- MULN stock drops almost 10 cents after the release of stronger-than-expected US labor data.
- The data increases expectations of the Federal Reserve will have to significantly tighten monetary policy, hurting risk assets including stocks.
- Mullen had been on the rise after the company hired a law firm to take naked short sellers to task.
- MULN stock has gained over 200% in 48 hours, jumping from $0.10 to $0.32.
Mullen Automotive (MULN) stock lost some of its strong gains on Thursday afternoon once US data showed the labor market in better shape than economists had expected. Now in Friday’s premarket, MULN stock is charging up 7.6% to $0.2375.
A popular penny stock, Mullen had been enjoying a meteoric rise after the news the company hired a law firm to go after naked short sellers who had been dumping the stock. From trading at $0.10 on Wednesday, it rose to just above $0.32 per share by Thursday, likely in part due to short sellers closing some of their positions, resulting in a short squeeze.
The stock fell almost 10 cents to trade at around $0.23, during the US session on Thursday, however, after the release of US labor market data, as traders interpreted a strong job market as likely to prime inflation. This will inevitably lead to more interest rate hikes from the Federal Reserve (Fed), pushing up the cost of borrowing and creating a headwind for businesses.
MULN gives back gains after US employment outlook improves
MULN stock declined to fill part of the roughly 50% gap up created between Wednesday’s close and Thursday’s open, on the back of better-than-expected figures from payrolls giant Automatic Data Processing (ADP), who reported 497K more jobs had been filled in June – economists had forecast only 228K from May’s 267K.
In addition, Continuing Jobless Claims fell to 1.72 million versus the forecast 1.75M, and below the 1.73M prior. Challenger Job Cuts showed 40.7K cuts – half the 80.1K previously. Initial Jobless Claims data was the only labor market print on Thursday that was negative, after showing a higher-than-expected gain of 248K compared to the expected 245K.
A stronger labor market suggests inflation will remain high, as more people earn and spend, leading the US Federal Reserve (Fed) to hike interest rates. This in turn will make it more expensive for companies to borrow as well as refinance their existing liabilities.
Mullen stock news: Hiring Christian Attar law firm
The euphoria that had surrounded Mullen stock prior to correction was a product of the company hiring the Christian Attar firm to bring charges against alleged naked short sellers and others who had attempted to manipulate the MULN stock price. Naked short selling is when a market participant sells short a particular stock without first borrowing actual shares. This illegal practice allows traders to short more of a given stock than the number of tradable shares existing in the market.
Formerly called the Christian Levine Law Group, Christian Attar will work in partnership with Warshaw, Burstein and LLP to combat the alleged market manipulation. Mullen said he had received reports from a company called ShareIntel that such naked short selling had occurred in the recent past.
The most recent information shows that slightly more than 27 million shares of MULN stock was sold short, according to the financial news website Benzinga.com.
“Since our announcement on April 28, we have been actively investigating naked short selling, and we now have enough intel to have the law firm actively investigate and, where justified, take action against any market manipulators using naked short selling, spoofing or other illegal acts,” said CEO David Michery in a statement.
Lost on no one is that the electric vehicle manufacturer’s extreme dilution in the first half of 2023 is the major culprit in the MULN share price losing nearly 98% of its value this year alone. In order to ramp up production of its Mullen One delivery van and its Mullen Three cab chassis, Mullen sold on the order of 2.3 billion shares and/or warrants. This grew the overall share count by about 10 times over.
Mullen had a cash position of $235 million as of June 23, which Michery says should give the company a 12-month runway at least. Mullen can also finally leave his mantle as a “pre-revenue” company behind. On June 29, the company announced that it had sold 22 Mullen One EV cargo vans to Randy Marion Automotive – a dealership based in North Carolina – for $308,000. This is the first official revenue the company has received, and it will be reported on Mullen’s second-quarter results.
NonFarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the other hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be tighter in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helping higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when the NFP came out higher-than-forecast, but the Average Weekly Earnings was lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in rare events such as the “Great Resignation” or the Global Financial Crisis.
Mullen stock forecast
The Mullen stock price shooting up nearly 70% on Wednesday was mostly just a result of the low base it was coming from. Again on Thursday the market is demonstrating that the rally has legs. The MULN share price has tacked on another 57% to trade near $0.27. This is quite close to the 21-day Simple Moving Average (SMA) at $0.275.
A close above that level in Thursday’s regular session would signal this rally will continue. Due to the extreme dilution that has taken place during the second quarter, the daily chart’s past areas of support are insignificant. If retail traders do treat them with respect though, the $0.30 level showed signs of resistance on June 15 and 16. Also in late May the region between $0.72 and $0.75 provided momentary support.
MULN daily chart