Shares of AutoNation (NYSE:AN), CarMax (NYSE:KMX), Group 1 Automotive (NYSE:GPI), Sonic Automotive (NYSE:SAH), and just about every other publicly traded automotive dealership group were soaring (some by double digits or higher) on Monday after a handful of positive developments made headlines. CarMax closed 5.2% higher, AutoNation was up 9.8%, Sonic finished 17.5% higher, and Group 1 was the big winner, up almost 20%.
Before we get to automotive related news, one comment that propelled broader markets higher today was from Federal Reserve Chairman Jerome Powell. He noted that the central bank still had plenty of ammunition if needed, and that while second-quarter data is likely to be rough, the economy is expected to recover gradually through the second half of 2020. For investors, it's nothing that hasn't been said before, but it's reassuring that the Fed is willing and able to do what it takes to get the economy back on track.
Another positive development for the markets today was from Moderna, a biotech, when it announced its vaccine mRNA-1723 was found to be safe, well tolerated, and capable of producing antibodies that could "neutralize" the new coronavirus in patients. It brings hope the COVID-19 impacts can be controlled sooner, rather than later. Late-stage trials could start as soon as July.
An interesting takeaway for auto investors comes from China, where the country's auto industry has been dealing with coronavirus impacts longer than the U.S. market. Automakers have resumed output, dealerships have reopened to the public, and new-vehicle sales increased for the first time in nearly two years in April. This is a huge silver lining for auto investors hoping the U.S. auto market can bounce back after new vehicle sales plunged and used-vehicle prices tanked due to COVID-19 social distancing and travel restrictions.
Perhaps the biggest reason the automotive sector is soaring today is that Detroit is coming back to life as the Big Three automakers and their suppliers restarted assembly lines after a two-month lockdown. The major automakers have been preparing for weeks to reopen North American factories safely, and it's obviously good news for the nation, since the industry accounts for roughly 6% of U.S. economic activity. There have been unforeseen consequences from the COVID-19 related shutdowns, and there's seemingly endless uncertainty with how quickly sales will rebound.
But today feels like a step forward for the automotive industry as well as the broader economy. That said, investors would be wise to take today's gains with a grain of salt as second-quarter financials and other data will be abysmal.