Shares of car makers were soaring Friday, and one reason is technical while the other might surprise investors.
Tesla
stock (ticker: TSLA) was up 4.3% in late trading Friday, outpacing the gains of the
S&P 500
and
Nasdaq Composite,
which were up 1.5% and 1.1%, respectively. Shares of other auto makers were higher, too.
General Motors
(GM) stock was up 4.2%.
Ford Motor
(F) stock had gained 2.9%.
The potentially curious reason is that unemployment rose in May. Reported Friday morning, the rate came in at 3.7%, up from 3.4% and higher than the 3.5% economists were expecting.
For the most part people need jobs to buy cars, but the market appears to like the May employment report, which also included wage and jobs data. Wage growth was meager and rising unemployment can signal weaker consumer spending down the line. The overall picture developing appears to justify the Federal Reserve pausing its program of lifting interest rates to slow inflation.
Interest rates impact car stocks more than others because most cars are purchased with financing, and higher rates raise monthly payments, a problem
Tesla
CEO Elon Musk has pointed out recently.
“Interest rates…have a very big effect on the affordability of cars,” said Musk at Tesla’s annual shareholder meeting in May, adding that he sees demand impacted for the coming few quarters.
Peaking or falling interest could change his outlook and the outlook for other auto maker stocks as well.
The other reason Tesla stock might be doing well is a golden cross. That is a bullish pattern looked for by traders. It happens when a shorter term moving average crosses over a longer term moving average.
Tesla stock’s 15-day moving average just crossed over its 50-day moving average on Thursday. That cross also happened in early February. After the February event, Tesla stock picked up about 7% in the following three weeks, until the 15-day moving average rolled over.
Tesla’s 50-day moving average crossed the 100-day moving average back in March. Shares are up about 13% since then.
The bigger golden cross is typically when the 50-day moving average crosses the 200-day moving average. That happed to Tesla in late 2019, when shares were about $23 a piece. The 50-day moving average was consistently above the 200-day until mid-2022, when shares were north of $300.
The 50-day moving average crossing below the 200-day is called a death cross. Tesla stock has traded to nearly $100 while its 50-day has been below the 200-day moving average.
Crosses and moving average are just trading observations. And they often line up with what fundamentally-minded investors already know. In the case of Tesla, rising interest rates and more EV competition have pressured growth rates and profit margins. Still, crosses can generate buying and selling pressure from investors that like to use those metrics as part of their process.
As far as Ford and GM go, Ford stock’s 15-day moving average hasn’t crossed the 50-day yet, but it is very close. The 50-day moving average also hasn’t crossed the 100-day yet. That goes for GM stock, too.
Ford and GM shares’ 50-day moving average crossed over the 200-day meaningfully in late 2020. That lasted until late 2021. Both shares did well over that span.
Write to Al Root at [email protected]
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