Futures edge lower, Tesla’s China-made EV sales surge – what’s moving markets

Investing.com — U.S. stock futures point lower on Wednesday after a mostly downbeat start to 2024 in the prior session. Markets are now awaiting the publication of the minutes from the Federal Reserve’s December policy meeting and, with it, potential clues into the central bank’s interest rate path in the coming months. Elsewhere, sales of Tesla’s (NASDAQ:) China-made cars soar in December, but Elon Musk’s electric vehicle giant is still grappling with fierce competition in the country.

1. Futures inch lower

U.S. stock futures edged down on Wednesday, as investors looked ahead to the release of minutes from the Federal Reserve’s latest policy meeting.

By 05:09 ET (10:09 GMT), the contract had dipped by 56 points or 0.2%, had shed 11 points or 0.2%, and had fallen by 76 points or 0.4%.

The benchmark and tech-heavy both lost ground in the first day of trading of 2024, weighed down in part by ebbing hopes that the Fed will roll out interest rate cuts early this year. Meanwhile, the 30-stock gained just under 0.1%.

In individual stocks, shares in Apple (NASDAQ:) sunk by around 4% after analysts at Barclays downgraded their rating of the iPhone maker, citing weak hardware demand and concerns over revenue at its services division. Nvidia (NASDAQ:), Google-parent Alphabet (NASDAQ:) and Microsoft (NASDAQ:) — who, along with Apple, form part of the so-called Magnificent Seven group of tech firms that helped drive a stellar 2023 for stocks — also declined.

“The impressive rally into year[-]end has faded a bit despite the seasonal tailwinds, but we expect the loss of short[-]term momentum to be modest,” analysts at Fairlead Strategies said in a note to clients.

2. U.S. Treasury yields climb

Also denting stocks on Tuesday was a rise in U.S. Treasury yields, in a possible sign that markets’ excitement over the prospect of Fed rate cuts early this year may be easing.

The yield on the benchmark 10-year note — a key gauge of long-term estimates for borrowing costs — briefly touched an over two-week high, while the yield rate-sensitive 2-year also moved up. Prices typically fall as yields increase.

At the end of 2023, the was under 3.9% following a strong rally to cap off the year that was driven by expectations for early Fed rate cuts and a so-called “soft landing” for the U.S. economy. In this scenario, the Fed’s aggressive rate hiking campaign successfully cools inflation without sparking a meltdown in the broader economy.

Bolstered by the jump in Treasury yields, the , which tracks the greenback against a basket of its currency pairs, had its best daily performance since March 2023.

3. Fed minutes ahead

Traders are now turning their attention to the minutes from the Fed’s December gathering, which are due out at 19:00 GMT on Wednesday.

How officials see borrowing costs evolving in the coming months could factor into the staying power of recent bets that the U.S. central bank will soon begin to bring down interest rates from a more than two-decade high.

In December, the Fed left rates unaltered at a range of 5.25% to 5.50%, but signaled that its unprecedented tightening cycle aimed at corraling elevated inflation may have peaked. New forecasts from policymakers also suggested that they may slash rates by 75 basis points this year, an outlook that was more dovish than prior projections.

Speculation over potential rate reductions fueled a late-year surge in stocks, although many officials have since attempted to temper this enthusiasm. The minutes could provide even more insight into the Fed’s thinking.

4. Sales of Tesla’s China-made EVs surge in December

Sales of Tesla’s electric vehicles (EVs) made in China surged by 68.7% on a yearly basis last month, new data from the China Passenger Car Association showed on Wednesday, although the U.S. carmaker still faces intense competition in the country.

The December total, which includes exports, brought Tesla’s annual amount of China-made sales up to 947,742 — just over half of the company’s global deliveries.

Tesla’s Shanghai plant is its largest production hub, supplying China and other countries like New Zealand and Australia. The group has outlined plans to expand its EV capacity at the factory, but the move has yet to receive regulatory approval from Beijing.

The latest CPCA numbers come after China’s BYD (SZ:) unseated Tesla as the world’s biggest EV maker earlier this week. BYD, who offers both battery-only and hybrid options, delivered 341,043 passenger cars in December, an increase of 45% year-on-year.

5. Oil slips

Oil prices retreated Wednesday, ahead of the release of crucial weekly inventories data from the U.S., the world’s largest consumer.

By 05:09 ET, the futures traded 0.6% lower at $69.94 a barrel, while the contract dropped 0.5% to $75.53 per barrel.

U.S. crude stockpiles from the American Petroleum Institute industry group are due later Wednesday, a day later than usual due to Monday’s New Year’s holiday. Official data will then be published on Thursday.

The crude benchmarks had climbed sharply earlier in the week after attacks on vessels in the Red Sea by Houthi rebels raised concerns over potential supply disruptions through this key region.

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