Tesla Declines on Analyst Downgrade
In premarket trade on Wednesday, the stock of Tesla Motors Inc. (TSLA, -4.86%) plunged 1.8 percent. This marked an extension of a sharp selloff which the electric car maker experienced in the previous session. This decline came in response to a downgrade by Brad Erikson, an analyst at Pacific Crest, who stated his concerns regarding the valuation of the stock price. According to Erikson, a fair valuation for Tesla’s stock is $293. This is currently 9.4 percent above the closing price on Tuesday. Despite the downgrade, Erikson wrote in a note to his clients that Tesla can be considered one of the most innovative companies which are unique to other competitors in the space. Based on this, Erikson feels that the current stock price is a fair valuation. On Tuesday, the shares of Tesla slumped 4.2% which marked the biggest one day decline in the last 5 months. This decline came as a result of a downgrade by Deutsche Bank who also cited valuation concerns. Despite the two blows, Tesla’s stock is still up year to date by 20 percent. This can be compared to the increase in the S&P 500's index (SPX, -1.50%) which has only gained 1.1 percent over the same period.
On Wednesday, in morning trade, U.S. stocks saw a major selloff which was prompted after the New York Stock Exchange was stopped for 3 and a half hours. Despite the morning decline, these stocks then turned and ended the trading session with modest gains. Adding to the pressure was the unresolved debt crisis in Greece while the major selloff in China also rattled some cages. At 11:32 a.m. Eastern, NYSE securities trading was stopped due to a technical glitch. Trading then only resumed at 3:10 p.m. Eastern and according to a spokesperson for the exchange, the shutdown of the exchange did not occur as a result of a cyber-attack. As a result, the CBOE Volatility index (VIX, +22.19%) rose above 19, up 22%. Meanwhile, the Dow Jones Industrial Average (DJIA) declined 1.5%, or 261.49 points, to 17,515.42. This marked the blue chip’s lowest closing level since February. Also on the downside was the S&P 500 index (SPX) which dropped 1.7%, or 34.65 points, to 2,046.69. This level also marked the benchmark index’s lowest closing level since March. Also, the Nasdaq Composite index (COMP) dropped 1.8%, or 87.70 points, to 4,909.76.
On Wednesday, the U.S. dollar (USD) traded lower. This came as investors focused on the debt crisis in Greece as the country was given until Thursday to present a new proposal to creditors by the eurozone officials. Added to this, due to a selloff and a major decline in Chinese shares, the Japanese yen (JPY) rallied as the demand for safe haven assets was boosted. The USD/JPY traded at 121.11, down 1.16 percent, which also marked the pair’s lowest level since the 22nd of May. Against the euro, the JPY traded at a 1-month high with the EUR/JPY at 133.86, down 0.79%. Meanwhile, the EUR/USD traded at 1.1047, up 0.32% while the GBP/USD traded at 1.5341, down 0.77 percent. Also, the U.S. dollar index was at 96.63, down 0.26%.
On Thursday, crude oil prices gained in early Asian trade. This came in response to data which showed that consumer prices in China increased in June as the CPI rose above the 1.3% gain seen by 1.4 percent. Meanwhile, the PPI declined 4.8 percent which was higher than the expected decline of 4.5%. WTI crude oil for delivery in August traded at $52.12 a barrel, up 0.90% on the NYMEX. On Wednesday, Brent crude oil for delivery in August traded between $55.88 and $57.75 a barrel on the Intercontinental Exchange (ICE) in London. According to data released by the EIA (Energy Information Administration) on Wednesday, for the week ending on the 3rd of July, crude oil inventories increased by 400,000 barrels which was above the expectations for a 500,000 draw. Crude stockpiles in the country are now at 465.8 million barrels.