Last week and today saw lots of intraday market volatility as early morning selloffs of 200 or 400 points have given way to late afternoon rallies ending with the Dow being up 400 or 500 points. Today’s action in the Dow began with an early 190 point drop and ended with the Dow up 406 points at 35,126. All of this occurred on lighter trading volume. Market indicators from IBD show markets in correction mode but some gurus are now saying a bottom has been put in as of a week ago. While that may or may not hold true stocks are definitely all over the place. The volatility is the result of cross currents from a combination of Federal Reserve comments regarding fighting inflation, economic data and corporate earnings which, for the most part have been good.
The Economy and Earnings
Tesla reported a 65% increase in Q4 revenues and a rise net profit of 218% beating guru estimates but not really delivering against so called “whisper numbers” which were sky high. The company warned that supply chain issues were keeping factories from being at full capacity and this issue will continue to plague the company over the rest of the year. Tesla maintained its forecasted 50% growth rate and expects the Berlin and Austin factories to begin car production and deliveries in the coming months. Shares were lower by 10% on this news but have rallied and regained most of that lost ground.
Boeing was “cash flow positive” for the quarter but posted a loss thanks to charges related to the 787 and air force tanker modifications. Boeing is now producing the 737 Max at a pace of 26 aircraft per month and hopes to be at 31 shortly. Revenue finished the quarter down 3% at $14.8 billion while the net loss came in a $4.1 billion.
The 2021 US GDP growth rate came in a 5.7% which is the fastest reading since the mid 1980’s. Given supply chain, labor and inflation issues the economy is expected to slow this year to the 4% range and this slowdown is being seen in the recent flattening of the yield curve where rates on long term bonds are flat while shorter term rates are rising. The US 10 year Treasury recently crested 1.81% while the 20 year treasury is yielding 2.1%.
Items of Interest
The IMF or International Monetary Fund lowered its global GDP growth forecast from 4.9% in 2022 to 4.4% citing slowdowns in the US and China as the main reasons for the downgrade. The IMF said the pandemic, inflation and supply chain issues are all to blame. In other words….its a familiar song being sung over and over.
As a reminder our old toll free 800 number has been canceled due to our office move. From now on please use the regular business line 206-352-9205.