S&P soars: Time to sell US stocks including Tesla !
On Wed, 24 Jan 2024 the S&P Global Flash US composite PMI report was released, one day ahead of the US GDP report.
The Flash PMI report captures activity in both the services and manufacturing sectors. (see below)
For January 2024, it came in 52.3, up from December 2023’s 50.9.
January’s data also beat Wall Street’s analysts forecast of 51.0.
What the report says?
Business confidence reached a 20-month high while prices charged (a measure of inflation), rose at its slowest pace since May 2020.
The manufacturing index saw the largest increase with a reading of 50.3, up from previous month’s 47.9.
The services component showed the index registered 52.9 this month, up from December’s 51.4.
**FYI — A reading above 50 (for these indexes) represents expansion in the sector; while a reading below 50 indicate contraction.
What to know so far ?
Wednesday's S&P Global Flash US composite PMI report is the latest “optimistic” reporting in January 2024.
Other reports that helped to instill the much needed confidence in the US market includes:
December retail sales report showed consumer spending finished 2023 in a better position than many economists feared.
US weekly jobless claims showed no signs of cooling off in the labour market, with the latest reading - hitting its lowest level since September 2022.
Building permits rose by more than expected in December; implying “recovery in progress” in the property sector as well.
The final report to seal the deal and confirm the Fed’s much touted “soft landing” will be the Personal Consumption Expenditure (PCE) for December 2023, due out on Fri, 26 Jan 2024 — setting the stage for the Fed’s first 2024 FOMC meeting on Jan 30-31.
If the Core PCI YoY report (for December 2023) is anything to go by, then Core PCE should be a declining data as well. (see above)
Economists are forecasting the annual "core" PCE to come in at 3.0% for December 2023, down -0.2% from November’s data.
All this comes, hot on the heels of a rising $S&P 500(.SPX)$ index that is powering to set the 4th straight record high on Wed, 24 Jan 2024, after earnings-related optimism fueled by Netflix Inc. moderated and traders tempered their expectations for Tesla Inc.’s quarterly figures.
By the time US market called it a day: (see above)
DJIA: -0.26% (-99.06 to 37,806.39).
S&P 500: +0.08% (+3.95 to 4,868.55).
Nasdaq: +0.36% (+55.98 to 15,481.92).
How I See Thu, 25 Jan 2024.
Believe the S&P 500 index will continue to break new high for the 6th consecutive trading day.
There is just too much upswing momentum at the moment.
Plus, Wall Street is willing the S&P index to break the 5,400 level - sooner than later, regardless of what it takes !
There is just too much hype in the market, my personal view.
On the flip side of things, $Tesla Motors(TSLA)$ is going to fall below its opening price of $191 per share.
This comes about as the EV maker reported a missed fourth-quarter estimates on both top and bottom lines. (see above)
What’s more, it has warned that vehicle volume growth may be lower in 2024.
Everything that Wall Street does not like to hear; especially coming from Tesla.
And just like that, it will continue to trend downwards in the coming days with the next support at or around $173 level?
In all honesty, just looking at the data alone, the numbers are not that “bad”. (see above)
However, taking it in consideration with Tesla’s “forward” pricing value of $207.83 (Thu, 24 Jan 2024 closing price) - it is vastly overpriced.
Operating margin has fallen “big time” from 16% (Q4 2022) to 8.2% is extremely bad news for an EV maker with its many undelivered & un-fulfilled dreams.
If demand continues to weaken (despite of steep discount) then like I have mentioned long ago, Tesla has dug a hole for it to jump into.
What is my strategy?
Believe it or not, given the current euphoria with the S&P 500 index, I might just take profit (wholesale or partial) in some of my holdings.
With blue-chips veering towards being overpriced, perhaps now is the time to reap what one has sowed? Right?
This is also a view echoed by Deutsche Bank, Global Chief Investment officer, Christian Nolting.
His arguments:
A potential -5% to -10% correction in the US stocks due to a slowing economy.
US economy expected to grow by only +0.8% in 2024, a huge drop from 2.3% expected for 2023.
With no discussion about recession in the US at all, there is a reality check coming this 2024 for US stocks.
A recession (if it happens and when it happens) will be brief, a market downturn will offer opportunity to re-enter.
Forecasts three Fed interest rate cuts in 2024.
Cautious stance on China, waiting for tangible investment flows before considering portfolio additions.
Not investing and divesting is also a strategy - right!
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