Good morning and welcome to the stock market today! The Ever Given is free, Wall Street is caught up in a fire sale tizzy and cryptos are climbing again. So what will the stock market do today? And what do you need to know?
To start, it seems that investors are having a rough morning. Stocks are in the red as Wall Street braces for volatility following major block sales. The top movers reflect this, with bank stocks garnering interest. Gainers this morning include Relief Therapeutics (OTCMKTS:RLFTF) and Big Rock Partners (NASDAQ:BRPA), two companies behind a new Covid-19 respiratory treatment. RLFTF stock is climbing on hopes for emergency-use authorization from the U.S. Food and Drug Administration.
What else will the stock market do today? Take a look at the top three stories.
What Will the Stock Market Do Today? Brace for Volatility.
Have you caught yourself looking up Archegos Capital Management this morning?
If so, you are not alone. Wall Street has been rapidly devouring news about the family investment office on Monday, especially following news that it is behind so much market volatility. Archegos, which Bill Hwang founded in 2013, discloses very little information to the U.S. Securities and Exchange Commission. As investors are learning today, it also had massive positions, perhaps as large as $50 billion.
Those positions backfired in a big way. Archegos defaulted on margin calls from Credit Suisse (NYSE:CS) and other banks that served as its brokers. Credit Suisse, Nomura (NYSE:NMR), Morgan Stanley (NYSE:MS) and several other bank stocks are taking a hit as a result, having been forced to facilitate block sales to exit their positions. Talk of significant losses and first-quarter earnings stress is already swirling on Wall Street.
So what do investors need to know now?
The first takeaway is that we could be in for more volatility. Some traders are waiting for more block sales, and anticipating a rocky morning. Plus, as Dion Rabouin wrote for Axios, we do not yet know the extent of the damage. Archegos took a fall, but are other firms in the same position? And if so, will we see similar moves in the coming days that rock big-name stocks? Archegos held positions in Chinese tech firms like Baidu (NASDAQ:BIDU), as well as media plays like ViacomCBS (NASDAQ:VIAC). Rumors of the block sales sunk these equities on Friday, piling on to already-existing headwinds.
The second takeaway is that we could start to see a rebound in names like Baidu and ViacomCBS. Investors could choose to see this as a dip-buying opportunity, and some shares are already recovering. Tencent Music Entertainment (NYSE:TME), for one, is up nearly 7% this morning. In the wake of the selloff, the company announced a $1 billion share buyback program.
Let’s Talk Infrastructure.
President Joe Biden will announce the first phase of his $3 trillion infrastructure plan this week, initially focusing on traditional improvements like roads and bridges. Later in April, Biden will give updates on child and healthcare.
Investors should note that economists are bullish on the plan. Why? They see it not only as the needed push to get past Covid-19, but as a long-term way to create jobs and fuel the economy. One estimate from economists at S&P Global calls for the plan to create 2.3 million jobs by 2024 and inject $5.7 trillion into the economy. Economists at Goldman Sachs are already upwardly revising their real consumption figures for the year.
So what should investors know? Look for a continued rally in infrastructure stocks, and keep an eye out for further Democratic plans. We can expect to see traditional infrastructure players respond to the news, especially the materials companies that would facilitate road and bridge work. However, Democrats are going to continue to push on plans for green infrastructure. As Biden continues to share more about his plans, keep an eye on solar and EV charging stocks.
Lastly, keep an eye on homebuilder and industrial metals stocks. As Howard Lindzon highlighted in his morning newsletter, the SPDR S&P Homebuilders ETF (NYSEARCA:XHB) closed the week at new all-time highs. He also noted strength in steel, aluminum and copper. Talk of the stimulus bill will continue to help this area, as will the current lack of housing supply. Supply simply cannot keep up with homebuyer demand.
Crypto Miners and the 2021 Chip Shortage
We ended this past week with news that Nio (NYSE:NIO) would temporarily halt production due to ongoing chip shortage woes. Without the necessary ships, Nio cannot keep its production running, and it cannot meet consumer demand for its electric vehicles.
Nio is far from alone, with other carmakers like Volkswagen (OTCMKTS:VWAGY) and Ford (NYSE:F) reporting similar production challenges. Consumer electronics companies are also struggling, with projected delays in gaming console restocks making headlines.
But what about crypto mining machines?
Bitcoin (CCC:BTC) continues to boom, with the leading cryptocurrency up more than 4% at the time of writing. As June Yoon wrote for the Financial Times, with the price of BTC climbing, the profitability of mining is also rising. This is pushing Bitcoin miners to improve their heavy-duty computers, and quite possibly, is worsening the chip shortage. Yoon says that Bitcoin miners have been increasingly purchasing high-end chips and computers, and others write that at this point, mining is too lucrative to pause.
So what does this mean for investor? Right now it seems that the booming crypto mining business can afford to pay higher prices for in-demand chips, contributing to the shortage and pushing up prices for other customers. It also may mean that we are about to see consolidation in the business, and that popular Chinese crypto mining companies could be at risk. With so much focus on the environmental negatives of Bitcoin, look for the chip shortage woes to get more coverage.
And if nothing else, know that the Bitcoin boom is seriously catching on. Texas Gov. Greg Abbott is working to make his state a haven for cryptocurrencies.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.
