Key Takeaways
- Tesla Reports Decline In Deliveries, Shares Drop 22% Since December
- Debt Ceiling And Dockworker Strike Loom Over Economic Stability
- Gold And Oil Prices Rise Amid Economic Uncertainty And Inflation Risks
Stocks kicked off the first trading day of the year by opening higher, only to see the gains erased as the day wore on. In the end, the S&P 500 and Nasdaq Composite each fell by around 0.2%, while the Dow Jones Industrial Average fell nearly 0.4%. Small cap stocks were the only group to post gains on the day with the Russell 2000 adding 0.7%. Despite the marginal moves for the day, intraday ranges we’re actually quite wide.
One of the bigger losers on the day was Tesla, whose shares have fallen 22% since December 18th when they closed at $488.54. The Electric Vehicle (EV) automaker reported annual deliveries fell 1% on a year-to-year basis. Worldwide deliveries came in at 1.79 million, marking the first time in nearly a decade that annual deliveries declined. At the same time, Chinese EV maker BYD closed the gap with Tesla, delivering 515 thousand vehicles in December and 1.76 million EVs for the year. That was a 12% year-over-year gain.
A couple other stocks in the news include Apple and U.S. Steel. On Thursday, Apple agreed to pay $95 million in cash to settle complaints the company used data collected from Siri without the consent of users. Then this morning, The Washington Post reported the Biden Administration plans to block Nippon Steel’s $14.9 billion deal to buy U.S. Steel. That news has shares of U.S. Steel indicated lower by nearly 10% in premarket trading.
One of the reasons we never saw the Santa Claus rally materialize this year and stocks have traded lower is the looming debt ceiling. After being suspended back in June of 2023, limits on government borrowing were reinstated this week. Congress has until sometimes between January 14th and 23rd to increase or suspend the debt ceiling, otherwise, the government will not be able to pay its obligations, risking a default. Compounding matters is a vote in the House to elect a Speaker. The current Speaker, Mike Johnson, is trying to assemble enough votes to maintain his current role. However, just as we saw when he was first elected to the position, House Republicans are divided over leadership, and we may not see anyone elected when the House votes later today. A delay in electing a leader will only increase the urgency with which Congress must act on the debt ceiling.
Elsewhere, the International Longshoremen/s Association could go on strike as soon as January 15th if they cannot reach a new contract with management. Dockworkers staged a three-day strike late last year before tentatively agreeing to a three-month deal in October. If they should resume their strike, it could shut down ports all along the East Coast and in Texas. This is a story that could have significant consequences if a strike should materialize. The more protracted any disruption becomes, the greater a chance it injects inflation into the economy. I think these negotiations are something traders will want to keep their eye on.
The looming debt issue and potential for a dockworker strike could help explain the run in gold of late. After coming off a strong 2024, gold prices have been trending higher, gaining nearly 1.5% Thursday. Oil prices have also been ticking higher, closing on Thursday above $73 per barrel. With prices back above $70, I think any concerns that oil was suggesting a recession have subsided.
For today, I’m watching to see if markets can hold a rally. On Thursday, stocks began the day strong but couldn’t sustain the momentum. Traders have been selling into any strength of and I’m curious as to when that selling will end. It’s not uncommon to see some capitulation selling after a few days of this type of activity. Therefore, I’m looking for some heavier selling followed by a rally. I think until we see that, we may be in for some continued weakness. As always, I would stick with your investing plans and long-term objectives.
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