Weakness in Tesla and Apple Weighs on Stock Market

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.48%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.71%.

Stock indexes this morning gave up early gains and turned lower, weighed down by losses in Tesla and Apple.  Tesla is down more than -9% after reporting fewer-than-expected vehicle deliveries in Q4, and Apple is down more than -3% after Nikkei reported the company had told several suppliers to make fewer components for its product due to demand concerns.

Stocks this morning initially opened higher on carry-over strength from a rally in other world equity markets as signs of China’s recovery have fueled some hope about the global economy.  A recovery in subway use in major cities in China indicates Covid infections in China may have peaked.  Market sentiment is also improving on hopes that supply chain issues in China will continue to ease, which could help bring down inflation. 

In addition, U.S. stocks have support from a rally in European stocks after today’s news showed German December consumer prices rose at a slower pace than expected and German unemployment in December unexpectedly declined. 

Stocks are also seeing support from a sharp -14.2 bp decline in the 10-year T-note yield to 3.733%.  T-note yields are lower on carry-over after the 10-year German bund yield today fell to a 2-week low when German Dec CPI rose less than expected. 

Overseas stock markets today are higher.  The Euro Stoxx 50 index is up +0.53%.  The Shanghai Composite index closed up +0.88%, and Japan’s Nikkei Stock index did not trade with markets in Japan closed for the New Year holiday.

Today’s stock movers…

Tesla (TSLA) is down more than -9% today to lead losers in the S&P 500 and Nasdaq 100 after reporting it delivered 405,268 vehicles in Q4, below the consensus of 420,760.

Apple (AAPL) is down more than -3% to lead losers in the Dow Jones Industrials after Nikkei reported the company had told several suppliers to make fewer components for AirPods, Apple Watches, and MacBooks for Q1 due to weakening demand. 

Molson Coors Beverage (TAP) is down more than -5% after Wells Fargo downgraded the stock to underweight from equal weight, saying it sees a “significant downside” to consensus earnings estimates in 2023. 

Molina Healthcare (MOH) is down more than -4% after Centene Corp won contracts to run U.S. Medicaid plans in Los Angeles County and other large California markets where it had previously been excluded for 2024, a move seen undercutting the earnings of Molina Healthcare.

CVS Healthcare (CVS) fell more than -1% in pre-market trading after Evercore ISIS downgraded the stock to inline from outperform.

Newmont Corp (NEM) is up more than +4% today to lead gainers in the S&P 500 as mining stocks gained after gold prices jumped to a 6-1/2 month high and silver prices soared to an 8-1/2 month high. 

PayPal Holdings (PYPL) is up more than +3% after Truist Securities upgraded the stock to buy from hold with a price target of $95. 

U.S.-listed Chinese stocks are moving higher amid signs that Covid infections in China may have peaked.  Pinduoduo (PDD) is up more than +6% to lead gainers in the Nasdaq 100.  Also, Baidu (BIDU) and NetEase (NTES) are up more than +5%.  In addition, Alibaba Group Holding (BABA) is up more than +4%, and JD.com (JD) is up more than +3%. 

U.S. casino operators with exposure to Macau are climbing in pre-market trading after JPMorgan Chase said it remains bullish on the operators heading into this year.  Wynn Resorts (WYNN) is up more than +2%.  Also, MGM Resorts International (MGM) and Las Vegas Sands (LVS) are up more than +1%.

Block Inc (SQ) is up more than +2% after Baird upgraded the stock to outperform from neutral.

Across the markets…

March 10-year T-notes (ZNH23) today are up +22 ticks, and the 10-year T-note yield is down -14.2 bp at 3.733%.  Mar T-notes today are moving higher on carry-over support from a rally in European government bonds.  The 10-year UK gilt yield fell to a 2-week low today at 3.537%, and the 10-year German bund yield fell to a 1-1/2 week low of 2.342%. 

The dollar index (DXY00) today is up by +0.96%.  The dollar this morning jumped to a 2-week high and is moderately higher.  A slump in European government bond yields today weakened the interest rate differentials of the euro and the British pound, benefiting the dollar.   

EUR/USD (^EURUSD) today is down by -0.85% at a 3-week low.  The euro is falling today on dollar strength and lower German bond yields.  Weaker-than-expected German December consumer price news today is dovish for ECB policy and knocked the 10-year German bund yield down to a 1-1/2 week low, which weakened the euro’s interest rate differentials. 

Today’s German labor market news was better than expected and was bullish for EUR/USD.  German Dec unemployment unexpectedly fell -13,000, showing a stronger labor market than expectations of +15,000.  The Dec unemployment rate was unchanged at 5.5%, showing a stronger labor market than expectations of 5.6%.

Germany's Dec CPI (EU harmonized) rose +9.6% y/y, weaker than expectations of +9.0% y/y and the slowest pace of increase in 4 months.

USD/JPY (^USDJPY) today is down by -0.43%.  The yen today rallied to a 7-month high against the dollar.  Speculation that the BOJ will end its negative-rate policy and raise interest rates this year is fueling some short covering in the yen. Trading activity in the yen today was dampened with the Japanese markets closed for the New Year holiday.

February gold (GCG3) this morning is up +25.1 (+1.37%), and March silver (SIH23) is up +0.645 (+2.68%).  Precious metals prices this morning are sharply lower, with gold climbing to a 6-1/2 month high and silver posting an 8-1/2 month high.  A slump in global bond yields today is pushing gold prices higher. Silver prices jumped today on signs that Covid infections in China may have peaked, which would lead to an increase in economic activity and industrial metals demand.  A rally in the dollar index to a 2-week high today is a bearish factor for metals.

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