Tesla, Fed Rate Cut Hopes Lead Market Rally

The last full trading week of September Opened with a broad-based rally on major Wall Street indices on 23 September. Let’s take a look at some of the key dynamics that may have defined Monday’s upbeat market mood:

New York’s Record-Breaking Monday

On Monday, 23 September, US stocks extended their winning streak with the Dow Jones Industrial Average (USA 30) and S&P 500 reaching record highs. The Dow climbed over 0.1%, while the S&P 500 gained nearly 0.3%, closing at a new peak. The tech-oriented Nasdaq (US-TECH 100) also edged up by more than 0.1%. 

The rally may have stemmed from a confluence of factors that contributed to lifting investor sentiment. One key driver was the growing expectation that the Federal Open Markets Committee (FOMC) might move to continue cutting interest rates, particularly if upcoming economic data supports the case for further monetary easing. Investors might have been especially focused on the release of the latest reading of the Personal Consumption Expenditures (PCE) index and Q2 2024 GDP figures. A cooling inflation environment could provide the central bank with the impetus to further lower the federal funds rate. Fed officials Raphael Bostic and Neel Kashkari expressed support for a more aggressive 0.5% cut, pointing to a slowdown in inflation and a weakening labour market.

Corporate developments also played a role in the rally. Tesla shares climbed after an optimistic delivery forecast, while Intel (INTC) surged on reports that Apollo Global Management was considering a multibillion-dollar investment, signalling confidence in the company’s recovery strategy. These factors contributed to the market’s rise. Now let's dive into Tesla's business moves:

Tesla: Plugged-In & Powered-Up

Tesla’s (TSLA) stock values continued their climb yesterday, driven by anticipation surrounding its upcoming product announcements and robust sales expectations. Investors are keenly awaiting the unveiling of Tesla's long-delayed robotaxi service, scheduled for 10 October, and the company's Q3 delivery figures, which are also due for release in the coming weeks.

Bolstered by optimism around both the robotaxi launch and rising sales figures, the firm's shares gained over 4.8% in value on Monday. Wall Street analysts forecast Tesla will have delivered around 460,000 electric vehicles (EVs) in the third quarter, marking a 6% increase from the same period last year. However, some experts have gone even farther, predicting the figure could turn out to be 10,000 higher than the aforementioned estimate, which would be an 8% year-on-year jump. This supposition is largely based on improving sales in China, despite strong competition from local automaker BYD (1211.HK).

The EV industry innovator has faced a range of challenges recently, including safety concerns, vehicle recalls, and factory closure. However, the company seems to have regained its momentum and then some, with strong second-quarter results following strategic price cuts. Tesla delivered nearly 440,000 vehicles in Q2, exceeding market expectations. Now, the “Robotaxi Day” event, expected on 10 October, could offer the next major catalyst for the stock’s further upward growth.

CEO Elon Musk has long touted Tesla's autonomous driving technology, claiming that Full Self-Driving (FSD) capabilities will revolutionise transportation. If the upcoming event can sway public opinion, it may mark a turning point for Tesla in the autonomous vehicle space, where competitors like Waymo and Cruise have stumbled. Tesla’s success could validate its ambitious vision for a driverless future. Whether this will come to fruition is unknown at this point, but what is certain is that Tesla's gains were a major contributing factor to Wall Street's high close on 24 September.

Conclusion

All in all, it is as yet far from certain that Monday’s rally will be continued over the longer-term, or even through the end of the trading week. Much rests on major data releases that will shed light on the state of the American economy. Traders and investors alike will have to wait and see.