What's going on?
Don’t get nauseous from the rollercoaster ride! After one of their worst weeks in recent memory, US stock markets on Monday were back on the rise.
What does this mean?
While stock markets performed pretty well across the board last year, a large majority of this year’s gains have already evaporated. While there are numerous reasons why, including the steady fall in bond prices, investors have panicked most recently at the prospect of an expensive international trade war.
However, reports that the US is allegedly considering several geographic exemptions to its steel and aluminum tariffs have helped alleviate some of those concerns. That’s likely one major reason that tech stocks rebounded on Monday, powered especially by gains for chipmakers like Qualcomm and Nvidia (which are seen as big potential victims of a trade war).
Why should I care?
For markets: Among tech stocks, Facebook was a big exception.
Shares in Facebook dropped by nearly 5% on Monday before recovering as an American regulatory agency said it was opening up an investigation into the social network, following the recent Cambridge Analytica revelations. The general concern appears to be that this scandal will push more people to dislike and unfriend the platform, denting the budget it’s able to bring in from advertising.
The bigger picture: One outstanding risk for stocks this week is the biggest ever auction of US bonds.
The US Treasury is set to auction around $300 billion in bonds later this week, partly in order to help the US government meet its greater financing needs brought on by tax reform. However, if there’s not enough demand from investors for the bonds on sale, as has been the case a few times this year already, then the payout of the bond will have to rise to draw in demand. As these returns rise, however, stock prices are often put under pressure – as the returns of (typically safer) bonds become more attractive – meaning this upcoming auction may spark more market volatility.