2020 lows, the lowest reading since May 2009 when the US economy was officially mired in recession. In a modest silver lining, reduced demand has allowed manufacturers to catch up on backlogged orders and input prices have eased, softening to their lowest level since December of last year. Overall, prospects for US manufacturing continue remains bleak, with anticipated interest rate hikes only adding to downside pressure in the second half of 2023.

OPEC+ members talk up extending oil outputs cuts

The world's top two oil exporters, Saudi Arabia and Russia, both announced that they will be extending cuts to their output, sending crude prices on a roller-coaster ride. On top of the existing OPEC+ curbs, Saudi Arabia voluntarily cut their production targets for July by one million barrels per day in an attempt to boost prices. Today they announced that would be extending these cuts into August, leaving open the option for further extensions. Russia joined the supply reduction effort, saying they will cut their own oil exports by 500,00 barrels per day in August, aiming to reduce production by the same amount. Contrary to expectations coming into the year, crude oil markets have struggled to rebound as a worse than expected economic recovery in China and lingering global recession fears have hampered demand. The countries' move to curtail supply in hopes of raising prices may bring them some short-term benefit, but looks to add more complexity to the world's attempt at economic recovery in an already clouded second half of 2023.

US Manufacturing continues to soften in June

• S&P Global's Manufacturing Purchasing Managers Index (PMI) for the US saw its final June reading hold at 46.3, its lowest level in 2023, and contracting sharply from May's 48.4
• The Institute of Supply Chain Management (ISM) also released their Manufacturing PMI for the US this morning, showing an even weaker reading of 46, down from 46.9 seen in May
• The ISM showed that demand continues to remain weak, although new orders did rebound to 45.6 from May's dip to a 42.6 reading
• Slowing demand led to reductions in both production and employment, with those portions of the index now showing contraction at 46.7 and 48.1, respectively

Construction spending rebounded in May, driven by residential housing

• US construction spending rose more than expected in May, up 0.9% month-on-month and ahead of the expected 0.6% rise, marking the largest increase since January
• The private sector was strongest, with an overall 1.1% monthly increase
• This in turn was driven by a 2.2% increase in residential construction spending, with single family projects up 1.7%, and multi-family projects falling by 0.1%
• Private sector non-residential spending fell by 0.3% from the month prior, and public construction spending grew slightly at a 0.1% increase from the month prior

TODAY’S MAJOR MARKETS

Equity markets

• The Nasdaq Composite and S&P 500 were up 0.2% and 0.1% in morning trade, with the more broadly-based Russell 2000 up 0.4%
• European markets were flat to down, with the DAX off 0.4%, FTSE 100 unchanged, and the Nikkei 225 up 1.7%
• The VIX, Wall Street’s fear index, was largely unchanged at 13.6

Currencies and Bonds

• The dollar index was flat against a basket of currencies at 103.0
• Euro/dollar and Sterling/dollar cross-rates were also unchanged
• Bond yields rose, with yields on 2- and 10-year Treasuries up to 4.93% and 3.86% respectively

Commodities

• Gold prices were unchanged at $1,929.5 per ounce
• Crude oil prices fell 0.9% to $70.0 per barrel, having seen moves up and down in morning trade
• Agricultural commodities were still mostly in the green, though soybeans have fallen considerably from highs set earlier in the session

Analysis by Arlan Suderman, Chief Commodities Economist: Arlan.Suderman@StoneX.com

Market outlook by Paul Walton, Financial Writer: Paul.Walton@StoneX.com