The stock market rally came under pressure this past week amid Mideast tensions, which pushed oil prices to six-year highs. Treasury yields hit 2024 highs amid strong economic data, including rebounding manufacturing and robust hiring. The Dow Jones fell below the 50-day line while the Nasdaq and Russell 2000 tested their 10-week lines, but the Nasdaq and S&P 500 reclaimed their 21-day lines on Friday. Leading stocks are hovering right around key levels. UnitedHealth and Humana tumbled on lower-than-expected Medicare Advantage rate increases for 2025. Tesla reported a sharp drop in Q1 deliveries while traditional automakers offering hybrids thrived. China EV sales generally met low expectations, though BYD reported a big rebound in March.
Market Rally Under Pressure
The major indexes and leading stocks suffered ugly reversals Thursday amid Mideast tensions, but bounced back Friday despite a hot jobs report. The Dow fell below its 50-day line. The S&P 500 and Nasdaq fell below their 21-day lines, but reclaimed that key level on Friday. All in all, the indexes and leading stocks are consolidating normally so far. Health insurers were big losers.
Jobs Report Strong
Friday's jobs report was about as solid as they come. The overall 303,000 payroll gain blew away Wall Street's 200,000 forecast, as private firms added 232,000 jobs. Average hourly earnings matched the forecast of 0.3% growth on the month, but only after rounding down from the actual 0.347% increase. Still, the annual wage gain cooled to 4.1%, the lowest since mid-2021. The jobless rate unexpectedly fell to 3.8%, but unrounded barely dipped to 3.83% from 3.86%. Meanwhile, the ISM manufacturing index popped 2.5 points to 50.3 edging above the break-even 50 level after 16 months of contraction. But the ISM services index unexpectedly fell 1.2 points to 51.4.
Tesla Deliveries Are 'Unmitigated Disaster'
Tesla delivered 386,810 EVs in the first quarter, far worse than the most bearish estimates and below Q1 2023 levels. Tesla produced 433,371 vehicles, further swelling inventories despite various plant slowdowns and suspensions. Wedbush Securities analyst Dan Ives, a longtime Tesla bull, called the quarter an "unmitigated disaster" for Tesla "that is hard to explain away." Analysts continued to cut earnings estimates. Tesla also began cutting vehicle prices and offering incentives early in Q2 to attract consumers after nudging up Model Y prices in key markets just a few days earlier.
Hybrids Fuel U.S. Auto Sales
General Motors reported U.S. sales fell 1.5% in Q1 vs. a year earlier, lagging other automakers. All-electric sales remained low, while GM has no hybrids on the market right now. Ford said U.S. sales grew 6.8%, with overall EV sales including hybrids jumping 82%. Toyota Motor reported a 16% jump, with hybrid sales soaring 57% and EV sales generally up 76.4%.
China EV Sales
BYD sold 302,459 vehicles in March, up from just 122,311 EVs in February and January's 201,493, thanks to a wave of big price cuts. Sales were below December's record 341,043. In Q1, BYD sold 612,315 vehicles, up 8% vs. a year earlier, with passenger BEVs up 9% to 291,730. Li Auto delivered 28,984 EVs in March and 80,400 for Q1, slightly topping sharply lowered guidance. Nio delivered 11,886 vehicles in March for a total of 30,053 in Q1, slightly beating lowered targets. XPeng delivered 9,026 EVs in March and 21,821 for Q1, in line with views.
Health Insurers Skid On Medicare Advantage Rates
The Centers for Medicare and Medicaid Services announced late Monday that private Medicare Advantage rates will increase an average 3.7% in 2025. That's what the CMS proposed in January. Typically the regulator raises rates with the final plan. UnitedHealth and Humana tumbled while other health insurers such as CVS Health and Cigna retreated.
J&J To Buy Shockwave Medical
Johnson & Johnson will acquire Shockwave Medical for $13.1 billion, or $335 a share, in cash. The Dow Jones giant said the deal will boost its position in cardiovascular intervention and accelerate its shift into higher-growth markets. Shockwave is a leader in intravascular lithotripsy, a way to crack hardened calcium in blood vessel walls. SWAV stock rose slightly on the news. Shares had surged in 2024, with takeover speculation among the driving forces.
In Brief
PVH topped fiscal Q4 views, but guided lower for fiscal 2025. Shares of the apparel maker plunged.
Intel disclosed a $7 billion operating loss in 2023 for its chip foundry business on sales of $18.9 billion. The Dow giant expects foundry losses to peak in 2024 and not break even until 2027, later than expected. Intel stock fell.
Dave & Buster's reported a 21% EPS gain with revenue up 6% to $599.1 million, but both missed views. The restaurant and games operator reiterated long-term EBITDA targets and doubled its buyback to $200 million. Shares jumped.
Cal-Maine reported a 55% EPS drop but easily beat views, while the 30% revenue drop to $703.1 million also topped. The egg producer also announced a $1 special dividend. Earlier, Cal-Main announced that a Texas facility has ceased output due to an avian flu outbreak. Shares jumped for the week.
Ulta Beauty warned of slower demand for beauty products, saying customers have too much credit card debt. Ulta stock and ELF Beauty plunged, with sharp losses for Sally Beauty, Coty and Estee Lauder.
Rivian Automotive dropped more than 6% this week after the EV maker reported Q2 deliveries of 13,588, slightly higher than expected, while it produced 13,980. For 2024, Rivian reaffirmed previous guidance of producing 57,000 vehicles.
United Parcel Service will become the United States Postal Service's primary air cargo provider, replacing FedEx after the latter's contract expires Sept. 2.
