The broader market sell-off
In the last week, the broader market has witnessed a sharp negative movement, which may have been triggered by a variety of factors, including rising bond yields, fears of a slowdown in China, and America’s ongoing trade tussle with China.
As of 1:25 PM EDT on October 10, the S&P 500 Index, the Dow Jones Industrial Average, and the NASDAQ Composite Index have fallen 1.3%, 1.3%, and 1.7%, respectively. Now, let’s find out how today’s broader market sell-off is taking a toll on auto stocks (XLY).
Auto stocks amid the market sell-off
Ferrari (RACE), Fiat Chrysler Automobiles (FCAU), Tesla (TSLA), and Harley-Davidson (HOG) have taken the worst hits today. As of 1:25 PM EDT, RACE, FCAU, TSLA, and HOG have fallen 7.8%, 4.5%, 2.4%, and 1.6%, respectively. In contrast, General Motors (GM) and Ford Motor Company (F) have risen 0.8% and 0.1%, respectively.
Despite its strong fundamentals, Ferrari has tanked the most today. Today’s sharp drop in Ferrari stock could be seen as a technical correction as investors rush to book profits for fear of a steep fall in equities.
On October 9, Ferrari was the only automaker trading in positive territory on a YTD (year-to-date) basis with a 23.0% gain. In comparison, GM, Ford, FCAU, and TSLA had fallen 20.3%, 27.5%, 4.7%, and 15.6% YTD, respectively, compared to the 7.7% YTD rise in the S&P 500 Index.
Why are GM and Ford in the positive?
GM and Ford seem to be defying the broader market sentiments today, as they’re trading in the green right now. However, both automakers hit their 52-week lows earlier today before witnessing this recovery. A stock’s 52-week low and 52-week high are widely considered by traders to be its key support and resistance levels, respectively. Therefore, the minor recoveries in GM and Ford could be technical rebounds after they hit their 52-week lows earlier today.
Overall, the auto industry is one of the sectors that has been the most negatively affected by America’s ongoing trade war with other countries, including China and many European countries. A continuation of the broader market sell-off could badly hurt auto investors’ sentiments in the coming sessions.