Biden takes on gas prices and 2 other things to watch in the stock market next week
As Biden taps oil reserves to curb high gas prices, do oil stocks keep rising? Also: Notable economic reports and a potentially bullish month for Bitcoin.
After giving up their mid-week gains, the major indexes are struggling at this writing to lock in a third straight week of gains.
The Nasdaq Composite, S&P 500 and Dow Jones Industrial Average (DJIA) are all poised to end the week basically flat. The Nasdaq is up 0.07%, while the S&P 500 and DJIA are down 0.07% and 0.18%, respectively.
Bearish sentiment among retail investors has been easing since mid-March. For the week ending March 30, only 27.5% of retail investors held a bearish stance, its lowest levels since the markets began their broader pullback starting in November.
Here are three things to watch next week that could affect your stocks.
1. As President Biden taps into the US Strategic Petroleum Reserve to bring relief at the pumps, will oil stocks move higher?
After rising back above $100 a barrel last week, crude oil is again on the decline. At the time of this writing, West Texas Intermediate (WTI) was at $99.68 a barrel, while Brent Crude was slightly higher at $104.95 a barrel.
Still, prices at the pump remain high.
President Joe Biden on Thursday announced a new plan to reduce the financial burden on Americans brought on from lofty gas prices. The president is seeking to bolster American energy independence that reduces demand for foreign oil and strengthens its clean energy economy. Under the plan, the White House is increasing the supply of oil by releasing 1 million additional barrels to the market every day for the next six months. According to the White House, it’s the largest release of oil reserves in history.
“The world has never had a release of oil reserves at this 1 million per day rate for this length of time,” the White House said in a statement. The release of reserves will provide a “historic amount of supply to serve as [sic] bridge until the end of the year when domestic production ramps up,” the White House said.
The oil will come from the Strategic Petroleum Reserve, a four-site US government complex that currently holds a total of 568.3 million barrels, according to the Energy Department.
The release of reserves will act as a buffer until domestic oil production ramps up. President Biden is also asking Congress to enact a law to charge oil companies fees on leased, inactive wells and on public lands that the White House said are being hoarded without any sort of active production. Oil companies will have the choice to increase production or pay a fee.
Companies that are producing from these leased acres and existing wells will not face higher fees, the White House said.
Still, in 2021, Russia exported more than 45%, or 4.7 million barrels per day, of the 10.1 million barrels per day of crude oil and condensate that it produced, according to the Energy Information Administration. So while Biden’s initiative may help reduce prices at the pump, the global oil market will still face a shortfall, which could continue the bullish case for oil stocks.
The energy sector was up 0.45% as of Friday afternoon.
2. Economic reports and indicators
America added 431,000 jobs in March, bringing the unemployment rate to a new pandemic low, the Bureau of Labor Statistics (BLS) reported Friday. The unemployment rate was 3.6%, down from 3.8% a month earlier. Prior to the pandemic, the jobless rate was at 3.5%. The industries with the most notable gains were leisure and hospitality, professional and business services, retail trade and manufacturing.
Looking to the week ahead, investors may want to pay attention to the following major economic reports that are slated for release:
- Foreign trade deficit. Schedule for Tuesday. Investors will get a glimpse into the current state of the economy. Last month’s report showed a record high US trade deficit for January, which surged 9.4% to an all-time high of $89.7 billion. Imports increased 1.2% to $314.1 billion, while exports fell 1.7% to $224.4 billion.
- FOMC minutes. Scheduled for Wednesday. The Federal Open Market Committee (FOMC) will release the minutes of its March 15–16 meeting. At the Fed’s meeting earlier this month, board members approved a 0.25 percentage point rate hike, the first increase since December 2018. While we know the end result, the FOMC minutes will give investors additional insight into committee members’ views and policy stances, the US economic outlook and the near-term monetary policy. Traders will be looking for signs of any change in the Fed’s current plans.
- Jobless claims. Scheduled for Thursday. The US Department of Labor will release initial and continuing jobless claims for the week ending April 2. For the week ending March 26, initial jobless claims inched higher to 202,000, up 14,000 from the revised 188,000 during the prior week. Continuing claims dropped to 1.307 million, down from a revised 1.342 million during the prior week.
3. Will Bitcoin bulls take over in April as usual?
April has historically been a bullish month for Bitcoin (BTC). According to CoinDesk, the leading digital asset has produced April gains in seven out of the past 10 years.
It’s also traditionally a good month for stocks.
Bitcoin traded as low as $44,283.66 on Thursday night after hitting a two-month high of around $48,000 just a day earlier. Since topping at $68,990.90 in November 2021, Bitcoin has given up nearly half its value. The digital coin sank to a low of around $35,000 in late January.
The recent drop back to the $45K support level came as the 5-year yields rose above 30-year yields for the first time since 2006, fueling fears of a recession. An inverted yield curve is a closely watched indicator of a pending economic recession.
Investors will be looking for Bitcoin to stay above the $45K support level, else it could slip back down to the $42K–$43K mark.
In related news, the US Securities and Exchange Commission (SEC) shot down another application for a spot Bitcoin exchange-traded fund (ETF), this time from Cathie Wood’s Ark21Shares. The SEC cited a lack of investor protections, according to a filing.
The application, filed on behalf of the Cboe BZX Exchange, proposed a rule
change to list and trade shares of the ARK 21Shares Bitcoin ETF.
Crypto advocates have been hoping for a spot-based Bitcoin ETF to materialize, as it would allow them to buy into the ETF without trading Bitcoin itself. Existing Bitcoin ETFs in the US trade Bitcoin futures. A spot ETF would own Bitcoin directly.
The SEC denied similar applications by NYDIG and Global X earlier in March.
At the time of publication, Matt Miczulski owned BTC.
Interested in cryptocurrency? Learn more about the basics with our beginner’s guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.
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