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Dow Jones Futures Up On U.S.-Canada Deal; Tesla Stock Expected To Jump On SEC Settlement

Dow Jones futures rose solidly Sunday, along with S&P 500 futures and Nasdaq futures, as U.S.-Canada trade talks reportedly have reached a deal. That would be good news for General Motors (GM) and Ford Motor (F). Tesla stock likely will rebound after the SEC settled with Tesla (TSLA) and Elon Musk. Musk will step down as chairman for at least three years but he can stay on the board and remain CEO. Elon Musk and Tesla will each pay a $20 million penalty. Meanwhile, hot recent IPO Stitch Fix (SFIX) reports earnings Monday.




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Dow Jones Futures Today

Signaling strong gains to start the fourth quarter, Dow Jones futures climbed 0.5% vs. fair value. S&P 500 futures advanced 0.4%. Nasdaq 100 futures were 0.5% above fair value. Remember that Dow futures and other overnight action don’t necessarily translate in actual trading in the next regular session.

U.S.-Canada Trade Talks

A key reason for Dow futures climbing? A revised Nafta deal with Canada is imminent. Canada’s CTV reported Sunday night that the “deal is done,” according to a U.S. source, with an announcement imminent. The Washington Post also reported that an announcement was expected by midnight ET.

A U.S.-China trade accord would ease investor fears. President Donald Trump has threatened to send a bilateral U.S.-Mexico trade deal to Congress. But a revised Nafta deal that excludes Canada would roil supply chains, especially in automobiles.

A continued North America trade deal, even if many experts say the revisions are a net negative, should be good news for automakers, notably GM and Ford. GM stock hit a 16-month last week amid Trump trade war fears and signs of weakening industry sales. Ford stock sank to a 6-year low.

SEC Tesla Settlement Should Boost Tesla Stock

On Friday, Tesla stock crashed 14% after the SEC sued Elon Musk, accusing him of fraud over his go-private, “funding secured” claims back in August. The SEC lawsuit had sought to bar Elon Musk from serving as an officer or director of any company. Wall Street saw Elon Musk’s ouster as devastating for Tesla’s stock.

That lawsuit and the Tesla stock plunge, apparently spurred Elon Musk to settle, after reportedly rejecting another SEC deal earlier in the week.

This could be a best-possible scenario for Tesla investors. Tesla gets a modest fine. Musk is still CEO, but he’ll lose a little control. Someone else will be chairman and the board must add two more independent directors. Plus, Musk must hire an “experienced securities lawyer” to vet future tweets.

Tesla stock is likely to rebound Monday, according to several analysts.

Still, the SEC-Tesla settlement, and information that the SEC disclosed, will help an ongoing Justice Department probe and shareholder lawsuits. Anyone who was shorting Tesla stock and covered after Elon Musk’s infamous go-private “funding secured” tweet on Aug. 7 has a strong case. So do investors who bought Tesla stock as result of the go-private effort.

Tesla Model 3 Output Figures

Meanwhile, early this week Tesla should report third-quarter production and delivery figures. Tesla Model 3 output should be 50,000-55,000 in Q3, the company says, with Model 3 deliveries of 55,000 or more. Electrek reported on Friday that Tesla Model 3 output had topped 51,000.

Meanwhile, Elon Musk has admitted trouble getting Model 3 sedans to customers, citing “delivery logistics hell.”

In a leaked email to Tesla staff, Elon Musk said the company is “very close” to profitability. Musk had said he expected profitability in the third quarter. Sustained profitability and positive cash flow is key, because Tesla’s cash levels have been dwindling.

Tesla Stock Chart

Perhaps this is the moment that everything starts turning around for Tesla and the stock. But investors are much better off looking for solidly profitable companies whose stocks are setting up in bullish bases.

For all the talk of Tesla’s big run since its IPO, most of those gains came from an April 2013 breakout to early 2014. Actually, Tesla stock closed Friday at 264.22, below its February 2014 peak of 265.

Tesla’s relative strength line, which tracks a stock’s performance vs. the S&P 500 index, is at a 21-month low. If Tesla stock rebounds, the RS line may move up. But  The stock chart is messy and heading lower.

Stitch Fix Earnings

Stitch Fix earnings are due after Monday’s market close. Analysts expect fiscal Q4 earnings per share of 4 cents on revenue of $319 million. The online retailer’s subscription business selects and delivers apparel to customers. A November 2017 IPO at 15 a share, Stitch Fix stock has soared this year, closing Friday at 43.82.

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