Analysis of US stocks in August: Moderna and General Motors

The stock price of American companies is influenced by positive statistics on the labor market

In August, the quotes of American companies are largely determined by the positive results of the labor market recovery. Impressive results were demonstrated simultaneously by the public and private sectors of the economy, which positively affected the stock price of American companies. Among the most interesting issuers, analysts distinguish automobile concerns and financial companies. We offer a traditional analysis of the shares of American companies.

The impact of the labor market

The main positive news that positively affected the stock price of American companies was a positive report on the labor market in the United States. According to the results of July, positive results were recorded in a number of parameters, including the number of new jobs, the unemployment rate and hourly wages. The results reinforce analysts ' expectation that the US labor market has recovered sufficiently, and in the near future the Fed may abandon the quantitative easing program.

This will lead to a sharp strengthening of the dollar against other currencies. In particular, the US currency has already grown against the euro, and the yield on US government bonds has increased from 1.22% to 1.28%. In parallel, the main US indices S&P 500 and Dow Jones are strengthening. However, the rejection of the quantitative easing policy is also expected to lead to an increase in interest rates in the economy, which in turn is likely to have a negative impact on technology companies traded on the Nasdaq.

In July, a record number of new jobs was created — 943 thousand, this is the maximum value for the last 11 months, and analysts did not expect such a result. Moreover, the official departments recalculated the number of new jobs created in June — it increased by 119 thousand to 938 thousand jobs.

Moreover, both the public and private sectors of the economy have made their contribution to the fight against unemployment. 240 thousand new jobs were created in the public sector, and 703 thousand in the private sector. Moreover, the most actively restored jobs in the entertainment and hospitality segment, primarily restaurants, theme parks and other recreation centers. This sector provided two-thirds of new jobs in private business.

The statistics were not even worsened by the reduction of jobs in the field of education — in July, due to the closure of schools, the number of employees in this field usually decreases by 1 million people, and the reduction of employees in car companies begins due to a lack of components. However, so far the number of jobs in the American economy is 5.7 million less than before the start of the pandemic. However, the growth of the business activity index in the US services sector, which reached a new record in July, gives hope for the future. In many ways, the labor market is stimulated by the refusal to pay increased unemployment benefits — $300 per week, which forces workers to look for a new job. Another important factor that positively affects the stock price of American companies is the growth of vaccination.

According to official data, unemployment in the US market fell from 5.9% to 5.4% in July, which is the lowest since March 2020. As a result, the ratio of the labor force to the economically active population increased slightly from 61.6% to 61.7%. The growth rate of hourly wages reached 0.4%. According to one of the Fed's leaders, Christopher Waller, if 800 thousand new jobs are registered in the United States in July and August, then in September the regulator may refuse to buy assets or start curtailing the quantitative easing program. However, there is no single point of view even among the Fed leadership — so far the official position says that the policy will not be revised until November, which will positively affect the stock price of American companies. Moreover, there are no plans to raise rates until the end of 2022.

Analysis of shares of American companies

One of the expected trends that should affect the stock price of American companies is the rate of the US presidential administration on the environment. In August, US President Joe Biden is expected to sign a program according to which the share of electric vehicles in the American market should reach 50% in 2030. Moreover, according to the administration's idea, emissions from gasoline cars should be sharply reduced by 2026.

American automakers have already supported the president's initiative, but they directly stated that the introduction of new technologies will require billions of dollars in government funding. Moreover, the largest concerns Ford, General Motors and Stellantis issued a joint statement in which they confirmed their goals to achieve sales of electric vehicles at the level of 40-50% of all sales in the United States per year by 2030. The new program includes not only electric cars, but also hybrid cars and electric cars with fuel batteries. Thus, investments in shares of automobile concerns can bring profit.

Among the players that are recommended to look at in August, analysts also name the manufacturer of the coronavirus vaccine Moderna. The company's quarterly report showed more positive results than analysts had predicted. However, the share price of Moderna still moved to a correction. This is largely due to the fact that the company, in fact, remains the manufacturer of one commercially successful product. The company has directed the funds earned from the sale of the vaccine to new research, but so far they have not brought results.

Moreover, as analysts predict, the coronavirus pandemic is expected to weaken in two to three years, which may negatively affect the stock price of Moderna. And the company is unlikely to be able to compensate for the reduction in revenue from the sale of the vaccine. Before the publication of the report for the third quarter, the company's shares are likely to move to a correction, and this will be a good moment to buy the company's shares.

Among the leaders of the month, it is worth noting the shares of General Motors (GM), whose profit in the first six months of 2021 reached $5.858 billion, compared with a $464 million loss a year earlier. Thus, the company's net profit per share reached $3.93 compared to a loss of $0.39 a year ago. In general, the company's revenue jumped by 35% to $66.641 billion compared to the same period last year. In many respects, such results are caused by the recovery of sales in the car market. In the first six months of 2021, 1.581 million cars were sold worldwide, which is 14% higher than last year's figure. Moreover, the pace of market recovery is increasing: in the second quarter, 760 thousand cars were sold, which is 1.8 times more than a year earlier.

At the beginning of August, an unexpected growth was demonstrated by the stock price of Robinhood Markets Inc-investors began to buy securities after they collapsed immediately after the IPO. As a result, in just one trading day, the shares reached the level of $70.39, which is below the maximum result of $85. In general, the company rose by 82% in just one session. Thus, the share price of Robinhood significantly exceeded the placement price of $38.

Following the results of the first trading session, Robinhood shares fell by 8.37% from the placement price — this result is considered rather negative for a company that has decided to enter an IPO. This result is partly explained by the actions of traders from the Reddit platform, who actively played against the growth of the company's quotes. This is largely due to their dissatisfaction with the fact that Robinhood previously restricted the purchase of GameStop shares. Another group of investors was unhappy that retail investors received only 20% of the shares during the IPO. Thus, the placement was aimed primarily at institutional investors.

Among those who showed a decline in indicators, we can call Uber Technologies Inc, which in early August reported losses for the second quarter. The indicators were influenced by the decision to increase payments to drivers in order to return them to the platform. As a result, the company's quarterly loss amounted to $509 million, although investors expected a loss of $324.5 million. Thus, the company's results were worse than expected, although it still plans to achieve positive adjusted EBITDA by the end of the year. However, the company stipulates that the spread of the delta strain can seriously affect its performance. In any case, food delivery remains one of the ways to diversify. Uber shares reacted to the publication of financial results by falling by 5%.

The S&P 500 index is moving in an uptrend, according to a technical analysis of US stocks. The RSI indicator indicates a triple "bearish" divergence, which indicates a possible short-term correction. However, in order for the index to move into the red zone, it must break through the support level located at 4370 points. Before that, the "bulls" were able to hold this level. At the moment, the resistance is located at the level of 4480 points.

The main negative factor that can affect the stock price of American companies remains the threat of the spread of a new delta strain, but in many respects the danger can be leveled thanks to mass vaccination. In the near future, the Joe Biden administration is ready to allocate additional funds to stimulate the vaccination campaign.