This report is from today’s TNC’s Daily Open, our international markets update. TNC Daily Open keeps investors informed on everything they need to know, no matter where they are.
What To Note Today
US markets have a negative start to the year.
All of the main U.S. market indices saw a decline on Thursday, giving up earlier gains, as the year got off to a gloomy start. For the first time in almost two years, the U.S. dollar index reached its peak. The pan-European Stoxx 600 index reversed earlier losses with a 0.6% gain. Despite a 0.3% decline in Europe’s banking index, oil and gas companies led advances, rising 2.3%.
Tesla delivers gains in reverse.
Following the company’s announcement that overall deliveries in the fourth quarter of 2024 decreased year over year, Tesla’s stock sank 6.1%. According to a consensus of estimates compiled by StreetAccount, the number was not only below projections, but it was also Tesla’s first yearly decline in deliveries. According to Tesla, deliveries are the closest estimate of sales.
Meta’s new global affairs president
Joel Kaplan, the company’s current policy vice president and a former Republican Party worker, will take Nick Clegg’s place as president of global affairs. Clegg was a former British deputy prime minister. It’s an indication of how IT firms are preparing for the upcoming administration of U.S. President-elect Donald Trump in Washington.
Russia’s gas supply has stopped
In a widely anticipated step, Ukraine stopped supplying Russian gas to a number of European nations on New Year’s Day, Russia’s state-owned energy giant Gazprom said on Wednesday. Although certain nations are more vulnerable than others, the European Commission stated that it has been trying to make sure the 27-nation union was ready for such a situation.
Feeling close to euphoria
Despite a difficult end to December, investor optimism has only increased. According to a barometer monitored by Bank of America, investor sentiment is almost at euphoric level, which is, on the other hand, a sell signal. What that means for investors is explained by Savita Subramanian, the bank’s equity and quant strategist.
Bottom Line
All of the major indices rose as the year’s first trading day got underway, raising hopes that equities would start 2025 on a positive note.
However, equities lost their lustre, started to decline, and ended the session lower, much like employees discarding their New Year’s celebrations and glumly making their way back to the office.
The S&P 500 dropped 0.22%, the Nasdaq Composite lost 0.16%, and the Dow Jones Industrial Average sank 0.36%. Due to their Thursday loss, the S&P and Nasdaq have experienced their longest losing streaks since April, closing lower for five straight sessions.
The most likely offender? Treasury yields are rising. The 10-year Treasury yield started to rise after first declining, and at 12 p.m. U.S. time, it was almost at 4.6%. At that point, equities started to fall: between 12 and 1 p.m., the S&P 500 dropped about 60 points.
Even though the 10-year yield eventually levelled down at the end of the day, equities are at risk from consistently high rates since they provide investors a safer place to keep their money. The risk of stock betting appears less alluring when Treasurys can guarantee a 4.6% return.
Given that economists don’t anticipate the S&P to recover anywhere close to its 23.31% 2024 rise, Treasurys may be even more alluring this year. On a median basis, it is more likely to increase by 9% in 2025, according to the December CNBC Market Strategist Survey.
In light of this, stocks might not fairly reward investors for the risk they are incurring in comparison to bond ownership.
In a report published on Thursday, Max Kettner, the head multi-asset strategist at HSBC, stated that the Fed’s hawkish turn causes rates to climb even more, setting off what is known as the Danger Zone.
Although fundamentals are still sound, Kettner believes that the current market turbulence “should create attractive entry points given that [the first half of 2025] will bring a proper Goldilocks backdrop.”
Even a highway that leads to the risk area must eventually lead to another location.
