Tesla stock rebounds 3% after Friday's brutal selloff: what's behind the move?

Tesla TSLA stock rose in early trading on Monday as investors looked ahead to a pivotal week for Elon Musk's business empire, with SpaceX's highly anticipated initial public offering expected to take center stage.

Shares of the electric-vehicle maker climbed about 3% to $403.65 in early trading, recovering some ground after a sharp decline at the end of last week.

The broader market was also higher. The S&P 500 gained 0.7%, while the Nasdaq Composite advanced 1.2%.

The Dow Jones Industrial Average rose 159 points, or 0.3%.

The rebound follows a difficult session on Friday when Tesla shares dropped 6.6%.

The decline came as technology stocks broadly sold off after a stronger-than-expected US jobs report fueled concerns that interest rates could remain elevated or potentially move higher. The Nasdaq Composite fell 4.2% during the session.

SpaceX IPO in focus

Investor attention this week is increasingly centered on SpaceX, the rocket, AI, and satellite company also led by Tesla Chief Executive Officer Elon Musk.

SpaceX is expected to price its record-setting IPO on Thursday, making it one of the most closely watched public offerings of the year.

Tesla and SpaceX have become increasingly interconnected through collaborations in areas including artificial intelligence applications and semiconductor manufacturing.

Speculation about a potential combination of the two companies has also persisted in prediction markets.

According to betting activity cited from Kalshi, participants currently assign a 50% probability to a merger occurring before May 2027. On Polymarket, odds imply a 43% chance of a merger before the end of 2026.

China sales return to growth

Tesla also received support from improving sales data in China.

Retail sales of Tesla vehicles in China rose 22.5% year-over-year in May to 47,281 vehicles, according to figures released Monday by the China Passenger Car Association.

The result marked Tesla's first year-over-year increase in Chinese retail sales since February and ended a two-month stretch of annual declines.

Retail volumes had fallen roughly 24% in March and about 10% in April before returning to growth in May.

The May figure also represented a significant improvement from the previous month. Domestic retail sales increased 82.2% from April's 25,956 vehicles.

While May sales remained below the 56,107 vehicles Tesla sold in March, they exceeded February's level of 38,206 units by roughly 24%.

The latest figures suggest Tesla may be stabilizing in one of its most important global markets after facing heightened competition from domestic Chinese electric-vehicle manufacturers.

JPMorgan upgrades Tesla

Investor sentiment also received a boost from a rating change at JPMorgan.

The bank on Friday upgraded Tesla to Neutral from Underweight, ending a bearish stance it had maintained since July 2023.

Analyst Rajat Gupta cited Tesla's vertically integrated supply chain and growing artificial intelligence capabilities as key reasons for the change.

Gupta said the interaction between Tesla's various business segments, including automotive operations and robotics initiatives, remains underappreciated by investors.

"Using cell and vehicle production factories as a test bed for Optimus/Humanoids should not only lower [costs] for the base automotive business, but more importantly, help validate the product at an industrial scale," Gupta wrote in a note to investors.