The markets had a volatile day with the Dow Jones Industrial Average closing up 0.19%. But while that index was up, other stocks like Lyft were down 35% and oil and gas stocks were up around 2.3%. How did this happen?
The stock market today is unpredictable, especially with the recent turbulence in the tech industry. Major tech companies such as Uber (-3.59%) and Lyft have taken significant losses over the past couple of months due to competition, low demand, and faulty business strategies. Meanwhile, oil and gas stocks saw an increase of 2.3% due to rising crude oil prices. Many investors are now questioning whether these gains are sustainable or if they are just signs of a short-term surge in prices.
Read this FintechZoom Article: Understanding 2-Year Treasury Rate Investing.
Today’s stock market performance can have long-lasting implications for investors’ portfolios. In providing an analysis on what happened today, this article aims to explain why some sectors saw increases while others experienced decreases, as well as possible outlooks of each market in terms of overall performance going forward.
The Dow Jones Industrial Average rose +0.19%
The Dow Jones Industrial Average (.DJI) rose 0.19% [1] on the day, according to information from Yahoo Finance, which provides data, charts, related news and more on the stock index. MarketWatch [2] reports that the stock market is highly volatile and that investors should be aware of news events and potential price changes. CNBC [3] provided the latest stock quotes, news, and financial information on the Dow Jones Industrial Average, which rose 0.19% on the day.
References:
[1] Dow Jones Industrial Average (^DJI) Charts, Data & News [2] Dow Jones Industrial Average Overview – DJIA – MarketWatch [3] .DJI: Dow Jones Industrial Average – Stock Price, Quote and …S&P 500 lost -0.14%
The S&P 500 (.SPX) lost 0.14% on the day, according to [1], as markets reacted to the rising interest rates and disinflation that has been unsettling investors. The Dow Jones Industrial Average (.DJI) also took a small dip of 0.19% while the Nasdaq Composite (.IXIC) dropped 0.9%. This decline was part of a larger trend for the year, as the S&P 500 ended the year down 19.44% [2], while the Dow finished the year down 8.78%, and the Nasdaq Composite down 33.10%. The Russell 2000 small caps also finished down 21.56% [3]. The 10-year Treasury yield, which began the year around 1.5%, ended the year below 4%, suggesting some optimism for investing in 2022.
References:
[1] S&P 500 Index Overview – SPX – MarketWatch [2] Stocks slip, dollar gains as further monetary tightening seen [3] Stocks fall to end Wall Street’s worst year since 2008, S&P 500 …Nasdaq Composite dropped -0.9%
The stock market has been moving around a lot recently, with the NASDAQ Composite (.IXIC) dropping 0.9% according to [1], while the S&P 500 (.SPX) lost 0.14% and the Dow Jones Industrial Average (.DJI) rose 0.19%. The July consumer price index was released Wednesday morning at 8:30 a.m. ET, and it is expected to rise by 0.2% on a monthly basis, or 8.7% year-over-year according to Dow Jones [3], while excluding food and energy, CPI is expected to rise by 0.5%, down from 0.7%. Year-over-year core inflation is expected to come in at 6.1%, up from June’s 5.9% [3].
References:
[1] GLOBAL MARKETS-Stocks slip, dollar gains as further … [2] NASDAQ Composite (^IXIC) Charts, Data & News [3] Nasdaq falls more than 1% as chip stocks struggle, key …Fed’s target interest rate
The Federal Reserve uses the Federal Open Market Committee (FOMC) to set the target federal funds rate or range. In December 2021, the FOMC set the target range to 4.50%-4.25% [3], which was the highest level since 2006 [1]. The FOMC has penciled in further increases for the funds rate until it hits a median level of 5.1% next year, equivalent to a target range of 5%-5.25% [2]. Open market operations (OMOs) are a key tool used by the Federal Reserve in the implementation of monetary policy and to adjust the supply of reserve balances so as to keep the federal funds rate around the target set by the FOMC [1]. The Federal Reserve also uses its standing repo facility (SRF) to conduct daily overnight repo operations against eligible securities [1].
References:
[1] Open Market Operations – Federal Reserve Board [2] Fed raises interest rates half a point to highest level in 15 years [3] Current Federal Reserve Interest Rates and Why They ChangeThe yield on benchmark 10-year
The yield on the benchmark 10-year Treasury note is an important indicator of investor confidence in the economy. It is closely watched by investors, economists, and policymakers in order to gauge how the markets are reacting to changes in the economic landscape. As of February 10, 2023, the 10-year Treasury yield is 3.601%, which is a day high of 3.63% and a day low of 3.596%, as reported by Tradeweb [1]. This is significantly higher than the record low of 1.37% that it had fallen to in 2016 following the Brexit referendum [2]. This increase in yield indicates that investors have confidence in the US economy, as well as in the policies of the current administration. The 10-year Treasury yield can also be used to price other financial products [3].
References:
[1] US10Y: U.S. 10 Year Treasury – Stock Price, Quote and News [2] Understanding The 10-Year Treasury Yield – Forbes [3] Why the 10-Year U.S. Treasury Yield Matters – InvestopediaU.S. consumer sentiment improved further in February
Consumer sentiment improved in February, according to the University of Michigan’s preliminary survey, which showed the index of consumer sentiment rising 1.5 points to 66.4 from 64.9 the previous month [1]. This increase in sentiment is likely due to a rally on the stock market and persistent labor market strength, which has raised hope that the economy could avoid the much-feared recession. Rising sentiment also suggests that the sharp declines in retail sales in November and December were a fluke. [2] Meanwhile, the Federal Reserve has continued to raise its policy rate, which is likely to put pressure on inflation. [3] High prices continue to weigh on consumers despite the recent moderation in inflation, and sentiment remains more than 22% below its historical average since 1978.
References:
[1] U.S. consumer sentiment in improves in February [2] U.S. consumer sentiment in improves in February – Nasdaq [3] US consumer sentiment jumps to 13-month high in early …Lyft Inc Stocks tumbling 35% after its first-quarter profit and revenue forecasts missed expectations
Lyft’s stock dropped significantly on Friday, with the company expecting to bring in about $975 million in revenue in Q1, compared to analyst expectations of $1.09 billion. [1] The company reported an adjusted loss per share of 74 cents, which was a contrast to rival Uber’s earnings report which sent their stock up. [2] Lyft is attributing the guidance to seasonality and lower prices, likely due to increased competition from Uber and other ride-hailing companies. [3] Driver supply was at its highest level since before the pandemic in 2019, which means that surge pricing will be lowered in the first quarter and cause a hit to their revenue. [2]
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References:
[1] Lyft stock down more than 35% – CNBC [2] Lyft falls as forecast exacerbates worries of falling behind Uber [3] Lyft Shares Tumble After Unexpected Loss, Downbeat …Spotify Stocks jumped 3%
Spotify’s shares soared 3 percent at the start of trading today to $126.01 [1], signaling a strong start to the year for the music streaming app. It now has a total of 489 million subscribers, a record high [1], and added 10 million more paying subscribers in the last three months [1]. Its stock surge came after Spotify Technology (SPOT) [3] joined a host of other big tech companies in unveiling big job cuts [2], laying off 600 workers or 6 percent of its workforce [1]. This was due to its operating expenses growing at twice the rate its revenue in 2022, which sparked the need to cut costs [1].
References:
[1] Spotify Shares Jump After It Reports Adding Record Monthly … [2] Spotify Stock Jumps Higher As Group Unveils Latest Tech Job … [3] Spotify Stock Jumps Higher As Music Streaming Group …Expedia’s stock plummeted 8%
Expedia’s stock plummeted 8% after falling short of analysts’ revenue and earnings expectations for the recent quarter [1]. It earned the No. 2 rank among its peers in the Leisure-Travel Booking industry group, second only to Booking Holdings (BKNG) [2]. After falling short of analysts’ revenue and earnings expectations, Lyft issued disappointing guidance for its first quarter, which was followed by a number of downgrades from analysts [3].
References:
[1] Stocks moving big midday: LYFT, SPOT, EXPE, YELP – CNBC [2] Expedia Stock Soars As Travelers Buckle Up [3] Stocks moving big midday: LYFT, SPOT, EXPE, YELPPan-European Stoxx 600 index finished trading down 1%
The European stock markets finished the day lower on Friday, with the pan-European Stoxx 600 index closing 1% down [1]. The decline came after the European blue chip index had closed 3% higher the previous session [2]. Automobile stocks tumbled 3.7%, their biggest one-day percentage fall in almost seven weeks [1], while oil and gas stocks bucked the trend, closing up 0.8% [3]. Moreover, British pound dipped to $1.12 following Prime Minister Truss’s speech and U.S. stocks opened lower, while German companies were planning price increases [3]. According to the Ifo Institute, the inflation wave is not about to subside [3].
References:
[1] Europe’s STOXX 600 drops 1% on Mercedes drag – Reuters [2] STOXX Europe 600 Index Overview – SXXP – MarketWatch [3] European markets: Open to close, stocks, data … – CNBCOil and gas stocks up +2.3%
Oil and gas stocks experienced an unexpected increase, rising 2.3%[1], which was a stark contrast to the decreases seen in other sectors of the market. This trajectory of oil and gas stocks closely mirrored an increase in commodity prices[2], which were already marching higher coming in to 2022 as Brent futures for March delivery fell $2.06, or 2.3%, to $86.13 a barrel[3]. U.S. crude also fell, dropping $1.49, or 1.8%, to $80.13 per barrel, as U.S. business activity faltered.
References:
[1] European markets open to close, earnings, data and news [2] US energy stocks buck dismal trend with ‘massive … [3] Oil falls $2/barrel on economic jitters, U.S. crude stock buildRead also: The Shocking Truth About Cyber Attacks on Gas Pipelines.
FTSE 100 ended the session down 0.3%
The FTSE 100 index fell 0.3% on Friday, driven lower by the uncertainty of the economic outlook and the potential for further monetary policy tightening from the U.S. Federal Reserve. This comes after the index hit a record high of 7,949.57 in intraday trading earlier in the week, the third time it has reached such a level. [1], [2], [3]
References:
[1] FTSE 100 hovers near session lows as US stocks start lower [2] UK’s FTSE 100 hits another record high – Reuters [3] European markets open to close, earnings, data and newsFAQs about volatility on markets
Volatility on the markets can be an intimidating concept for investors, particularly those who are new to investing. Here are some FAQs about market volatility that may help investors better understand this phenomenon:
Market volatility refers to the degree of uncertainty or risk associated with the size of changes in a security’s value. It is a measure of the fluctuations in the price of a security over time, and it can be measured using standard deviation or variance between returns from that same security or market index.
There are numerous factors that can cause market volatility, including economic news, political uncertainty, natural disasters, and large transactions such as mergers and acquisitions. Other factors can include changes in investor sentiment, speculation on future prices, and news of company earnings.
Volatility can both be beneficial and detrimental to investors. In the short term, increased volatility may lead to higher returns as prices fluctuate rapidly, but it can also lead to high losses if investments are not carefully managed. In the long term, low volatility can indicate a stable market and offer more consistent returns.
Investors can manage volatility by diversifying their portfolios, setting realistic expectations, and understanding the risks associated with the investments they make. Additionally, investors should monitor their investments regularly and adjust their strategies accordingly.
