Dow Jones Futures Rise as Government Shutdown Averted; Tesla Deliveries in Focus

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Congress passes short-term funding bill

Dow Jones futures rose on Sunday evening after Congress approved a 45-day continuing resolution to keep the government open, avoiding a shutdown with hours to spare. The House and the Senate passed the bipartisan bill on Saturday, which will fund the government through December 3. The bill also includes $28.6 billion in disaster relief and $6.3 billion for Afghan refugees.

The government shutdown has been averted for now, but Congress still faces a looming deadline to raise the debt ceiling, which Treasury Secretary Janet Yellen warned could trigger a default and a financial crisis as soon as October 18. Lawmakers are also working on two major spending bills: a $1 trillion bipartisan infrastructure package and a $3.5 trillion social spending plan that faces opposition from some moderate Democrats.

The Dow Jones Industrial Average fell 1.2% last week, closing below its 200-day moving average for the first time since June 2020. The S&P 500 index retreated 0.4%, while the Nasdaq composite ended fractionally higher. The small-cap Russell 2000 rose 0.5%.

Tesla deliveries expected to hit record high

Tesla (TSLA) is expected to report third-quarter production and delivery figures early Monday, with analysts forecasting a record high of 223,000 vehicles, up 13% from the previous quarter. The electric vehicle maker has been ramping up output at its factories in California and China, despite facing supply chain challenges and regulatory hurdles.

Dow Jones Futures Rise as Government Shutdown Averted

Tesla stock briefly flirted with an aggressive entry of $730 on Friday, but closed at $775.22, up 2.6%. The stock is still below its 50-day and 200-day moving averages, but has been forming a cup-with-handle base with a buy point of $780.89. Tesla stock is on the IBD 50 list of top-performing stocks.

Several China EV rivals released their sales results on Sunday, with mixed outcomes. Nio (NIO) reported a 125% year-over-year increase in deliveries to 10,628 vehicles, but missed its own guidance of 11,000 to 11,500. Li Auto (LI) delivered 9,433 vehicles, up 248% year-over-year and beating its forecast of 8,500 to 9,000. XPeng (XPEV) delivered 10,412 vehicles, up 199% year-over-year and within its guidance of 10,000 to 10,500. BYD (BYDDF), the largest EV maker in China, is expected to report its sales before Monday’s open.

Market awaits inflation data and earnings reports

The Commerce Department will release the August PCE price index at 8:30 a.m. ET, the Fed’s preferred measure of inflation. Economists expect the overall index to rise 0.5% vs. July, fueled by higher gasoline prices. The annual PCE inflation rate is forecast to climb to 3.5% vs. July’s 3.3%. But the core PCE price index, which excludes food and energy, is seen up 0.2% once again, with core inflation cooling to 3.9% from July’s 4.2%.

The PCE inflation data could have implications for the Fed’s tapering timeline, which the central bank signaled could start as soon as November and end by mid-2023. The Fed has maintained that the current inflation surge is transitory, but some market participants are concerned that it could persist and force the Fed to raise interest rates sooner than expected.

Meanwhile, the third-quarter earnings season is set to kick off next week, with several major companies reporting their results. Nike (NKE) and Carnival (CCL) are among the notable names that will report on Friday. Nike stock surged nearly 10% in premarket trade after the athletic apparel giant unexpectedly edged higher earnings, though sales growth just trailed views. Carnival stock is up more than 2% even before releasing its fiscal Q3 results. Analysts expect the cruise operator to report its first quarterly profit since the pandemic.

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