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Dow Jones futures up 160 points; Tesla’s market cap exceeds $280bn

The Nasdaq Composite has led the Dow since the lows US markets recorded in March, as investors flock to tech at an accelerated rate.

Dow Jones futures Source: Bloomberg

The battle between old and new

The present represents a constant struggle between the old and the new. Investors – forward-looking as they are – are always attempting to pre-construct the future in the present, an enterprise which has proven both hazardous and fortuitous over the long and winding history of capital markets.

The Dow Jones Industrial Average – established in November 1882 – distinctly represents the old: though many of its largest constituents are anything but, with the likes of Apple and Microsoft now contributing a significant amount to the benchmark’s weighting.

These musings aside, as of 2:29 (New York time) futures markets suggest that the key US benchmark will open some 160 points or 0.62% higher on Monday, suggesting that the Dow’s furious run since March is poised to continue. For reference, at the close on Friday, the benchmark is up some 43% from its March lows.

During the previous session, the best performing Dow stocks were financial heavyweights JP Morgan and Goldman Sachs, with the top three rounded out by Travelers. The worst performing Dow stocks were Caterpillar, Procter & Gamble and Pfizer.

Yet it is the tech-heavy Nasdaq Composite – established in February 1971 – that has truly captured the investing community’s attention since the lows it recorded in March, outpacing the gains of the Dow and rising a staggering 60% from those lows.

Centrally, many have argued that the coronavirus has helped push tech stocks higher – as individuals retreat inside, work from home and shop online. The common thread here is the argument that Covid-19 has accelerated the adoption of e-commerce. Accurate or not in the long-run, that argument looks well reflected in the share prices of a number of key tech stocks.

Indeed, the likes of Amazon, Netflix and Facebook are all trading around their 52-week highs – though it may prove more curious that electric automaker Tesla has made new highs and dominated news cycles alongside these pure-play techs. Tesla finished out Friday’s session up 10.78%, or US$140.37 – at US$1,544 per share – implying a staggering market capitalisation of US$286 billion.

Tesla’s stock is up more than 500% in the last year.

As John Authers mused in his ever-enjoyable newsletter, Points of Return:

‘I don’t see that the coronavirus aids Tesla in any significant way. The pandemic tends to inhibit mobility, which is bad for auto demand, although it may cause more people to give up on public transport and buy a car. The oil price is historically low, which should make it harder to make the case for electric cars, although fuel is more expensive than at the trough in spring.’

Looking forward, Nasdaq Composite futures were up at the time of writing, suggesting that the tech-focused index would open higher on Monday, 13 July.

Events to watch out for and data points to know

Elsewhere, Markit services PMI (final) data covering June and ISM nonmanufacturing index data covering June are set to be released on Monday; job openings data is set to be released Tuesday, consumer credit data, covering May is due out Wednesday; while initial and continuing jobless claims data is due out on Thursday.

From an earnings perspective, Citigroup is set to report their Q2 on 14 July; while JP Morgan is set to report their Q2 on 16 July.

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