Markets fall as investors weigh expectations over interest rate cuts

Dow inched up 16, decliners slightly over advancers & NAZ lost 250.  The MLP index was off pennies at 254 & the REIT index went up 2+ to the 397s.  Junk bond funds edged higher & Treasuries were sold, raising yields (more below).  Oil inched higher pennies in the 71s & gold slid back 4 to 2067.

AMJ (Alerian MLP Index tracking fund)

Tesla (TSLA) published its 4th-qtr vehicle production & deliveries report for 2023:

Total deliveries Q4 2023:            484,507
Total production Q4 2023:          494,989
Total annual deliveries 2023:   1,808,581
Total annual production 2023: 1,845,985

In 2022, the Elon Musk-led automaker reported annual deliveries of 1.31M & production of 1.37M electric vehicles.  The new numbers represent delivery growth of 38% year over year & production growth of 35% year over year.  In 2022, the company reported 40% growth year over year in deliveries from 2021.   In Oct, execs offered guidance that the company would notch at least 1.8M deliveries for the full year, a number they had revised down from a 2M goal earlier.  Analysts had expected  deliveries of 477K for the year-ending qtr as of Dec 28.  Deliveries are the closest approximation of sales reported but are not precisely defined in the company's shareholder communications.  In Oct, CEO Musk said the company's Model Y entry-level SUV was likely to “be the bestselling car on Earth, but not just in revenue, but in unit volume,” for the year.  TSLA does not break out delivery & production numbers by individual model but reported combined numbers of: TSLA produced 476,777 Model 3 & Model Y vehicles during the qtr & reported 461,538 deliveries for these models.  It didn't break down Model S or X production or delivery numbers, instead batching them into “Other Models.”  It produced 18K other models & delivered 23K during the qtr.  The stock rose 27¢.

Tesla reported 485,000 deliveries for the fourth quarter, bringing 2023 total to 1.8 million

Denmark-based shipping giant Maersk said it will once again pause all transits thru the Red Sea & Gulf of Aden after one of its vessels came under attack by Houthi rebels on Sat.  The announcement comes just one week after Maersk officials said it would resume routes thru the area which were stopped because of similar attacks.  Maersk said routes thru the Bab el-Mandeb Strait were paused in early Dec because of attacks against its ships & the Suez Canal, which is heavily traversed by ships from around the world, became unstable for most routes.  On Dec 19, National Security Council spokesman John Kirby said ships & aircraft of several nations would join the US in conducting surveillance & taking defensive action against Houthi rebels who target commercial ships in the Red Sea, in what is being called, "Operation Prosperity Guardian."  With the operation in place, Maersk said on Fri that it was resuming voyages thru the Red Sea & Gulf of Aden, as well as the Suez Canal, as a gateway between Asia & Europe.  Everything changed Sat, when the container ship Maersk Hangzhou reported they were struck by a missile while transiting the Southern Red Sea.  The container ship requested assistance, & the USS Gravely & USS Laboon responded.  While responding, the USS Gravely shot down 2 anti-ship ballistic missiles fired from Houthi-controlled areas in Yemen toward the ships.  Maersk said that after being struck by an unknown object & seeing no indication of fire on the ship, it continued its transit north in the Red Sea.  Then, 4 boats approached the vessel & opened fire in an attempt to board the ship.  Maersk Hangzhou's security team, along with a helicopter deployed from a nearby navy vessel, thwarted the attempt & the crew of the Hangzhou was reported to be safe.  "The safety of our crew is our utmost priority and all necessary security measures have been implemented to protect them," Maersk said. "Maersk is currently working to ascertain the full details of the incident involving Maersk Hangzhou."  Maersk said it is pausing voyages in the area until at least Jan 2, at which point the company expects to provide customers with an update on the situation.

Maersk pauses Red Sea voyages a day after Houthis attack ship

Treasury yields climbed as 2024 trading kicked off & questions about the outlook for interest rates & the state of the economy remained.  The yield on the 10-year Treasury was up by 8 basis points at 3.943% & the 2-year Treasury yield was also last up 8 basis points higher at 4.328%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  2023 marked a tumultuous year for bond markets, with the 10-year Treasury yield rising above 5% in Oct before ending the year below 3.9%.  The interest rate hikes, persistent inflation, recession fears & market shocks like the regional banking crisis in the US were among factors that shaped bond markets in 2023 & several of them will likely also have a significant impact in the year ahead.  Markets are widely expecting the Federal Reserve to have reached the end of its rate-hiking cycle, with the central bank having left rates unchanged at its last 3 meetings.  Rate cuts are expected in 2024, with the Fed saying it was anticipating 3 cuts.  When they will take place remains unclear.  Even after these initial rate cuts, interest rates will remain higher, which has caused concerns about how this will affect the economy & whether the US will dip into a recession this year.

Treasury yields climb as 2024 trading begins

Stocks drifted lower as investors assess uncertainties.  While interest rate cuts are expected, timing  by definition is unpredictable, Q4 GDP is expected to be under the 4.9% rate in Q3 & with the goings on in the Red Sea, the future for oil prices, a key part of inflation, can not be predicted & the stock market is heavily overbought after the extraordinary run in the last 2 months.  This could be a wild year in the stock market.

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