WSJ What’s News: What’s News in Markets – January 4, 2025
Hosted by Francesca Fontana
Market Overview: A Gloomy Start to 2025 with a Tech-Led Rebound
Timestamp: [00:33]
Francesca Fontana opens the episode by reflecting on the transition from a stellar 2024 to a shaky beginning in 2025. She highlights that while 2024 marked the best two-year period for the stock market in a quarter-century, the onset of the new year has been less encouraging. The major indices experienced a losing streak as December closed and January kicked off.
"2024 was a great year for the stock market, capping the best two-year period in a quarter century, but the new year started off pretty gloomy," Fontana explains ([00:33]).
Investors are expressing concerns over high valuations and are recalibrating their expectations regarding the Federal Reserve’s monetary policy. The Fed appears increasingly hesitant to cut interest rates amidst a robust U.S. economy, signaling a potential continuation of higher rates throughout the year.
However, optimism returned on Friday, driven primarily by gains in the technology and semiconductor sectors. The Dow Jones Industrial Average ended its four-day losing streak by rising nearly 0.8% after a day off for New Year’s. Both the S&P 500 and Nasdaq Composite also saw significant upticks, closing up over 1% and nearly 2%, respectively. These gains interrupted the preceding five-day declines for both indices.
On a weekly performance basis, the Dow fell by 0.6%, while the S&P 500 and Nasdaq each dipped roughly half a percent.
Tesla’s Declining Sales: A Shift in the Electric Vehicle Landscape
Timestamp: [02:15]
A focal point of the episode is Tesla’s reported decline in annual vehicle deliveries for 2024—the first drop in over a decade for the electric vehicle (EV) giant. Despite recording a record number of cars sold in the fourth quarter, Tesla fell short of the anticipated 500,000 vehicles needed to surpass its previous year’s performance.
"For all of 2024, Tesla delivered 1.79 million vehicles worldwide, which is down about 1% from a year earlier," Fontana notes ([02:15]).
This decline places Tesla in closer competition with Chinese EV manufacturer BYD, which reported sales of approximately 1.76 million vehicles for the same period. BYD’s growth signifies intensifying competition within the global EV market.
The market reacted to Tesla’s sales figures with a notable impact on its stock. On Thursday, Tesla shares plummeted by 6.1%, although there was a partial recovery on Friday. From the closing price on December 24 through Friday’s close, Tesla experienced an overall decline of approximately 11%.
Alcohol Sector Under Pressure: Health Warnings Impact Revenue
Timestamp: [05:20]
The episode delves into the challenges faced by major beer and spirits companies following a public health advisory. U.S. Surgeon General Dr. Vivek Murthy issued a statement urging alcohol manufacturers to include cancer warnings on their products. This advisory emphasizes that alcohol consumption is the third leading preventable cause of cancer in the United States, trailing only tobacco and obesity.
"Dr. Vivek Murthy said the drink should carry warnings to increase awareness that alcohol consumption is the third leading preventable cause of cancer in the US after tobacco and obesity," Fontana reports ([05:20]).
In response to these health concerns and shifting consumer preferences, alcohol consumption in the U.S. has been on the decline. Major companies claim that these trends have adversely affected their revenue streams.
Examining specific stocks:
- Anheuser-Busch InBev (Budweiser): U.S. traded shares saw a decline of approximately 2% on Friday.
- Diageo: The British conglomerate, known for brands like Guinness, Smirnoff, and Captain Morgan, experienced a sharper drop of around 3.8% in its U.S. traded shares.
These declines reflect investor apprehension about the long-term impacts of reduced alcohol consumption and the potential need for companies to adapt their strategies.
U.S. Steel Blocked from Foreign Acquisition: Implications for the Industry
Timestamp: [08:10]
The discussion moves to the steel industry, focusing on a significant development involving U.S. Steel, the third-largest steelmaker in America. President Joe Biden upheld his commitment to maintaining U.S. steel ownership by blocking a $14.1 billion acquisition offer from Japan’s Nippon Steel, the world’s fourth-largest steelmaker.
"President Biden has kept his pledge to keep U.S. steel domestically owned," Fontana states ([08:10]).
Nippon Steel had sought to acquire U.S. Steel as a strategic move to penetrate the American market, where protective tariffs have sustained higher steel prices compared to other global regions. The Committee on Foreign Investment in the United States (CFIUS) conducted a prolonged review before the decision was made.
This blockage is hailed as a triumph by the United Steelworkers Union, which has long opposed foreign takeovers that could threaten domestic operations and employment.
However, the decision casts uncertainty over U.S. Steel’s future. Company executives have hinted at the possibility of closing plants and relocating production to more cost-effective locations if the acquisition from Nippon Steel does not proceed.
The market reacted adversely to the news, with U.S. Steel shares declining by approximately 6.5% on Friday and recording a weekly loss of around 4.5%.
Conclusion: Navigating Market Volatility and Sector-Specific Challenges
In summary, the episode of What’s News in Markets provides a comprehensive overview of the current financial landscape as of early January 2025. While the market begins the year on a shaky note with concerns over high valuations and Federal Reserve policies, gains in the tech sector offer a glimmer of hope. Sector-specific challenges, such as Tesla’s declining sales and health-related impacts on alcohol companies, underscore the dynamic and interconnected nature of global markets. Additionally, strategic decisions in the steel industry reflect broader themes of domestic protectionism and economic nationalism.
"Have a great weekend and see you next," concludes Francesca Fontana, wrapping up the detailed market analysis and providing listeners with essential insights to navigate the evolving financial terrain ([11:30]).
Production Credits:
- Producer: Anthony Banci
- Supervising Producer: Michael Kosmides
- Host: Francesca Fontana
For more in-depth coverage and analysis of the week's market movements, readers can explore Francesca Fontana’s column in the Wall Street Journal's Exchange section.