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Stock Market Rally Passes Test Amid Meme Stock Frenzy and Labor Shortage

Strategic Insights

— 2 min read

The stock market rally paused briefly as the Nasdaq dipped below its 50-day line on Thursday, but rebounded powerfully the next day on a strong jobs report. Meme stocks such as AMC Entertainment and BlackBerry continued to surge in wild action, while General Motors jumped on a bullish outlook. However, Tesla's stock tumbled on concerns about China demand and various recalls.

Key Takeaways:

  • The Nasdaq rose modestly for the week, along with the Dow Jones, S&P 500, and Russell 2000, despite dipping below its 50-day line on Thursday.
  • The labor market showed a strong May jobs report, with 559,000 new jobs created, but hiring is being limited by a worker shortage, with wages growing 4% in the past two months.
  • Meme stocks such as AMC Entertainment, BlackBerry, and GameStop have seen significant price increases, with AMC selling 11.55 million shares at $587.4 million in a single day.
  • The worker shortage is attributed to a $300 weekly boost to jobless benefits, making not working more rewarding for some, but this will only last through Labor Day.
  • General Motors sees first-half 2021 results to be "significantly better" than prior guidance, citing the pull-ahead of chip deliveries and increased vehicle production and deliveries.
  • Ford will unveil a new compact pickup called Maverick online on June 8, which will add to its profitable lineup of trucks.
  • China electric-vehicle sales fell 6% for Nio and 22% for Li Auto in May, but Xpeng Motors saw a 10% increase, with Xpeng's sales jumping 483% year-over-year.
  • Tesla's orders in China nearly halved in May, which may reflect a consumer backlash and state media coverage.
  • Several traditional chipmakers, including Broadcom and Ambarella, posted strong earnings and guided higher for the current quarter.
  • Zoom Video Communications reported a 560% gain in earnings and a 191% increase in revenue, while other tech companies such as CrowdStrike, DocuSign, and Smartsheet also saw significant growth.

Statistics:

  • The Nasdaq rose 1.4% for the week, while the Dow Jones and S&P 500 gained 0.4% and 0.6%, respectively.
  • The May jobs report saw 559,000 new jobs created, with the unemployment rate falling to 5.8%.
  • The worker shortage is attributed to a $300 weekly boost to jobless benefits, with new claims for jobless benefits dropping to 385,000 in the week of May 29.
  • General Motors expects first-half 2021 results to be "significantly better" than prior guidance, with adjusted EBIT expected to be around $5.5 billion.
  • China electric-vehicle sales fell 6% for Nio and 22% for Li Auto in May, but Xpeng Motors saw a 10% increase.
  • Tesla's orders in China nearly halved in May, from 4,520 to 2,450.

Sources:

  • "The Wall Street Journal"
  • "Bloomberg"
  • "CNBC"
  • "Nasdaq"
  • "Business Insider"
  • "Forbes"
  • "The New York Times"

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