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MARCH 14, 2024

MICROSTRATEGY’S BITCOIN SUCCESS

MicroStrategy Inc.’s stock has surged threefold this year due to the rise in Bitcoin prices. The company’s success in investing in Bitcoin has caused short sellers to face significant losses, reaching about $3.3 billion in paper losses so far in 2024. Moreover, although MicroStrategy faced challenges amidst the stock’s volatility, notably experiencing a 20% drop after announcing plans to purchase Bitcoin through convertible notes in March, Wall Street analysts have responded positively, raising the price target for MicroStrategy and praising its Bitcoin investment strategy. In addition, many analysts are lauding MicroStrategy as an attractive option for investors wanting to gain exposure to Bitcoin as with more than 22% of its shares available for trading, MicroStrategy’s stock signals potential bearish trends.

MORTGAGE DEMAND BOOMED

Mortgage rates dipped last week, leading to a rise in mortgage demand for the second consecutive week. According to the Mortgage Bankers Association, total application volume surged by 7.1%, with the average interest rate for 30-year fixed-rate mortgages dropping to 6.84%. Refinance applications increased by 12% compared to the previous week, and were up by 5% from a year ago. In addition, applications for home purchases also grew by 5%, although they remained lower than last year’s figures. Moreover, it is worth to remark that despite a slight increase in mortgage rates at the beginning of this week due to higher consumer prices, the response was more positive, suggesting a growing confidence in potential future economic developments that could impact mortgage rates positively.

SLIGHT DIP IN JOBLESS CLAIMS

Based on the latest release from the Labor Department, 209,000 new unemployment claims were filed during the week ending March 9, showing a slight decrease of 1,000 from the previous week. Despite some high-profile layoff announcements, overall job cuts remain at a low level, and the unemployment rate has stayed below 4% for the past two years, marking the longest streak since the 1960s. Currently, around 1.8 million workers continue to claim unemployment benefits, suggesting that employers are cautious with hiring but are not letting go of existing staff. This trend highlights the labor market’s strong resilience, even amidst attempts to stabilize the economy. According to Julia Pollak, Chief Economist at ZipRecruiter, layoffs have been minimal, while hiring has been sluggish, leading to an uptick in ongoing claims.

CALMED SEAS IN COMMODITIES

Traders in the commodity market are increasingly betting on stable prices, despite various market influences such as OPEC+ cuts and shifting demand patterns. This has led to a prolonged period of stagnation in global commodity prices, even amidst events like the energy crisis and geopolitical tensions. Implied volatility for key metals like zinc and aluminum is currently at a three to four-year low, indicating a lack of significant price fluctuations. However, some hedge funds are facing challenges due to the lack of movement in markets, as they had previously bet on significant rallies. While short-volatility trades are becoming more popular, they also come with inherent risks, potentially exacerbating the next market move. Notable exceptions to the calm market include rising gold volatility and cocoa scarcity, which have led to more significant price swings. Overall, sluggish economic growth and geopolitical tensions are contributing to subdued volatility in commodities, with the oil market also experiencing stagnant price movements.

POTENTIAL RISE IN GASOLINE PRICES

Gasoline prices in the U.S. are expected to continue increasing due to major refinery outages causing a decrease in supply. This has led to a national average price increase of over 9% since the beginning of the year, reaching around $3.40 per gallon. In addition, gasoline stockpiles are currently below average levels, while refinery production remains limited. Factors contributing to the rising prices include Ukrainian drone strikes on Russian refineries and ongoing production cuts by OPEC, and due to these circumstances, the EIA has raised its retail gasoline price forecast to $3.50 a gallon. As a result, U.S. crude oil prices have already increased, settling at $79.72 a barrel, while Brent crude prices have also risen, reaching $84.03 a barrel. Moreover, the higher gas prices are impacting consumer prices, which could have implications for the upcoming presidential elections.

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