Tesla and Boeing are in decline
Stable US economy provides confidence
January 25, 2024, 10:47 p.m
The most important US indices make profits at the close of trading. However, a surprisingly strong economy and mixed company news are dampening the buying mood. It’s not enough to set new records.
Unexpectedly strong US economic growth in the fourth quarter of 2023 has created a good mood on Wall Street. The Dow Jones Index went up 0.6 percent to 38,049 points in the tension between a bullish IBM share and a tumbling Boeing share. The S&P 500 rose by 0.5 percent and those that have mostly done better recently Nasdaq indices gained 0.2 percent. According to initial information, there were 2,136 (Wednesday: 1,273) price winners and 701 (1,557) losers on the Nyse. 67 (68) shares closed unchanged.
In the fourth quarter, GDP rose 3.3 percent on an annual basis, while economists had expected just 2.0 percent. At the same time, the deflator for personal consumption expenditure (PCE), favored by the US Federal Reserve as a measure of inflation, rose by 1.7 percent, compared to 2.6 percent in the third quarter. Other economic data of the day such as durable goods orders and weekly labor market data were below expectations, which, like the PCE deflator, sparked new hopes that interest rates will soon fall.
Yields on the bond market fell sharply, by a good 5 basis points to 4.13 percent in the ten-year range. The players were not bothered by the fact that the strong GDP growth speaks against interest rate cuts in the near future. The fact that the ECB, as expected, confirmed interest rates and ECB boss Lagarde avoided specifying the timing of possible interest rate cuts also provided a tailwind for bonds. This leaves the door open for a first cut as early as April, market participants said.
Eagerly awaited: Fed interest rate outlook
When the US Federal Reserve makes its interest rate decision next week, interest rates are also generally expected to remain unchanged. The main focus will then also be on the outlook. Before that, another important price date is on the agenda on Friday with the PCE price index for personal spending in December. Economists expect a decline to 3.0 from 3.2 percent year-on-year.
On the foreign exchange market, the dollar rose sharply by a good 0.4 percent to 1.0840 per euro. While the dollar received support from US GDP, the euro tended to suffer from interest rate cut speculation that continued even after the ECB statements.
IBM is bullish – Tesla is in reverse gear
On the stock market, business figures and outlooks drove prices again. The clear winner in the Dow was “Big Blue” IBM. The driver was an optimistic outlook. In addition, profits and sales in the final quarter exceeded expectations and IBM reported a sharp increase in demand for its AI software. The IT giant is also planning a restructuring program. The price shot up 9.5 percent.
We ended up lagging behind in the Dow Boeing (-5.7%). The US aviation authority has lifted the flight ban on the 737 Max 9, which was imposed after new incidents. At the same time, however, it initially prohibited Boeing from producing any more aircraft of this type. Bank of America has downgraded Boeing to neutral.
For the Tesla stock there was a steep decline of 12.1 percent. According to its own estimates, the electric car manufacturer will increase vehicle sales less significantly this year than in 2023. In the final quarter, sales and adjusted earnings were also below consensus estimates. Microsoft closed 0.6 percent higher. Around 1,900 employees in the gaming division have to go. According to an internal email, these are surplus positions after the takeover of Activision Blizzard.
Oil prices are rising
The chemical company Dow slipped into the red in the fourth quarter, although adjusted earnings were slightly higher than analysts expected. The price rose by 3.5 percent. American Airlines increased by over 10 percent. The airline beat fourth-quarter earnings expectations and posted a positive earnings outlook.
Oil prices rose sharply by around 3 percent. US economic growth sparked speculation about increasing demand. There was also a report about a now-extinguished fire at a Russian refinery that supplies oil to Turkey, China, Malaysia and Singapore. In addition, continued attacks by Houthi rebels on ships in the Red Sea had an impact on prices.