A rally in Tesla Inc. on Tuesday shows how eager investors are to look past a litany of risks -- from war in Ukraine to rising interest rates to slowing growth -- and bet on stock market winners.
Tesla shares surged 7.9% for their best day since Jan. 31, helping to make the consumer discretionary sector by far the biggest gainer in the S&P 500 Index, rising 2.5% compared with an increase of 1.1% in the broader benchmark. But the electric-vehicle maker was hardly alone. Strong performances by automakers, retailers Etsy Inc. and Nike Inc. and travel related-companies such as Wynn Resorts Ltd. and Booking Holdings Inc. also helped drive the group. Meme stocks also made a reappearance, with GameStop Corp soaring 31%.
The outperformance comes against the backdrop of an ongoing bloodbath U.S. Treasuries, where yields on 10-year bonds are the highest since May 2019. And it’s happening in defiance of the Federal Reserve’s aggressive rate-hike regime aimed at clamping down on the fastest rate of inflation in 40 years.
“Many investors have reverted to full-on FOMO, certainly not caring about the gloomy message being sent by the bond market,” said Steve Sosnick, chief strategist at Interactive Brokers. “Is Amazon or Tesla suddenly worth 20-25% more than they were two weeks ago? Or GameStop worth 30% more today than yesterday? Animal spirits are back in a big way and the market narrative has flipped on a dime.”
To be sure, a spate of positive news on many different fronts helped bolster optimism during the session. Tesla opened a new factory in Berlin, a welcome development as automakers globally grapple with lingering supply shortages that are weighing on production plans. Nike, meanwhile, posted healthy earnings that gave investors a “big sigh of relief” and underscored the strength of the brand.
Tesla, in particular, may simply be in the right place at the right time. It’s benefiting from rising investor interest in electric vehicles as the price of oil has surged since Russia invaded Ukraine late last month and is hovering around the highest level in over a decade. And it’s getting a bounce from investors looking to chase stock-market winners. Tesla shares have rallied 30% since Feb. 23, the day of the invasion, while the consumer discretionary sector is up 10% and the S&P has gained 6.8% in the same period.