By Julia Horowitz | CNN Business
In recent years, when a company announced it was splitting its shares, Wall Street went wild. When Tesla revealed such plans in 2020, its shares immediately soared. They climbed 66% over the next 12 months.
But while worries about the Federal Reserve, inflation and the economy plague investors, those days may be over.
Tesla announced on Friday that it would ask investors to split its shares 3-for-1 at its annual meeting in August. But the stock barely moved after hours on Friday and is slipping in pre-market trading on Monday. Shares are down more than 30% since the company first announced a stock split in late March.
In the case of a 5-to-1 split, someone who owned one share priced at $100 would instead receive five shares worth $20 each. A 3 for 1 split would distribute three shares worth $33.33.
This may not seem like a big deal. Yet in the past, this has helped drive demand, as it makes stocks more accessible to ordinary investors.
It also makes companies more likely to be included in the Dow Jones Industrial Average, which tends to include cheaper stocks. Apple announced a 7-for-1 stock split in 2014 and joined the Dow Jones in 2015.
In the current market environment, it’s hard to get anyone interested in Tesla or many of its fast-growing peers. Amazon’s 20-for-1 stock split went into effect last Monday. Its shares are still down 25% since the start of the year. Alphabet, owner of Google, will split its shares 20 for 1 in July. The stock has fallen 23% this year.
These three companies all took a beating on Friday after government data showed consumer prices in the United States were rising at the fastest rate in 40 years. The consumer price index jumped 8.6% for the 12 months ending in May.
That capped the S&P 500’s worst week since January. The concern is that higher inflation will cause the Federal Reserve to be more aggressive in raising interest rates. When rates rise, it hurts stocks like Tesla, whose prices are tied to long-term growth expectations and earning potential.
Tesla has already seen tons of cash wiped from its valuation this year. In January, it was worth $1.15 trillion. Today, its market value is $722 billion.
CEO Elon Musk’s recent warning that he has a “super bad feeling” about the economy, combined with confusion over whether he plans to cut jobs at the automaker, hasn’t helped. Federal investigators also said last week they were expanding their investigation into Teslas that rammed into parked first responder vehicles.
At some point, Wall Street bargain hunters could come into the picture, putting a floor under stocks that have been hit hard by the recent selloff. But that moment hasn’t arrived yet, even with stock splits on the table.
The $5 gas has arrived. Is $6 around the corner
Over the weekend, the national average price of a gallon of regular gasoline hit $5 for the first time as drivers brace for a painful summer at the pumps.
Gas prices have risen steadily over the past eight weeks. The latest milestone, reached on Saturday, marked the 15th straight day the AAA reading broke a record.
The average price of a gallon of gasoline was $4.42 a month ago and $3.08 a year ago. But the pandemic and the war in Ukraine have strained energy supplies, sending prices soaring.
Rising fuel costs are a big part of the reason inflation in America is rising at such a rapid rate. Energy prices in the year to May soared nearly 35%, data showed Friday.
This is fueling concerns about whether consumers could become more frugal, leading to a weaker economy. Consumer confidence hit a record low on Friday, according to a University of Michigan survey.
Gasoline prices are unlikely to stop rising. As the summer travel season begins, the demand for gasoline will increase. And although some oil producers have promised to increase supply, they are unlikely to make up for shortages as Western traders wean themselves off Russian crude.
The U.S. national average for gasoline could be close to $6 later this summer, according to Tom Kloza, global head of energy analysis for the Oil Price Information Service.
“Everything goes from June 20 to Labor Day,” he said last week of the demand for gasoline as people hit the road for long-awaited getaways. “Come hell or high gas prices, people are going to take vacations.”
The highest statewide average price is in California. It stood at $6.43 a gallon on Saturday
There are really more weddings this year
Scrolling through social media lately, I had to wonder: Are more people getting married this year?
Signet Jewelers, which recently released its quarterly results, has a clear answer: yes.
The world’s biggest diamond jewelery retailer said weddings were at their highest level in 40 years after a lull due to the coronavirus.
“We’ve seen an increase in wedding bands, wedding bands, wedding jewelry, gifts for the bride and groom, that sort of thing,” Signet’s CEO told analysts.
The company said it works hard to persuade people who come to buy engagement rings to come back for their wedding bands. Commitments are expected to rebound to pre-pandemic levels this year, according to Signet.
Shares surged last week after the company beat Wall Street earnings expectations. But they are down more than 20% since the start of the year as diamond prices soar.
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