Market Update (March 24)

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OVERVIEW

Down day for the markets

After starting the day higher than yesterday, all three major indexes closed in negative territory. This week, stock prices have varied, leading investors to figure out the impact of the volatility of the US bond market. In recent weeks, bond yields have increased, resulting in a dip in the investment of technology stocks. However, bond yields have decreased every day this week, yet technology stocks are still not stable. Apple, Netflix, and Amazon stocks all decreased today, yet these stocks fueled market growth last year. Additionally, the volatility of the market is expected to continue and gains are going to be harder to achieve for the rest of the year according to Brian O’Reilly, the head of market strategy at Mediolanum International Funds.

GASOLINE

Gasoline prices are close to being $3 per gallon

As summer starts to come around, more and more drivers are taking to the streets. As such, the price of gasoline is increasing, and according to experts, this is a sign of economic recovery. Last week, the average price for a gallon of gasoline was $2.88, up more than a third from a year ago. Generally, gasoline prices increase closer to the summer as families drive to vacation spots. In past years, many drivers said that they would consider other modes of transportation if gasoline prices crossed $3 a gallon. However, observers expect drivers to be less sensitive to price this time around due to the pandemic. Regardless, gasoline prices might have hit their peak as many Americans are either unemployed or working from home.

ETFs

Young buyers discover the QQQ

A new generation of investors, including Reddit’s Wall Street Bets, have discovered QQQ, an ETF launched 22 years ago at the climax of the dot-com boom. QQQ tracks the Nasdaq-100 and is concentrated in high-growth stocks that have been labeled as “' ‘innovative’ and ‘disruptive’ “. Over the past year, shares have soared by 90% while funding has drastically increased to $150 million. Overall, the embrace of QQQ by younger investors has been a success, however, future problems may arise. For example, technology stocks are not performing as well as they previously have, leading to an outflow of $1 billion from the QQQ fund in 2021.

FACTORIES

Resurgent economies are creating factory disruptions

As global economies are bouncing back, spearheaded by the US, the demand for consumer goods is creating a strain on supply chains, and the Suez Canal’s as well as a fire in one of the factories of the leading auto chip makers have added to the pressure. This will lead to worse shortages and higher prices of consumer goods. These events come shortly after the winter storm in Texas, which has closed many petrochemical factories. Overall, the Federal Reserve expects the US to recover faster than projected, which is continuing to add pressure to global supply chains. If these shortages are continuing, they may create a cause for concern for the recovery of global economies.

Works Cited

Carpenter, Julia. “Young ETF Buyers Discover the Tech Sector's Old Friend, the QQQ.” The Wall Street Journal, Dow Jones & Company, 24 Mar. 2021, www.wsj.com/articles/young-etf-buyers-discover-the-tech-sectors-old-friend-the-qqq-11616587201?mod=markets_lead_pos3. 

Hannon, Paul. “Global Factories Pay Higher Prices as Surge Strains Supplies.” The Wall Street Journal, Dow Jones & Company, 24 Mar. 2021, www.wsj.com/articles/global-factories-pay-higher-prices-as-surge-strains-supplies-11616583929. 

Horner, Will, and Caitlin McCabe. “Stocks End Lower Amid Decline in Tech Shares.” The Wall Street Journal, Dow Jones & Company, 24 Mar. 2021, www.wsj.com/articles/global-stock-markets-dow-update-03-24-2021-11616575197?mod=markets_lead_pos1. 

Wallace, Joe. “Leap in Gas Prices Puts $3 a Gallon in Sight.” The Wall Street Journal, Dow Jones & Company, 24 Mar. 2021, www.wsj.com/articles/unusual-leap-in-gas-prices-puts-3-a-gallon-in-sight-11616578202?mod=markets_lead_pos5.