Little Fireworks during today’s shortened session! USD, ISM, Tesla

• US stock market closes at 1 p.m. and the bond market closes at 2 p.m. EST  and will stay closed for the Fourth of July.
• US ISM Manufacturing index contracts for an eight straight month
• Tesla shares pop on robust Q2 delivery data

The start of the second half of the year is not doing much for US stocks as most of Wall Street is in holiday mode for the Fourth of July.  Today’s shortened trading session saw traders focus on strong electric vehicle data from Tesla and a weak ISM Manufacturing report. 

ISM

The headline manufacturing reading fell to 46.1, the eight straight contraction and weakest reading since May 2020.  The ISM manufacturing report showed a large price drop with prices paid and the employment component fell into contraction territory.  Prices paid fell from 44.2 to 41.8, the lowest levels in a year.  The news was not all bad as new orders rose from 42.6 to 45.6. 

The dollar tumbled following the ISM report that might suggest manufacturing activity is getting close to finding a bottom.  Fed swaps saw a lower peak rate following the softer manufacturing report. 

Student Loan Debt

The Supreme Court delivered a big blow to millions of students that were hoping to have up to $20,000 of loan debt wiped away.  The Biden administration was hoping to get a major win with the $1.8 trillion student loan crisis. They will now scramble to formulate a new plan that will give students a break before the federal student loan payments are due in October.  This could be a noticeable hit to the economy as these students haven’t had to make payments since the pandemic began.  Biden announced a one-year ramp on loan repayments, which is probably just the beginning of pledged efforts to help students.  This will likely become a campaign issue for Biden. 

Tesla

It shouldn’t come as a surprise that Tesla posted a record number of deliveries in the second quarter after all the price cuts, a resilient US consumer and a decent performance in China. Tesla delivered 466,140 vehicles in Q2, much better than Wall Street’s expectation of 448,350 cars.  When it comes to analysts ratings, Tesla mostly has buy and hold ratings, but that might improve following these results. 

BYD also posted robust sales in China, topping Volkswagen for the first time.  Volkswagen was king in China for the past 15 years, so this overtaking is a key changing of the guard moment for BYD.  China has gone all-in with electric vehicles and that is benefitting Tesla and BYD. 

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