Market Highlights: Wall Street rallies as fear index eases; Tesla is an 'auto stock, not AI' says analyst

The ASX is set to track Wall Street higher today
Morgan Stanley analyst believes Tesla is an auto stock, not AI
BTC will soon enter its next halving phase

Aussie shares are set to extend gains on Friday as US stocks advanced in New York. At 8am AEST, the ASX 200 index futures was pointing up by +0.65%.

Overnight, Wall Street rose across the board, with the S&P 500 finishing higher by 1% and tech heavy Nasdaq by 1.3%.

The VIX index, which measures stock market volatility and sometimes called “Wall Street’s fear index”, tumbled 12% as the debt ceiling bill passed the House on a 314-117 vote. An approval by the Senate is expected soon despite a revolt amongst a handful of Republicans.

AI stocks hit a speed bump as C3.ai tumbled 13% on weaker-than-expected full-year revenue guidance. Salesforce also stumbled -5% despite reporting a strong Q1.

Retailers meanwhile cast a different tone, with Nordstrom jumping by +5% after its Q1 beat earnings and sales estimates.

On the economic front, US private payrolls posted another robust beat as employment increased by 278,000 in May, much higher than the 170,000 consensus estimate.

The ADP report noted, “Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.”

Tesla is an auto stock, not AI – analyst

Morgan Stanley analyst Adam Jonas told Bloomberg that at the end of the day, Tesla should be viewed as an auto stock, not AI.

Many investors had hoped that Tesla might be able to get a lift from the AI frenzy that has gripped the markets recently.

“While it is tempting to speak in platitudes about Tesla’s AI chops, the stock’s direction will be dominated by the supply and demand of electric cars over the next 12 months,” Jonas said.

“With such an expansive total addressable market, Tesla can be considered many things. But we think it’s an auto company.”

“Though Tesla is developing several technologies that fall under the broader umbrella of AI — such as self-driving software and Optimus robot — autonomous driving and generative AI are two very different technologies,” Jonas added.

The Tesla share price has nearly doubled in 2023.

In other markets

Crude prices recovered and gained almost 3%, with WTI now trading at US$70.09.

Energy traders are not sure what to expect with the upcoming OPEC+ weekend meeting.

“If prices remain significantly under pressure going into the weekend, the Saudis might try convincing the Russians to take part in some type of modest production cut,” said Oanda analyst, Edward Moya.

Gold rose +0.75% to US$1,977.10 an ounce.

“If tonight’s US jobs report doesn’t impress, that could be the catalyst that takes gold back above the $2000 level,” Moya said.

Bitcoin was down -0.9% in the last 24 hours to US$26,892.

BTC now has less than one year left before its next halving in April 2024, ie: when the reward for mining further cuts in half.

A trader has shared that each time Bitcoin entered into a halving phase (the last three being on November 2012, July 2016, and May 2020), prices increases have accompanied them.

#Bitcoin has entered the final phase before the next halving.
This phase is "UP-ONLY" phase, which was test 3 times in $BTC history.#BTC #Crypto pic.twitter.com/DsGUvkwwyg

— Trader Tardigrade (@TATrader_Alan) May 31, 2023

5 ASX small caps to watch today

Delta Drone (ASX:DLT)
Delta Drone has secured the Basic Aviation Risk Standard (BARS) registration in its operations in Australia and South Africa. BARS is a highly respected industry demonstration and commitment to safety in the aviation world, and was recently extended to cover unmanned aviation in addition to pre-existing manned aviation. BARS registration is increasingly recognised by large mining and oil & gas operators, and other member organisations who utilise airspace as part of their operations.

Lithium Energy (ASX:LEL)
Maiden drilling programme at the Corella Graphite Project has confirmed a significant graphite discovery. Multiple high-grade intercepts of graphite at Corella include: 142m @ 9.5% TGC from surface, and 133m @ 10.1% TGC from surface. These drilling results will feed into the Maiden JORC Mineral Resource Estimate for Corella.

iTech Minerals (ASX:ITM)
iTech announced a breakthrough in REE metallurgy at Caralue Bluff clay-hosted REE prospect. Recoveries of up to 86% TREO were achieved in leaching trials undertaken by METS Engineering. Recoveries of up to 88% were achieved for the MREOs (Nd, Pr, Dy, Tb). These results suggest that the bulk of the REEs should be extractable and not bound within the lattice structure of the clay particles, or in resistive minerals such as zircon or monazite.

Grand Gulf Energy (ASX:GGE)
An independent review has confirmed significant helium flow potential. The review, performed by Blade Energy, indicates reservoir with the potential for significant helium flow in the Jesse-1A well and surrounding area. GGE says these findings de-risk reservoir deliverability for the Jesse-3 well, and provides a potential re-completion of the Jesse-1A wellbore that could generate significant value for a modest cost.

Cyclone Metals (ASX:CLE)
Cyclone previously entered into loan agreements with European Lithium (ASX: EUR) and was advanced funds totalling $2,250,000 (EUR Loans). Cyclone now advises that both parties have agreed that the principal amount of $2,250,000 plus accrued interest will be converted into equity based on a share conversion price of $0.002. All other terms and conditions of the EUR Loans remain unchanged.

At Stockhead we tell it like it is. While Cyclone Metals and Lithium Energy are Stockhead advertisers, they did not sponsor this article.