Investors weren’t able to enjoy a second day of gains to start 2020, as markets fell following unexpected news on the geopolitical front. A U.S. attack that killed a key Iranian military leader raised new concerns about the state of affairs internationally, and repercussions rippled throughout many different financial markets. As of 11 a.m. EST, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 223 points to 28,645. The S&P 500 (SNPINDEX:^GSPC) lost 21 points to sink to 3,237, while the NASDAQ Composite (NASDAQINDEX:^IXIC) fell 63 points to 9,029.
Among individual stocks, earnings season is still a couple weeks away, but some good news from Tesla (NASDAQ:TSLA) sent shares of the automaker higher. Meanwhile, American Airlines Group (NASDAQ:AAL) saw its stock price descend amid worries about the ramifications of the U.S. attack on Iran.
Tesla hits the target
Shares of Tesla rose almost 5% after the electric vehicle specialist announced its delivery figures for the fourth quarter of 2019. The numbers were above what most of those following Tesla had anticipated, helping the automaker hit its annual targets.
Image source: Tesla.
Tesla delivered a total of 112,000 vehicles during the fourth quarter: 92,550 of those cars were Model 3s, while the other 19,450 were higher-price Model S and X vehicles. Production came in just shy of 104,900 cars for the quarter.
With these results, Tesla celebrated record annual deliveries of 367,500 vehicles in 2019. That figure ended up toward the lower end of the company’s projections for 360,000 to 400,000 cars. Yet shareholders were encouraged that Tesla didn’t end up missing the target entirely, as some had feared.
Tesla has high hopes that its newly launched facility in Shanghai will help it sustain even stronger production and delivery volume into 2020. With the stock at all-time highs, investors are counting on Tesla’s growth curve continuing to rise for the foreseeable future.
American deals with oil threats
Meanwhile, shares of American Airlines Group were down almost 5%. Many of its peers also suffered declines as the threat of disruptions to global oil supplies pushed crude prices higher by more than $2 per barrel to around $63.50.
Fuel makes up a substantial portion of the overall costs that airlines like American have to cover, and fuel costs can be among the most volatile of an airline’s regular expenses. For the most part, companies can predict the behavior of other major cost centers like employee compensation and equipment expenses, but energy markets can rise sharply over very short periods of time.
Costs have been a rising concern for American, and fuel is only part of the issue. Increases in nonfuel unit costs have climbed over the past five years at a rate that’s roughly double what most airlines try to achieve, and the grounding of the 737 MAX has added some extra short-term pressure on margins.
Airlines have been extremely profitable in recent years, but many had anticipated that low energy prices would eventually give way to a more typical pricing environment. If the current conflict with Iran escalates, that might prove to be the catalyst that makes fuel more expensive for American — eating further into its profit margin.