Stocks started the day with a positive note but ended down 106 points at 26,385. Trading volume was higher and bank stocks led markets lower. IBD and BTS are still “thumbs up” on the market rally.
The Federal Reserve increased interest rates today from 1.75% to 2% and indicated that there will be one more rate hike this year and perhaps three (pronounced “shree” if you are from Alabama) more rate hikes in 2019. The Fed also increased its estimate of GDP growth from 2.8% to 3.1% for 2018. Fed Chair Powell commented that they do not foresee a surprise jump in inflation and this news sent longer term rates lower while short term rates went higher.
While traditional auto industry executives like Bob Lutz and Mike “MJ” Jackson cast stones of doubt at Tesla, German auto engineer Alex Voigt wrote an article for Cleantechnica sounding the alarm to the German car industry that Tesla could be about to crush them. He said the innovations that Elon Musk has incorporated into the Model X, S and 3 are far ahead of anything the German’s currently offer or will offer in the next 2 to 5 years. He notes that Tesla is now grappling with a car delivery problem as they scramble to get new Model 3’s to eager buyers. In August, Tesla sold 17,000 Model 3’s which is 2X more than either BMW, Mercedes or Audi in the luxury sedan category. Alex also notes that even if Germany woke up to Tesla threat it would not have in place a supportive distribution network, battery supply, charging network or ability to upgrade software overnight like Tesla can. It will be interesting to see if Alex is right and if German auto execs will recognize the potential for disruption. They might also be waiting to see if Tesla will implode if Elon cannot get the financials in order. One thing I do know however is that I once listened to a group of boy scouts on a hiking trip talking about how they can’t wait to buy a Tesla Model 3. I recall when I was a kid we all wanted GTOs or Mustangs. It seems times are changing.