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The World Health Organization’s latest report about the new COVID-19 variant spread has feared the market, increased the volatility index, and caused a sell-off in the energy, airlines, and retail stocks. Oil price drops by 6% amid the growing fear of new restrictions despite rapid vaccine rollout. The United States administers 2.5 million COVID-19 vaccine shots per day while the new case globally has increased by 8%. Nearly 50 million Americans have fully vaccinated and more than 80 million received the first dose.
Markets
| Up/Down | Market | Price/Yield | Gain/Loss |
|---|---|---|---|
 | S&P 500 | 3,910.52 | – 0.76% (-30.07) |
| Dow 30 | 32,423.15 | – 0.94% (-308.05) |
| NASDAQ | 13,377.54 | – 1.12% (-149.84) |
| Russell 2000 | 2,287.55 | – 3.58% (-81.16) |
 | VIX | 20.30 | + 0.01% (+0.30) |
| – | US 2-YR | 0.15% | – |
| US 10-YR | 1.63% | – 6 bps |
| US 30-YR | 2.34% | – 4 bps |
| OIL | 57.70 | – 6.25% (-3.85) |
| GOLD | 1,738.30 | – 0.71% (-12.4) |
| Bitcoin | 53,670.34 | – 3.98% (-2,224.95) |
Stock Markets: The volatility index’s rise amid new variant spread drives the stock market indexes across the board to tumble. The small-cap index, Russell 2000, takes the most significant loss at 3.58%, followed by Nasdaq at 1.12% loss. Dow Jones Industrial Average (DJIA) and S&P 500 slightly end with a slight drop less than 1% loss. The airline stocks tumble more 6%, cruise lines fell by 7%, and retailer GAP down by 8%.
Bond Market: The bond yield continues to drop for both 10-YR and 30-YR Treasury Bills, which will give higher stock valuation, especially for growth stocks, when the volatility index diminishes.
Economy: Federal Reserve chairman Jerome Powell in joint session with US Treasury Secretary Janet Yellen, remarked that the US and global economy were in the deflationary stage in the last decades due to globalization and growth in emerging markets. The cost of goods and services has come down due to the rise of technology and outsourcing to emerging markets with lower labor and supply chain costs. Despite today’s high asset valuation, the policymakers are not worried about inflationary risk of the trillion dollars stimulus package. Both Powell and Yellen agree will focus on the resiliency of the financial markets and ensuring the market function works well. The Fed Chairman assured the market that the Federal Reserve will use every tool in its arsenal to deal with inflation when the time comes.
Oil: Oil price tumble 6% due to the growing fear of new variant spread in Europe. The largest oil consumer in Europe, Germany, extends its lockdown until mid-April to stop the spread of the third wave of COVID-19 pandemic. Besides, US dollar has been gaining in value among other currencies. A strong US dollar will make oil more expensive for buyers with other currency, which reduce demand and consumption of oil.
Bitcoin: Bitcoin drops another 2,224 points and hits valuation slightly above $1 trillion. The cryptocurrency is facing criticism about high energy use to mine the coin which leave a massive carbon footprint that will worsen the climate change risk. At the same time, central banks across the world are working on their digital currency using the same blockchain technology. Bank of Canada has been working with the University of Calgary to develop the first government issued digital currency [1].
Intel invest $20 billion in new manufacturing facility in Arizona
Intel’s stock price jumps 5% after the company announces $20 billion investment in new chip manufacturing facilities in Arizona. After multiple production delays on delivering its latest chip to market, Intel finally takes the bold approach to leverage both design and manufacturing capabilities despite the opposite industry trend to separate chip design and manufacturing.
Intel will be in direct competition with TSMC after announcing that the largest chip company by market cap will position itself a foundry or manufacturing partner for other semiconductor companies. Intel will target Google, Microsoft, Qualcomm as their main customer to meet the growing needs for chips with ARM technology for mobile devices. The company will form a business unit called Intel Foundry Services to gain market share worth $100 billion.
The global chip shortage has been the key driver for the company to build manufacturing capability in the US to meet the domestic demand. US automakers have to shut down and delay production for their top-selling trucks and SUVs due to the shortage. The President Biden has signed Executive Orders called CHIP Act to provide full finding and government support to compete in the global semiconductor market and reduce dependency in foreign supply.
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1 Comment
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