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Tesla dips despite efforts to expand self-driving, Nike shares fall on supply woes

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Yahoo Finance's Brian Sozzi and Emily McCormick break down which stocks they're keeping a close eye on during Monday's sell-off.

Video Transcript

BRIAN SOZZI: Seeing what could be a challenging star to trading today, and then also for the balance of the week. Really, Dow futures off the worst of the session, but still down more than 500 points. The S&P 500 and NASDAQ also solidly in the red. I'm also looking right now at the CBOE Volatility Index, better known as the VIX index, spiking close to 40%, really at levels not seen since early May at around 26.

So, the volatility is starting to creep back in this market, Emily. And Inez was talking a little bit about it earlier. Not seeing that safe haven trade or those flows into Bitcoin. Looking at Bitcoin, down about 8% so far this morning. Below the 44,000 level. Really, in past selloffs, Emily, we would see investors gravitate to many other cryptos and we're not seeing that really risk off across the board today.

EMILY MCCORMICK: That's right, Brian. Risk off across the board really is the move that we're seeing and the mood in markets, but one of the things that I want to highlight here, and this is a staff that Bloomberg had actually highlighted earlier today, and that's that Bitcoin's correlation on a 30-day basis to NASDAQ 100 futures has actually consistently been positive since February of last year.

And in plain English, essentially what that means is that we are seeing Bitcoin's correlation and the moves in the cryptocurrency, or at least in the biggest cryptocurrency by market capitalization, be more tethered to the moves that we're seeing in the broader market, in the NASDAQ, in particular.

So, this asset really is trading a lot like the other risk assets that we've been seeing on a more traditional basis, but where we are seeing this sort of flight to safety in the markets is in US Treasuries this morning. Now, we are seeing yields coming down across the board here. That 10-year yield, that benchmark 10-year yield, is down more than 4% basis points to just under 1.33%. So, again, Brian, really a risk off move here across the board, and a little bit of a flight to safety when we think about that move in Treasury yields.

BRIAN SOZZI: And you know, I'm not just staying on Bitcoin, of course, but Tesla, of course, owns a little bit of Bitcoin. But Tesla right now is the top trending ticker on the Yahoo Finance platform. I do find it very interesting, Emily. Perhaps Tesla shares are getting swept into the Evergrande debacle.

As we know, a large part of the bull thesis on Tesla stock, because they could mint money in China for the foreseeable future. But given all these crackdowns we have seen, you have to wonder at some point if Tesla's sales are going to slow down. The market might be pricing, or starting to price, that [INAUDIBLE] shares are down, down about 3 and 1/2 percent in the pre-market.

EMILY MCCORMICK: That's right, Brian. And of course, Tesla doesn't actually break out geographically how much of its sales or how many of its deliveries take place in China, but that's something that a lot of analysts have been really focusing on, is this China bull thesis here. The fact that this is the largest electric vehicle market that we have globally is based in China, of course, the Shanghai gigafactory being such a point of strength for the company.

But on a different note. One headline risk that I want to highlight for Tesla as well is we did get news out from the "Wall Street Journal," the National Transportation Safety Board's new head, Jennifer Homendy, did say on the topic of Tesla's full self-driving that she believes that the company shouldn't be rolling out this new software update potentially at the end of this month until the company deals with what the agency has said are existing safety concerns with the company's technology. Now, she also said that the full self-driving term was, quote, "misleading and irresponsible."

So, again, a couple of conflicting and dual headline risks here for Tesla. We think about the China concerns, as well as these ongoing safety concerns, and now, these new headlines around full self-driving. Brian.

BRIAN SOZZI: And we're coming up against that opening bell on Wall Street. And really, it could be a high drama week as we have been talking all morning long. Of course, we have the big Fed decision. You'll have a lot of focus on Evergrande. That continuing fallout as they have to make their debt payments.

And there we just about have the opening bell on Wall Street. That is Archer Aviation. We just talked to that company about a week and a 1/2 ago ahead of their debut. There's the opening bell on Wall Street.

United Airlines CEO, former CEO, Oscar Munoz, on the board of Archer. So they will debut, and hopefully, potentially fly into big stock market gains. And we'll just wait for the first few trades to settle out here on the opening bell.

But again, it's looking like a pretty serious start in the red here for the markets to kick off this week. We'll continue to watch that all morning long. You're seeing the Dow now down about 550 points. The S&P 500 and NASDAQ are also really solidly in the red here.

And of course, Emily, so much focus this morning on China and the Evergrande fallout. Well, Nike's earnings are coming up this week later in the week as well. And really the stock has corrected. It has been a stock correction in Nike on fears on how it's doing in China, given the slowdown in growth there. But also two big concerns I would say on Nike and their supply chain.

They get a large amount of goods from Vietnam. And I'm actually going to point this out. The contract factories for Nike in Vietnam amount for about 51% of their branded footwear manufacturing. And Vietnam, of course, dealing with lockdowns related to COVID. And if Nike can't get those goods out of that key market of Vietnam, they may have trouble meeting some of their financial forecasts.

EMILY MCCORMICK: Absolutely, Brian. And of course, this is one of the earnings results that every quarter we really watch closely, since it is one of the early reporters here. But I think, you know, one of the big stories here heading into earnings later this week for this company is going to be, like you mentioned, how the supply chain in Asia is really impacting results, the supply chain concerns, and port congestion that we've seen globally is impacting results, since that did have such a pronounced impact on Nike in some of the earlier quarters this year.

But overall, we still are expecting, or Wall Street is still expecting, to see Nike's overall sales rise 18% over last year. And some of the strong pockets are likely to be in activewear as well as some of that back to school momentum. We have to remember that sales in China had actually missed expectations in Nike's most recent quarter prior to this one. But at the same time, we did see North America revenues come in at a quarterly record of $5.4 billion.

So, of course, we still have concerns over variants that are occurring in China. Variants of the COVID-19 happening on the global scale. But as we continue to have these reopenings, as we start to see North America the strength in goods spending coming back, that's something that could provide a little bit of a tailwind here for Nike for this latest quarter. Brian.

BRIAN SOZZI: All right, if there's any positive into Nike's earnings this week, it's that expectations have definitely been lowered. We do want to get one more check of the markets here. A couple of minutes into today's trading session, seeing the markets come off the worst of what we had been seeing in the futures. At one point, the Dow futures were down over 600 points.

The Dow right now down about 481 points. S&P 500 and NASDAQ in the red again. Also watching the VIX Index, that is the CBOE Volatility Index, spiking close to 40%. Now back to around 26. Some of the highest levels we have seen since really early May. Quite stunning.