Plus, oil and gold are surging, manufacturing disappointed in December, and Tesla delivered a record number of vehicle deliveries for 2019.
Stocks fell sharply to start Friday with the Dow dropping 212 points, or 0.8%. The S&P 500 and Nasdaq also traded 0.8% lower.
“Reckless.” “A dangerous escalation.” “Severe revenge.” Those are just a few of the reactions from world leaders and politicians in the wake of the assassination of Maj. Gen. Qasem Soleimani, Iran’s top military commander and the face of the Islamic Republic’s interventions throughout the Middle East, by the U.S. Soleimani was killed in an airstrike in Iraq Thursday night that was ordered by President Donald Trump who tweeted this morning, “General Qassem Soleimani has killed or badly wounded thousands of Americans over an extended period of time, and was plotting to kill many more…but got caught!” Iran’s Supreme Leader has threatened “severe retaliation” in response to the assassination, and the U.S. State Department has issued a directive urging American citizens to leave Iraq immediately and the U.S. military is reported sending an additional 3,500 vrooms to the region following the killing of the Iranian general.
Oil prices have surged following the confirmation of the killing of Soleimani as the market worries about what a bigger conflict between the U.S. and Iran could mean for energy production in the region. Brent Crude is up to $68.35 per barrel, while West Texas Intermediate Crude has added nearly 3% to $62.76, at the time of writing. “It’s been a knee jerk reaction because everybody is asking the question how is Iran going to retaliate, and I think that’s why you’ve seen prices jump 3, 4%,” said Energy Aspects’ Amrita Sen. “The real risk is how does Iran retaliate. We’ve seen what it can do in Saudi Arabia, does it do similar stuff again, is there another attack on Saudi facilities.” Gold rose to just under a 6-year high and gold mining stocks are also on the rise. The benchmark 10-year Treasury yield tumbled more than 6 basis points to around 1.82%, the biggest decline in a month.
U.S. manufacturing closed out a tumultuous year with the fifth-straight and weakest monthly performance since the end of the Great Recession. The Institute for Supply Management said this morning that its manufacturing index fell to 47.2 in December, the lowest level since June 2009, and below consensus estimates for a reading of 49 for the month. “Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China,” Timothy R. Fiore, chair of the Institute for Supply Management, said in a statement. “Trade issues remain an issue for supply managers,” Fiore added on a call with reporters. “I think that unplanned factory closures and extended holiday periods had a part to play on the production side and likely the employment side.” Pantheon Macroeconomics chief economist Ian Shepherdson said, “This is a seriously weak report, and we see little chance of a sustained near-term recovery.”
Tesla shares are up 3.45% this morning after the electric vehicle maker reported that it delivered a record 112,000 vehicles globally in the fourth quarter, topping analysts’ expectations of 106,000 deliveries. Tesla also said that it delivered approximately 367,500 vehicles in 2019, a 50% jump from 2018. Wedbush Securities managing director of equity research Daniel Ives called the full-year delivery number “impressive” and “another step in the right direction.” “While part of this recent rally has been a massive short covering, it has also been driven by underlying fundamental improvement as the company’s ability to impressively not just talk the talk but walk the walk has been noticed by the Street and the optimism around the story has grown markedly from the dark days seen earlier in 2019,” Ives wrote in a note.
Stocks We’re Watching
StoneCo Ltd (NASDAQ: STNE): This Warren Buffett-backed digital payments processor stock is up 124.38% over the last twelve months and nearly 11% over the last week. In its most recently reported quarter, StoneCo reported a 71% year-over-year jump in revenue, a 212% rise in adjusted net income, and gross profit margin of 83.3%.
Taiwan Semiconductor Manufacturing (NYSE: TSM): Susquehanna analyst Mehdi Hosseini reiterated his buy rating for Taiwan Semiconductor Manufacturing, saying that Advanced Micro Devices’ success will be positive for TSM as AMD uses it to manufacture its chips. “We are increasing estimates to reflect a better than expected… March quarter, while AMD’s share gain is now exceeding prior expectations and thus helping lift our earning power assumptions for TSM,” Hosseini wrote in a note. The analyst boosted his price target for TSM to $70 – nearly 20% higher than the current price.