Stocks have enjoyed a nice rally in November, and Wall Street looked poised to see the good times continue on Wednesday morning. With investors having largely concluded that the Federal Reserve is likely to cut interest rates next year rather than raise them, some believe that a renewed bull market is now inevitable. Stock index futures were up about half a percent before the open.
Gains in major market benchmarks this year have largely come from some of the most massive tech companies in the world. However, many believe that a bull market will have to see gains in other industries beyond technology. In that light, Wednesday morning's rise in auto stocks General Motors (GM 0.48%) and QuantumScape (QS 5.69%) comes as potentially good news, indicating the possible broadening of the stock market's recent rally. Here's what's making shareholders in GM and QuantumScape more optimistic.
GM makes a bunch of shareholder-friendly moves
Shares of General Motors moved higher by 9% early Wednesday. The Detroit automaker gave investors some information about the impact of recent strikes on its business, but it also sweetened that news by announcing a major return of capital to shareholders.
GM reinstated its earnings guidance for 2023 after having withdrawn it several months ago due to labor strikes. In all, General Motors set the cost of the UAW strike at $1.1 billion due to lost production. That led the company to estimate adjusted full-year earnings of $7.20 to $7.70 per share, which was toward the lower end of its previous range of $7.15 to $8.15 per share. However, the automaker sees more favorable free-cash-flow metrics for the year.
In addition, General Motors announced a $10 billion accelerated share repurchase program. Of that amount, $6.8 billion in stock will get repurchased immediately, with the remainder to come at some point before the program's conclusion in the fourth quarter of 2024.
Shareholders were also pleased to see GM raise its dividend by 33% beginning in 2024. The $0.12-per-share quarterly payout would work out to a fairly modest yield of around 1.6% to 1.7%, but it indicates confidence that the automaker can deal with higher labor costs without threatening its financial condition.
QuantumScape keeps looking to disrupt the EV market
Shares of QuantumScape, meanwhile, were up about 7% in premarket trading early Wednesday. The EV battery technology company has dealt with plenty of ups and downs in recent years, but investors have seemed more optimistic about its long-term prospects over the past couple of days.
QuantumScape has been a pioneer in researching solid-state EV batteries. Solid-state batteries theoretically have big advantages over conventional lithium-ion battery cells that you'll typically find in EVs currently on the market. Increased energy density means being able to use lighter batteries without sacrificing range. Moreover, a solid-state battery design would avoid some of the safety concerns about potential battery fires that currently plague lithium-ion batteries. Perhaps best of all, faster charging times of as little as 15 minutes could make EVs more viable for a wider range of customers.
Companies in the EV business have benefited from government initiatives lately, and word earlier this month of $3.5 billion in funding from the Department of Energy to support battery makers and lithium producers could help QuantumScape overcome obstacles to get its technology ready for commercial use.
Shareholders have had to be patient with QuantumScape, as the stock has fallen sharply from its highs in late 2020 and early 2021. If its EV battery technology eventually gets on the road, however, it could prove to be a big turning point for QuantumScape's business.
