[New York Stock Market] From the First Day of the New Year... Tesla Down 12%, Apple Market Cap Falls Below $2 Trillion

[Asia Economy New York=Special Correspondent Joselgina] The high interest rates, high inflation, and recession concerns that weighed down the U.S. stock market throughout the past year continue into the new year. On the first trading day of the year, January 3rd (local time), major indices on the New York Stock Exchange all closed lower as key tech stocks like Tesla and Apple plunged sharply. The price of gold, a representative safe-haven asset, hit a six-month high, while international oil prices fell by over 4%.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,136.37, down 10.88 points (0.03%) from the previous session. The large-cap focused S&P 500 index fell 15.36 points (0.40%) to 3,824.14, and the tech-heavy Nasdaq index dropped 79.50 points (0.76%) to 10,386.99.

[Image source=Reuters Yonhap News]

By sector, energy stocks showed notable weakness. As international oil prices plunged over 4%, related stocks also slid collectively. ExxonMobil fell 3.44%, Chevron dropped 3.06%, and Devon Energy declined 5.51% compared to the previous session. Interest rate-sensitive tech stocks also underperformed. Tesla, a leading tech stock, closed down 12.24% amid heightened demand concerns following disappointing electric vehicle delivery results. Apple also fell 3.74% after reports that it had notified some suppliers to reduce production of certain components, causing its market capitalization to fall below the $2 trillion mark.

Investors focused on the recession fears alongside the flood of negative news about Tesla and Apple from the start of the year. Tesla, which recorded a double-digit drop on the first trading day, revealed its Q4 electric vehicle deliveries (405,278 units) the previous day, falling short of Wall Street expectations and intensifying concerns about its performance. On an annual basis, Tesla delivered about 1.31 million electric vehicles. Although this represents a 40% increase compared to the previous year, it falls short of Tesla's original target of 50% growth.

Tony Sacconaghi Jr., an analyst at Bernstein Research, pointed out right after Tesla's Q4 delivery results were released that "Tesla is facing serious demand issues." He warned that Tesla might have to reduce electric vehicle prices by $1,800 to $4,500 compared to Q3 2022 and said, "Demand issues will persist until Tesla introduces a large volume of low-priced vehicles, which is difficult to predict in the short term."

Apple also declined from the first trading day amid growing concerns about weakening demand. Earlier, Nikkei Asia reported that Apple had notified some suppliers to reduce production of components for MacBooks and Apple Watches in Q1 due to deteriorating demand. Apple, the company with the largest market capitalization, saw its market cap fall below the $2 trillion level based on the closing price. Economic media CNBC noted, "This is a stark contrast to a year ago when Apple became the first U.S. company to surpass a $3 trillion market capitalization."

Concerns about a recession in the new year persist. According to a Gallup poll, 79% of respondents?about 8 out of 10 Americans?said they expect the economy to be difficult this year. Additionally, 65% of respondents predicted that high inflation levels would continue this year. More than half, 53%, expected unemployment rates to rise. Michael Burry, the Big Short investor who predicted the 2008 global financial crisis, stated, "A recession in the U.S. is inevitable."

Economic indicators released on this day were also weak. The U.S. Manufacturing Purchasing Managers' Index (PMI) for December stood at 46.2, marking the lowest level in two years and seven months. The monthly manufacturing PMI has remained below the baseline of 50 for two consecutive months, indicating continued contraction.

In the New York bond market, U.S. Treasury yields fell. The 10-year Treasury yield dropped to around 3.76%, and the 2-year yield fell to about 4.39%. The inversion of the yield curve, where long-term yields like the 10-year fall below short-term yields such as the 2-year and 3-month, continues. This phenomenon is generally considered a precursor to a recession. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," surged more than 5.6% from the previous session, hovering in the high 20s.

Greg Basuk, CEO of AXS Investments based in New York, forecasted, "The recession environment in 2023 could further worsen the performance of tech stocks in the new year." However, CNBC also emphasized that historically, the U.S. stock market tends to rebound the year following a recession.

On the following day, January 4th, investors will focus on the release of the December Federal Open Market Committee (FOMC) minutes and the November Job Openings and Labor Turnover Survey (JOLTS). Additionally, before the Fed's interest rate decision on February 1st, the December employment report and speeches by Fed officials are scheduled. Investors are expected to seek hints about future monetary policy through these releases.

Meanwhile, the price of gold, a representative safe-haven asset, hit a six-month high. On this day, February delivery gold on the New York Commodity Exchange closed at $1,846.10 per ounce, up 1.1% ($19.90) from the previous trading day. This is the highest closing price since June 16 of last year, about six months ago. Gold prices began rising from early November last year as recession fears intensified and financial markets weakened. Additionally, central banks worldwide have supported the gold price rally by purchasing gold on an unprecedented scale as part of their 'de-dollarization' strategies.

There are also expectations that the gold price rally will continue throughout the year, potentially breaking all-time records. In particular, whether central banks, including the U.S. Federal Reserve (Fed), pivot (change direction) will have a significant impact on gold prices. Eric Strand, who manages the AuAg ESG Gold Mining Exchange-Traded Fund (ETF), predicted that gold prices could set new all-time highs this year and surpass $2,100 per ounce, opening a "new long-term bull market."

On the other hand, international oil prices plunged from the start of the new year amid recession concerns. On this day at the New York Mercantile Exchange (NYMEX), February delivery West Texas Intermediate (WTI) crude oil closed at $76.93 per barrel, down 4.2% ($3.33). This is the lowest closing price since December 20 of last year. Brent crude for March delivery on the London ICE Futures Exchange also recorded a decline of over 4%.