Indices, Natural Gas Surprise on Tuesday

Tuesday’s trading was characterised by large shifts on the markets as key American Indices rose while Natural Gas fell from a high of more than a decade. Volatility still seemed to be the name of the game on trading floors yesterday across the world.

Indices Climb

With 2022’s first-quarter earnings season in full swing, yesterday saw swift rises for major New York Indices. The S&P 500 rose by 1.6% yesterday, while the Nasdaq (US-TECH 100) and the Dow Jones Industrial Index (USA 30) had posted gains of 2.1% and 1.4% respectively by the closing bell. Already, many major companies have posted better-than-expected Q1 results, which may have investors feeling confident enough to push stock values upwards. While only one-tenth of S&P 500-listed firms have announced how they fared over the course of the first quarter of the year thus far this earnings season, on average, they’ve beaten market consensus expectations by a respectable 8%.

However, some analysts posit that the real factors behind yesterday’s market jumps were not related to encouraging earnings reports at all. In the current macroeconomic landscape, bond yields have been moving higher as the Federal Reserve takes a more hawkish position on monetary policy to rein in inflation, raising interest rates. Because of this, stocks are becoming somewhat less attractive to investors, meaning that firms might have to really hit it out of the park with their Q1 earnings in order to see a real jump in share value. 

One of the major drivers of Tuesday’s positive trading returns on Wall Street could have been investors moving to buy the dip. Given that American Indices have been on a downtrend so far in 2022 due to a confluence of factors such as the conflict in Ukraine, the COVID-19 pandemic, and steadily rising inflation, share prices might have moved low enough to encourage traders to buy stocks on the cheap.

A further, U.S.-specific, reason could have been behind the boost yesterday. April 18th, this past Monday, was the deadline for filing federal income returns in the United States. Market analysts have observed that the day after ‘Tax Day’ is generally positive for major Indices in the United States, if the previous year showed stock gains. Given that the S&P 500 (USA 500) rose by 29% in 2021, bringing capital-gains taxes on equities to $800 billion, an all-time record, this theory seems to fit the market behaviour observed yesterday. 

However, one major firm’s Q1 results had its shares swimming against the stream in afterhours trading. Yesterday evening, the streaming video giant announced yesterday that it had lost subscribers for the first time in over a decade. This massive reversal in fortunes for one of the COVID-19 pandemic era’s biggest winners has some analysts wondering whether Netflix’s (NFLX) bottom line can stand up to the increasing prevalence of password sharing among subscribers, as well as competition for viewers posed by Walt Disney (DIS), among others. Once the markets on Wall Street open today, market watchers may get a better sense of whether Netflix’s afterhours 27% drop in share value will be carried into the trading day. 

Natural Gas Loses Momentum

In another sector of the world markets, one key Commodity was on a rollercoaster yesterday. Global supply lines of key energy sources have been a source of concern for many given the current state of affairs in Eastern Europe. With the Russian Federation coming under a broad swathe of economic sanctions due to its military engagement in Ukraine, some for the past month have been raising the spectre of Oil (CL) and Natural Gas prices skyrocketing as energy sourced in Russia becomes scarcer.

From the beginning of 2022 until Monday, Natural Gas (NG) prices had more than doubled, reaching their highest level since the United States began producing shale gas. Inventories of Natural Gas in the U.S. are about one-fifth lower than normal, fueling record inflation in the country. Many nations, especially in Europe and Asia, have shifted to American-produced gas as Russia becomes progressively isolated from the global economy, further pushing prices skyward.

However, Tuesday’s trading marked a huge reversal of this months-long trend. Over the course of the day, traders drew back from this key Commodity, and the price of Natural Gas fell by 6.6% after hitting a high of $7.93. Some characterised Natural Gas as ‘overbought’, which could have been the proximate cause for yesterday’s steep drop. As of the time of writing Wednesday morning, Natural Gas has fallen a further 2%. Market analysts’ opinions remain divided on what the outlook for Natural Gas prices are over the near-term; coming trading sessions could see the cost of gas attain former heights as American exports struggle to satisfy demand.

All in all, yesterday’s trading showed surprises in many sectors. With uncertainty continuing to define the market mood for many, it remains to be seen what the economy’s trajectory has in store.