Nio Stock Forecast: NIO loses more than 2% after higher inflation reading

NIO stock has stalled out near $9, right at the 21-day simple moving average.
September US CPI report showed a slight pickup in headline inflation.
Nio stock is having difficulty recovering from a 17% plunge following its decision to raise $1.5 billion from convertible bonds.
Equity futures including the NASDAQ 100 advanced 0.4% prior to the CPI release but lost half their gains after inflation arrived above consensus.
US Treasury yields rose on the back of higher headline inflation, with the 2-year gaining more than 1%.

Nio (NIO) stock trades 2.5% lower at the beginning of Thursday's regular session. NNIO appears stuck below the $9 price level, close to the 21-day Simple Moving Average (SMA). Initially, NIO shares advanced close to 1% before the market opened, but the September Consumer Price Index (CPI) read on inflation was higher than expected.

NASDAQ 100, S&P 500 and Dow Jones futures all rallied in the premarket as many viewed the week’s advances as likely to continue. However, equity futures were cut in half after the US CPI data made its debut, and the NASDAQ 100 futures pared gains from 0.4% to 0.2%. The regular market has trimmed some indices, but the market is decidely mixed. The NASDAQ Composite has risen 0.4% in the first half hour, while the Dow Jones has sold off 0.2%.

Nio stock news: Higher headline inflation a bad sign for stocks

Core inflation, the measure that excludes more-volatile energy and food prices, was reported in line with consensus. Economists correctly estimated that the September core CPI rose 0.3% on a monthly basis and 4.1% on an annual basis.

Headline inflation was slightly higher than consensus however. Headline CPI arrived at 0.4% on a monthly basis, above the 0.3% forecast. Similarly, annualized headline CPI was reported at 3.7% instead of the 3.6% forecast. This is likely due to the rise in Oil prices during August and September.

This is mostly viewed as a bad sign for equities, because higher inflation readings could engender the Federal Reserve (Fed) to raise interest rates further. This option has seemed less likely over the past week since a number of Fed officials have said fighting inflation did not require higher rates at this point but rather keeping rates flat at the 5.25% to 5.5% its been at since July.

On Tuesday, San Francisco Fed Bank President Mary Daly said that the higher Treasury yields that have emerged of late can be treated as a substitute for higher rates since it should lead to lower spending and investment. Dallas Fed Bank President Lorie Logan, Fed Vice Chair Philip Jefferson, and Atlanta Federal Reserve Bank President Raphael Bostic all have seemed to agree with Daly in their separate statements.

The CME Group’s FedWatch Tool has seen bets on a rate hike at the November meeting actually fall of late. On Thursday, the FedWath Tool shows a 91% chance that rates remain unchanged, whereas the odds were only 80% one week ago.

Separately, Nio’s stock price has been having trouble achieving lift-off this week after the Huawei-backed Aito company announced it had received 50K orders for its M7 electric SUV. Aito appears to be just the latest competition for the Chinese EV market, and shares of Li Auto (LI) and XPeng (XPEV) also backtracked on the announcement.

EV stocks FAQs

What are electric vehicles?

Electric vehicles or EVs are automobiles that use rechargable batteries and electric motors to accelerate rather than internal combustion engines (ICEs). They have been around for more that 100 years, but battery technology research & development was meager for much of the 20th century. Lithium-ion battery technology became advanced enough to produce EVs at scale in the late 1990s and 2000s, and sales have been steadily increasing since then Tesla’s Roadster was unveiled in 2008. EVs are viewed as a means of reducing carbon emissions since battery electric vehicles (BEVs) themselves produce zero emissions. Other vehicles called plug-in hybrid electric vehicles (PHEVs) utilize both battery electric power and ICEs as a backup.

What is the market share held by EVs?

EVs are growing from a small base, but they rose from 9% of global new auto sales in 2021 to 14% of the total in 2022. This was a 65% YoY growth rate, and the industry delivered 10.2 million EVs worldwide in 2022. Projections show this number climbing above 16 million in 2023. Across the world, market shares differ greatly among nations. Nearly 88% of Norwegian new car sales in 2022 were EVs. On the other hand, the United States, where much of the modern innovation in EVs was forged, had less than 8% of new vehicle sales go to EVs in 2022. The largest EV market in the world, China, saw 30% of the market go to EVs that year.

Who is the father of the EV?

We know you’re thinking Elon Musk, but he’s probably more like the father of the mass-market, contemporary EV. All the way back in 1827, a Hungarian priest named Anyos Jedlik invented the electric motor and used it the following year to power a vehicle of sorts. French scientist Gaston Planté invented the lead-acid battery in 1859, and German engineer Andreas Flocken built the first true electric car for the public in 1888. EVs made up about 38% of all vehicles sold in the US around 1900. They began losing market share rapidly after 1910 when gasoline-powered vehicles grew much more affordable. They largely died off until new research programs in the 1990s led to gradual private sector investment in the 2000s.

Who are the biggest makers of electric vehicles?

China’s BYD is by far the largest manufacturer of EVs in the world. In 2022 it sold 1.8 million EVs and in the second half of the year made up 20% of the global market. The asterisk given to BYD is that the vast majority of these vehicles are hybrids. Tesla’s 12% market share is often treated as more significant than BYD, because it only sells BEVs and is the most famous EV brand in the world. Volkswagen, BMW and Wuling then round out the top five. As a new sector with heavy investment though, many startups have flooded the market. These include China’s Nio, Li Auto and Xpeng; a Swedish-Chinese manufacturer called Polestar; and Lucid and Rivian from the US.

Nio stock forecast

The 21-day Simple Moving Average (SMA) sits at $8.97 at the time of writing. This is exactly where NIO’s stock price closed on Wednesday. Ever since management raised $1.5 billion via convertible bonds on September 18, NIO has experienced resistance near the $9 level.

Typically, $9.50 has been a more formidable point of resistance for NIO shares in the past. The expected dilution from the convertible bond sales appears to have lowered this threshold however.

At this point Nio stock will require a catalyst to boost the share price back into the $10.15 to $11.30 high-volume zone. Support sits near $8.

NIO daily chart

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