Tesla`s record deliveries miss goal

General market commentary

Equity markets closed lower on Thursday, reversing earlier gains, with US benchmarks facing a sell-off in shares of Tesla, which dropped 6.1% after the electric vehicle maker reported a year-on-year decline in deliveries for 2024. The S&P 500 and Nasdaq Composite both fell 0.2%, while the Dow Jones dropped 0.4%. The broader sentiment was mixed globally, as Asian markets were weighed down by disappointing December manufacturing data from China, while European equities gained, bolstered by strong performances in energy shares. Meanwhile, the US dollar continued its upward trajectory against major currencies, and bond yields eased, with the 10-year Treasury yield falling to 4.56%. In commodities, oil and gold prices saw modest gains, reflecting ongoing market volatility.

In company-specific news, Boeing saw a significant decline of 2.9%, making it the worst performer on the Dow, as investors reacted to disappointing updates. On the other hand, Nvidia's shares rose 3% after the company revealed a $1 billion investment in artificial intelligence firms last year. Constellation Energy, which secured an $840 million contract to supply power to US federal agencies, was another standout, with its shares surging 8.4%. On the economic front, while US unemployment claims showed some positive signs, the manufacturing sector remained weak in December, with output and new orders continuing to contract. This lacklustre economic data, coupled with persistent volatility in commodity markets, suggests that investors are navigating a challenging macroeconomic environment at the start of 2025.

Latest market update

Most Asian markets were higher on Friday, with South Korean equities leading the gains, while Chinese shares recovered some losses on expectations of fresh stimulus measures. Despite weaker-than-expected December manufacturing data, China's central bank signalled further easing, supporting market sentiment across the region.

U.S. equity index futures are steady ahead of Friday’s session, with investors digesting weak performances from Apple and Tesla, alongside concerns over slower interest rate cuts. Market sentiment is likely to remain cautious as traders assess economic data and corporate results from the previous day.

European equities started 2025 on a positive note, with the STOXX 600 index rising 0.6%, driven by strong gains in the energy sector as oil prices surged. However, concerns about slowing manufacturing activity in the euro zone and broader economic uncertainty capped the upside, with declines in the automobile and luxury sectors weighing on the overall performance.

The US dollar remained strong on Friday, holding near two-year highs, supported by expectations of fewer Federal Reserve rate cuts and continued economic resilience. Against the euro, the dollar traded at 1.0273, reflecting its dominance as investors sought safe-haven assets amid global uncertainties.

Oil prices extended their gains on Friday, supported by hopes of increased government stimulus to boost economic growth and fuel demand. Investors are also eyeing potential interest rate cuts and the impact of upcoming policy decisions in the US, China, and Saudi Arabia on the oil market in 2025.

China's central bank is expected to cut interest rates in 2025 to support economic growth, moving towards a more market-driven approach in its monetary policy. At the same time, the government plans to boost fiscal stimulus, including issuing more treasury bonds and launching initiatives to stimulate domestic demand, as it faces persistent economic challenges and potential trade tensions with the U.S. under a second Trump administration.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Tesla reported record vehicle deliveries of 495,570 in Q4, below expectations, and deployed 11.0 GWh of energy storage products. Despite a drop in shares and a slight decline in annual EV sales, analysts remain optimistic, with targets for 20%-30% delivery growth in 2025, driven by a new lower-priced EV and advancements in Full Self-Driving technology.

Constellation Energy has secured a record $1 billion in contracts to supply nuclear power to the U.S. government. The company, the largest operator of nuclear plants in the country, will provide electricity to over 13 federal agencies under the agreement with the U.S. General Services Administration.

Apple has agreed to pay $95 million to settle a class action lawsuit alleging its Siri assistant violated users' privacy by unintentionally recording conversations and sharing them with third parties. The settlement, which could provide up to $20 per affected Siri-enabled device, is subject to court approval, and Apple denied any wrongdoing in the case.

U.S. President Joe Biden has blocked the sale of U.S. Steel to Japan’s Nippon Steel, citing concerns over potential impacts on domestic steel supplies and jobs. The decision follows over a year of political opposition and delays, despite Nippon Steel offering concessions to address regulatory concerns.

Hindenburg Research revealed it is shorting Carvana, accusing the company of accounting manipulation and risky loan sales that inflated income, despite a 284% share surge last year. At the same time, analysts from Stephens maintained an Overweight rating with a $300 price target, expecting 2025 to be a crucial year as Carvana leverages its streamlined cost structure, expanded delivery, and the fully integrated ADESA acquisition.

JMP Securities downgraded Alphabet's equity to Market Perform, citing concerns over the impact of a potential court ruling in its ongoing antitrust case, which could limit Google's search distribution, particularly on iOS devices. The analysts predict that legal uncertainty and potential changes to Google's business model could cap its valuation and negatively affect earnings, making the equity's risk/reward profile more balanced.

Bank of America analysts maintain Nvidia as their top equity pick ahead of the Consumer Electronics Show (CES) on 6th January, highlighting its potential in robotics, AI, and data centre technologies, with projected 50%+ sales growth in 2025. Despite challenges in robotics, they see Nvidia's valuation as attractive, with a forward PE ratio of 30x within its historical range.

Bernstein has named DHL as its top logistics equity pick for 2025, citing its favourable valuation, strategic positioning, and potential for recovery in freight volumes. Despite near-term challenges, DHL's strong infrastructure, diverse revenue streams, and exposure to e-commerce make it well-placed for long-term growth in the evolving logistics sector.

Goldman Sachs added Norwegian Cruise Line, Uber Technologies, and Belden to its U.S. Conviction List, citing strong growth potential, cost-saving opportunities, and profitability improvements. The bank expects Norwegian to narrow its valuation gap with Royal Caribbean, while Uber is projected to surpass profitability targets, despite challenges in its Mobility business.

Deutsche Bank is optimistic about the aerospace and defence sector in 2025, upgrading RTX to "buy" and highlighting Boeing’s improved operations post-strike. While the defence sector remains mixed, suppliers like Carpenter Technology and Howmet Aerospace are favoured due to strong demand and pricing power, with RTX and Northrop Grumman as top defence picks.

Upcoming data and events

Today, key economic data includes German unemployment figures for December and UK mortgage lending data for November, offering insights into the labour market and housing sector. In the U.S., the ISM Manufacturing Index will be released, providing a gauge of manufacturing sector health and potential economic trends.

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