Tesla's shares fell more than 8% on Thursday after Elon Musk warned of slower sales growth in 2024. The company's market value is set to drop by about $50 billion if premarket losses hold, adding to a 16.4% decline this month. Musk's announcement that growth would be "notably lower" this year comes as Tesla prepares to launch a next-generation electric vehicle in the second half of 2025.

Analysts have expressed concern over Tesla's fourth-quarter revenue and profit, which fell below expectations. The electric vehicle industry is already facing a demand slowdown, and Tesla's price cuts have increased pressure on margins. Other EV makers, including Rivian Automotive, Lucid Group, and Fisker, also saw their shares fall.

Competition is intensifying, particularly from Chinese automakers like BYD, which have overtaken Tesla in global EV sales. Musk acknowledged that without trade barriers, Chinese companies could "demolish" most other car companies. Tesla's strategy to boost sales may lead to further operating margin declines, as it competes with BYD in China and faces increased competition elsewhere.

Yesterday, Netflix's higher Q4 2023 subscriber number and ASML's copious order intake at the end of last year helped keep alive investors' preferred scenario that the technology sector is still firing on all cylinders and will retain its immense traction. The industrial and consumer players are kind of stuck in a rut: Kimberly-Clark, DuPont de Nemours, Alstom, Baker Hughes... All these companies sank on the stock market yesterday after their results. They're no match for the narrative power of AI and falling rates.

However, Tesla goes against the narrative today. The automaker has been something of a weak link in the "Magnificent Seven" for some time now. Unlike the rest of the group, Tesla operates in a far more competitive market, made up of both the dinosaurs that shared the automotive market not so long ago and new, long-toothed players, many of them Chinese.

The other event of the day is the ECB's rate decision. Lagarde & Co kept rates unchanged. It said that “aside from an energy-related upward base effect on headline inflation, the declining trend in underlying inflation has continued". The market believes that the central bank could start cutting rates in June, but there is no certainty that this will be the case. Lagarde said that “the consensus around the table of the Governing Council was that it was premature to discuss rate cuts. One other thing, which was very much a consensus around the table was that we had to continue to be data dependent.”

Let me remind you that while the ECB and the Fed look set to cut rates, the two institutions are dealing with different situations. The former fears a resumption of inflation even though the economy is weak, while the latter fears a resumption of inflation because the economy is vigorous. The January PMI indicators published yesterday illustrate this very well. They were a little weak throughout Europe, i.e. in the contraction zone, to put it more professionally. Conversely, in the United States, the PMIs for services and industry are in the expansion zone and came in above expectations. If the ECB doesn't lower its guard a little, the market is likely to feel the pinch of so much austerity.

Meanwhile, the US economy expanded more than expected in the fourth quarter, boosted by consumer spending. GDP rose at a 3.3% annualized rate, while 2.2% was expected in the consensus.

On the corporate front, I've already mentioned Tesla, but I'd like to add that IBM published good results yesterday.

In Asia-Pacific , the party continues in China, since the measures being deployed by the authorities suggest that Beijing has finally got to grips with the problem. After rumors of the use of SOE cash to feed a fund to support equities, the PBOC announced a reduction in the reserve requirement ratio for banks and hinted at the possibility of further measures. The Hang Seng and the CSI300 both rallied about 2%. Elsewhere, Japan and South Korea ended at equilibrium, while India had a tough time and Australia rose. European leading indicators are rather bearish. The French CAC40 is down 0.1. The Swiss SMI and Britain’s FTSE 100 remain flat. On Wall Street, futures point to another session in the green.

Economic highlights of the day:

In the business climate category, there's France and Germany with the Ifo index. Also on the agenda, the ECB's monetary policy decision, the Chicago Fed's national activity index, durable goods orders, annualized GDP, new jobless claims and wholesale inventories, as well as new home sales. The full agenda is here.

The dollar is trading at EUR 0.9202 and GBP 0.7856. The ounce of gold retreats to USD 2018. Oil rallies, with North Sea Brent at USD 80.75 a barrel and US light crude WTI at USD 76.18. The yield on 10-year US debt stands at 4.15%. Bitcoin is trading at USD 40,000.

In corporate news:

  • Boeing- On Wednesday, the US Federal Aviation Administration (FAA) temporarily prohibited Boeing from increasing the production rate of its 737 MAX aircraft, which could have repercussions on the development projects of airlines and equipment manufacturers worldwide. This decision comes after the mid-air loss of a door on an Alaska Airlines ALK.N Boeing 737 MAX 9 earlier this month.
  • IBM on Wednesday forecast above-estimated annual sales growth, betting on stable demand for its computer software and consulting services from companies looking to adopt artificial intelligence (AI).
  • Ford said on Wednesday that it expected to record a pre-tax revaluation loss of around $1.7 billion in the fourth quarter, linked to pensions and other post-retirement benefits for its employees. The share price fell by 1.1% in pre-market trading.
  • Apple - Apple's smartphone shipments in China fell by 2.1% in the last quarter of 2023 compared with the same period a year earlier, hurt by intensifying competition from local rivals led by Huawei, data from research firm IDC showed on Thursday. Apple supplier STMicroelectronics, meanwhile, forecast a drop of more than 15% in first-quarter sales.
  • Blackstone reported a 4% rise in distributable profit to nearly $1.4 billion in the fourth quarter, as the world's largest private equity firm liquidated more of its real estate, credit and hedge fund assets.
  • Humana loses 13.7% in pre-market trading, becoming the latest health insurer to report a disappointing annual profit, as the sector faces rising costs.
  • Paramount - Skydance Media CEO David Ellison has made a preliminary offer to buy National Amusements, the Redstone family's holding company, to take control of Paramount Global, Bloomberg News reported on Wednesday.
  • Southwest Airlines - The Dallas-based airline, which on Thursday said it had excluded Boeing's MAX 7 model from its fleet plans for 2024, reported a fourth-quarter net loss of $219 million, linked to operating expenses of $426 million.
  • American Airlines on Thursday forecast 2024 earnings well ahead of expectations, with the carrier benefiting from strong demand for international travel, sending its shares up 3.7% in pre-market trading.

Analyst recommendations:

  • Dr. Martens: Investec maintains its buy recommendation and reduces the target price from GBP 160 to GBP 110.
  • DuPont de Nemours: Wells Fargo downgrades to equalweight from overweight with a price target reduced from USD 85 to USD 69.
  • Enphase Energy: Deutsche Bank maintains its hold recommendation with a price target raised from USD 80 to USD 105.
  • International DI: JP Morgan maintains its overweight recommendation and raises the target price from GBP 3 to GBP 4.50.
  • Lam Research: Redburn Atlantic maintains its buy recommendation and raises the target price from USD 800 to USD 964. Goldman Sachs maintains its buy recommendation and raises the target price from USD 700 to USD 912. JP Morgan maintains its overweight recommendation and raises the target price from USD 700 to USD 900. Citigroup maintains its buy recommendation and raises the target price from USD 800 to USD 975. Morgan Stanley maintains its equalwt recommendation and raises the target price from USD 720 to USD 866.
  • Netflix: DZ Bank AG Research upgrades to buy from hold with a price target raised from USD 495 to USD 600. New Street Research LLP maintains a neutral recommendation with a price target raised from USD 431 to USD 520.
  • Charles Schwab: Zacks downgrades to underperform from neutral with a price target reduced from USD 69 to USD 54.
  • Seagate Technology Holdings: Baird maintains its outperform rating and raises the target price from USD 70 to USD 100. Cowen maintains its outperform rating and raises the target price from USD 85 to USD 110.
  • Servicenow: Morningstar maintains its hold recommendation and raises the target price from USD 640 to USD 770. BMO Capital Markets maintains its outperform rating and raises the target price from USD 630 to USD 850.
  • St. James's Place: Peel Hunt maintains its buy recommendation and reduces the target price from 1500 to GBX 1100.
  • Tesla: KGI Securities Co Ltd downgrades to neutral from outperform with a price target reduced from USD 309 to USD 213.
  • Tullow Oil: Panmure Gordon & Co. Limited upgrades to buy from hold with a price target raised from GBX 40 to GBX 43.
  • Workspace Group: Numis upgrades to add from hold with a target price of GBX 640.