U.S. stocks appear to be returning to risk appetite, with a signature signal that Tesla's stock price has soared, its biggest one-day gain since Jan. 31.
Overnight, Tesla shares surged 7.9 percent to close at $993.98. Tesla's gains propelled the U.S. consumer discretionary sector up 2.5 percent, making it the biggest gainer in the S&P 500 on the day.
Why is Tesla a sign of risk appetite? Although Tesla is already the world's highest-valued automaker and its share of the electric vehicle market is far ahead, Tesla is still a start-up company for traditional automakers such as GM and Ford.
From the valuation point of view, Tesla's current price-to-earnings ratio based on earnings per share for the past 12 months is 203 times, compared with 6.6 times for General Motors and 3.8 times for Ford.
Even in the ranks of technology stocks, Tesla's valuation dwarfs giants such as FANG. As of Tuesday's close, Meta,000, Amazon, Netflix and Google parent Alphabet had price-to-earnings ratios of 15 times, 51 times, 36 times and 25 times, respectively, based on earnings per share for the past 12 months.
Robert Bacarella, a U.S. fund manager at Monita, once vividly described Tesla's price-to-earnings ratio as not a performance multiple today or tomorrow, but a multiple of Musk's dream.
In short, Tesla's valuation is the "market dream rate." Investors who are willing to pay for Musk's dream are naturally brave people who chase risks.
Another sign of the return of risk appetite in U.S. stocks is the comeback of retail stocks. Overnight, GameStop shares surged 31 percent and continued to rally more than 16 percent after hours.
In addition, the popular Chinese stocks also rose gratifyingly. Chinese ETFs KWEB and CQQQ closed up more than 8% and 3.8%, respectively, while the NASDAQ Golden Dragon China Index (HXC) closed up 7.8%. Among the four constituent stocks of the Nasdaq 100, Pinduoduo, JD.com, Baidu and NetEase closed up nearly 19%, 5.4%, 5.4% and 6.5% respectively.
By the close, the S&P 500 was up 1.13 percent, its highest since Feb. 9; the Dow was up 0.74 percent, its highest since Feb. 16; and the NASDAQ closed up 1.95 percent, its highest since Feb. 16. This means that the mainstream US stock indexes have recovered all the losses since the outbreak of the Russian-Ukrainian conflict on February 24.
Financial blogGer Zerohedge also found that the S&P market returned above the key technical level of the 200-day moving average, and the Dow and NASDAQ also returned to the 50-day moving average. The NASDAQ has clearly gained more in recent days and has formed a divide with other stock indexes, rising on 5 of the last 6 days.
Animal spirits return
Of course, the overnight rise in U.S. stocks also had news factors, such as Tesla's opening at the Berlin factory, and the news of Xiaomi and Alibaba's large-scale expansion of buybacks also boosted Chinese stocks.
But good news can only stir up waves in the right atmosphere.
Bloomberg quoted Steve Sosnick, chief strategist at Interactive Brokers, as saying that many investors have returned to full-blown FOMO sentiment, the Feather of missing opportunity, with fear of missing opportunities, "the animal spirit is returning on a massive scale and the market narrative has changed dramatically." ”
But in anticipation of the ongoing Russian-Ukrainian crisis and the Fed's aggressive interest rate hikes, how long this animal spirit can last needs to be marked with a question mark.
Goldman Sachs raised its interest rate hike expectations on Monday, arguing that the Fed will raise rates by 50 basis points each at its May and June FOMC meetings. Derivatives traders are also betting that the remaining 6 Fed meetings this year will raise rates by a total of about 7.5 25 basis points, which equates to a sharp 50 basis point hike that has already been raised more than once. Some analysts believe that the uncertainty of the Fed's "interest rate hike storm" will still be a headwind obstacle for the stock market.
Michael Hartnett, a strategist at Bank of America who is known as "the most pessimistic analyst on Wall Street", believes that the recent rally in US stocks is just a "temporary ceasefire" of the bear market, and the "recession shock" is about to begin.
Hartnett explains that the historic short-selling has contributed to a large extent to the market's broad-based melting:
This is nothing more than a "bear market ceasefire rally" as the world continues to be mired in a stagnant purgatory, and the real bear market won't start until the recession begins, sometime in the second half of 2022.
