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Anywhere to Go But Up?

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Wednesday, January 2, 2019

Global markets began 2019 with more selling, following disappointing manufacturing numbers out of China and signs of a new global oil glut sending energy stocks lower. Every major overseas index has either closed in the red or appears ready to do so. U.S. indexes, in turn, are also in the red for today’s pre-market.

The challenges we’ve seen over the past couple weeks haven’t changed just because we cracked open fresh new calendars. We don’t even get new economic data before the bell until tomorrow, when we see new Initial Jobless Claims and ADP (ADP - Free Report) private sector payroll figures for last week and the month of December, respectively. Until then, stay strapped in — looks like a bumpy ride to kick off the new year.

Tesla (TSLA - Free Report) shares are trading down more than 7% this morning, upon a new release of vehicle deliveries in Q4 which underperformed forecasts. Although the leading electric car manufacturer produced nearly 1000 automobiles per day for the quarter, its 90,700 deliveries overall was a few hundred short of consensus.

The company has also announced a price cut on its Model S sedan, Model X crossover and its top-selling Model 3 of $2000 per vehicle. Tesla products remain priced in the luxury vehicle category, and government incentives for electric vehicle purchases aren’t what they once were, but the company remains the most popular brand of electric vehicles on the market. That said, these sorts of disappointing delivery figures have become commonplace at the company founded by storied inventor and CEO Elon Musk.

Currently, the Dow looks to open 400 points lower than its close on New Year’s Eve. The blue-chip index has given up more than 3500 points since its all-time highs just 3 short months ago. The Nasdaq’s four-day winning streak looks to be in jeopardy at this hour, down 150 points. The S&P 500 appears ready to open down 40 points, and the Russell 2000 is clearly in bear-market territory.

Even the 10-year treasury bill is noticeably lower — under 2.7% and sitting at its lowest levels in 11 months. In other words, the Fed funds rate was a full percentage point lower the last time the 10-year fell this far. The inversion of the yield curve here — with interest rates at the 2.25-2.50% range — is as close to becoming a reality as we have seen in quite some time.

It would appear we can only go up from here. Hopefully our economic data in the back part of the week will help lift everyone’s spirits. We also see the opening salvos next week of Q4 earnings season; some better-than-expected news on this front might bring us around, as well.

Mark Vickery
Senior Editor

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