Plus, Iran threatened to inflict an “historic nightmare” on the U.S., the Senate Finance Committee approved the USMCA trade deal, and Cowen just upgraded Micron shares.
Stocks were lower to start Tuesday with the Dow trading 94 points, or 0.3%, lower. The S&P 500 dipped 0.1%, while the Nasdaq dropped 0.3%.
Iran said that it is evaluating 13 possible ways to inflict an “historic nightmare” on the U.S. in retaliation for the killing of Gen. Qasem Soleimani. “Even if the weakest of these scenarios gains a consensus, its implementation can be a historic nightmare for the Americans,” said Ali Shamkhani, the head of Iran’s National Security Council. “For now, for intelligence reasons, we cannot provide more information to the media.” The U.S. Department of Homeland Security has warned of “homeland-based plots” against infrastructure targets including cyberattacks by Iranian proxies, including the Lebanese militant group, Hezbollah. “The Trump administration has essentially thrown a hand grenade into already extremely tense region,” said Ellie Geranmayeh, a senior policy fellow at the European Council on Foreign Relations. “This move has exposed every American boot on the ground to a possible retaliatory attack.”
Meanwhile, Secretary of State Mike Pompeo said today that the U.S. “got it right” by killing Gen. Soleimani despite questions around President Donald Trump’s decision to authorize the airstrike that killed the Iranian military leader. Pompeo also said that the U.S. will act in accordance with international law, which is in contrast to Trump’s threats on Sunday to attack 52 Iranian “cultural sites,” which could constitute a possible war crime. “Let this serve as a WARNING that if Iran strikes any Americans, or American assets, we have targeted 52 Iranian sites (representing the 52 American hostages taken by Iran many years ago), some at a very high level & important to Iran & the Iranian culture, and those targets, and Iran itself, WILL BE HIT VERY FAST AND VERY HARD,” Trump tweeted on Sunday. Pompeo’s comment echoes what the Pentagon said to reporters when Joint Chiefs of Staff Chairman Gen. Mark Milley said that the U.S. has no peas to target Iranian cultural sites in potential strikes, despite Trump’s threats, because “That’s the laws of armed conflict.”
The Senate Finance Committee approved a new North American trade deal this morning, moving it one step closer to ratification. Up next, the panel will send the United States-Mexico-Canada agreement, or the USMCA, to the full Senate for a vote. “USMCA will bring much needed certainty and real benefits to America’s farmers, workers and businesses,” said Senate Finance Committee Chairman Senator Chuck Grassley. In other trade news, the U.S. trade deficit fell more than expected in November, with the gap between goods and services exports and imports falling to $43.1 billion, down from $46.9 billion in October and the lowest level since October 2016. Pantheon Macroeconomics’ Ian Shepherdson attributes the drop to tariffs, as U.S. importers moved forward purchases following the Trump administration announcing tariffs on $120 billion in Chinese consumer goods on August 1 to take effect on September 1. “This can’t last,” Shepherdson said, noting that he expects a rebound to begin in February when the tariff rate is cut to 7.5% as part of the “phase one” trade deal with China, which is set to be signed on January 15.
Tesla shares are up 2% this morning following Elon Musk revealing plans for a design and engineering center in China where a future model will be developed for world-wide sales. Musk also launched the new Model Y SUV program at the electric carmaker’s Chinese factory. “We intend to continue making a significant investment and increasing the investment in China, making the Model 3 and the Model Y and future models also in China,” Musk said to an audience in Shanghai. “Something that would be super cool… So we’re going to do it… is to try to create a China design and engineering center to actually design an original car in China for worldwide consumption. I think this will be very exciting.” Wedbush Securities’ Daniel Ives said in a note, “In a nutshell, we believe China remains the major swing factor in the stock and ultimately is worth between $75 to $100 per share to Tesla’s valuation with Giga 3 the linchpin.”
And Micron shares are up nearly 7% today following an upgrade from Cowen. Cowen analyst Karl Ackerman raised his rating for the chipmaker’s shares to Outperform and raised his price target to $70 – just under 23% higher from the current price. “Our field work indicates DRAM fundamentals may improve earlier than expected on an improvement in server and smartphone demand,” Ackerman wrote. “Coupled with MU’s improved cost position vs. peers, we see profitability scaling from here.”
Stocks We’re Watching
Plug Power Inc (NASDAQ: PLUG): Plug Power shares jumped 20% yesterday after the company announced that it received an order valued at more than $172 million at the end of last year from a Fortune 100 customer for its GenDrive hydrogen and fuel cell deployments across their distribution network over the next two years. “The material handling industry remains our core growth market in the near-term. the sizable contract signifies continual market vindication to customer’s rapidly moving material handling business thus far,” said Plug Power CEO Andy Marsh. “We commend this customer for its leadership in hydrogen and fuel cell adoption throughout the logistics business. Coupling this growth with already unfolding market expansion in stationary power and on-road electric vehicles well positions Plug Power to achieve our $1B gross billing goal for 2024.”