North American markets today, Monday, viewed several hours before the 9:30 a.m. EST opening appear set to start mixed. The NASDAQ is comfortably in positive territory, but the S&P 500 and DOW are negative. However, the S&P 500 is improving as I write this, and it is very possible that it will move into positive territory before or after market opening.
Currencies are also mixed. the Canadian dollar and British pound are up while the Euro is down. The safe havens of gold and silver are down.
European markets are open at time of writing and they too are mixed. The FTSE 100, DAX and CAC 40 are all in negative territory. However, the FTSE and DAX are improving as I write this, and it is very possible they will turn green during today’s European trading.
This week has several potential surprises in store, and they will need some tall thinking by investors. GameStop Corp., one of the companies at the center of the Reddit trading frenzy reports fourth quarter results on Tuesday. The stock has been more in the spotlight than ever would have been the case in the absence of the frenzy. Whether the results justify the company’s current $14 billion market value remains to be seen.
At time of writing, it has 4 Sell ratings and 6 Hold ratings. Not surprisingly there are no Buy ratings amongst analysts that I checked. Whether that changes if investors get sufficient clues about plans to become an ecommerce firm also remains to be seen. GameStop shares closed on Friday at $202.44, well down from the $483 high they reached on January 28 during the frenzy. Some investors who bought in at inflated prices may have some painful decisions ahead.
And the spotlight seems likely to continue. Reports say that Hollywood studios have commissioned at least nine projects based on the frenzy.
Also in the spotlight is TESLA Inc. following reports that the Chinese military has banned its cars from entering its premises, citing security concerns connected to in-car cameras. Some analysts see this as a retaliation for American measures against Huawei, also citing national security and as a backdrop for the U.S. China meeting In Alaska. “The Street was laser focused on any action by TESLA/Musk in response to this poker move,” explains Dan Ives, Managing Director of Equity Research at Wedbush Securities.
This follows Musk’s allegations last Fall that Chinese carmaker Xpeng Inc., also highly rated by Wall Street analysts, had stolen source codes both from his company and from Apple Inc.
Notwithstanding the rosy projections for TESLA, there may be a bumpy road between here and there. “China has an array of tools - some direct, some indirect - for putting the heavy on foreign companies like TESLA,’ suggests Michael Dunne, head of consulting company ZoZo Go in a Reuters report.
However, TESLA Chief Executive Elon Musk said on Saturday that TESLA would be shut down if its cars were used to spy. “If TESLA used cars to spy on China or anywhere, we will get shut down,” he said, according to Reuters.
Whatever the rationale, dedicated TESLA shareholders or those who are considering whether to become TESLA shareholders will have to decide whether to trade off continuing volatility against future returns (preferably in discussion with a professional advisor).
The first part of the week will be a heavy – and perhaps telling – period on the speakers’ circuit and there may be some clues about the economy. On Tuesday, Federal Reserve Chair Jerome Powell is scheduled for an appearance at the House Financial Services Committee to discuss the Coronavirus Aid, Relief and Economic Security Act.
Federal Reserve Bank of St. Louis President James Bullard speaks on the economy to the London School of Economics. Federal Reserve Bank of Atlanta President Raphael Bostic speaks about African American and minority business innovation on a Clark Atlanta University podcast. Federal Reserve Board Governor Lael Brainard speaks on climate change at the Ceres 2021 Conference.
Federal Reserve Bank of New York President John Williams joins a New York-based virtual roundtable analyzing the New York economy.
These speeches sometimes produce nothing new but sometimes produce clues about government thinking.
Also unclear is the potential impact of new corporate taxes by the Biden administration. Some analysts believe that a partial reduction in the corporate tax cuts of the Trump administration will erode gains on some equities.
We all have a lot to think about.
Disclosure: I do not own any shares in any company mentioned in this report.