Pre-Markets Open March in Red
We start a new month of trading rather inauspiciously, with pre-market futures falling fairly steeply into the red after it looked like there may have been a correction to the upside after yesterday’s modest sell-off. This, on basically no new news out in terms of economic reports before the opening bell nor major earnings reports hitting the tape. Currently, the Dow is -66 points, the S&P 500 -11 and the Nasdaq -20 points.
February started off fine, appearing for a while that it would continue on the promising January the markets enjoyed. But as economic prints kept coming in stronger than expected, it became clear that the Fed’s war on inflation is not yet over, and that we will be embattled with higher interest rates for longer — just like Fed Chair Jerome Powell kept telling us. The Dow was -4.5% for the month, the S&P -4%, the Nasdaq -3% and the small-cap Russell 2000 -3.7%. For the year, only the Dow is in negative territory, -2%, while the Nasdaq retains +10% gains for 2023, the Russell +7.7% and the S&P +3%.
However, the month was not a washout for everyone. In fact, the outperformance on the Nasdaq might be seen to have been caused by strength in the tech sector, but really we can parse it even further than that: NVIDIA NVDA, which suffered a cruel 2022, gained +18% just last month alone — an astonishing +62% just since the start of the year. Also Tesla TSLA was up +18% in February, and has gained an even more eye-popping +90% so far in 2023. In addition, today we may see a new impetus for Tesla investors to be hopeful for the future.
I’m speaking of Tesla’s Investor Day today, where CEO Elon Musk puts forward his vision for the world EV leader over the next 5-10 years or more. We expect Musk to flesh out his recent quote that he expects Tesla will produce 20 million cars per year by 2030, which would be an extraordinary accomplishment. Currently, Tesla produces 1.3 million autos per year. But new models — including perhaps a cheaper option to help the EV revolution take its next step forward — will assist this trajectory. That said, Musk himself estimated that Tesla would need 12 Gigafactories to accomplish this goal. Currently, the company has five.
After the opening bell today, both PMI and ISM Manufacturing reports for February are expected, with both figures expected top remain below the 50(%) level, which determines expansion from contraction. We also look for a new Construction Spending report for January after today’s open, with expectations to swing to a positive +0.3% from -0.4% reported the previous month. In all cases, we looks to see where productivity levels exist; productivity is one way to overcome the inflation barrier we’re currently experiencing.
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