Oil Pulls the Market Lower Again
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What is the main topic discussed in this episode?
Oil is up and stocks are down and Motley Fool Hidden Gems investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoy. I'm joined today by Lou Whiteman and Rachel Warren. Guys, we got to start with the topic of the day, which is the market is down. Oil is up about 5% as we're recording early on Wednesday. So Rachel, this does seem to be a bit of a trend, at least over the past couple of weeks. NASDAQ is down about 5%, the NASDAQ 100. We're starting to see a little bit of a pullback there. Maybe that's valuation based. You know, we're waiting for earnings season to begin, but now we have this oil thing going on. So what are the headlines that people need to keep in mind as they're looking at their investments today?
Yeah, I mean, there's a few factors at play. Obviously, oil and inflation are two big ones. You know, the U.S.
Why did oil spike and how did markets react today?
just canceled its sanctions waiver on Iranian oil as the ceasefire has been declared over. That basically means less oil is likely to be moving around the world. We've seen Brent crude prices go up. Tech stocks are obviously taking a big hit because U.S. inflation is already quite warm at 4.2 percent. The worry about some of these spikes is that the Fed will keep interest rates higher for longer. And when interest rates stay high, investors are less willing than they might be in other periods to pay those premium prices for the tech companies that move the market and that promise huge profits down the road. You could look at the chip sector this week, right? Had Samsung reported a massive 19-fold jump in profits with a huge AI demand, but the stock still fell.
I think a lot of what we see is this kind of Wall Street being trapped in a short-term 90-day game. A lot of the daily market volume is driven by quantitative computer algorithms. And when scary headlines hit the tape, those models often trigger those cell orders. So I think that's also something we're seeing at play right now.
Lou, computers have been really running the market for quite a while, but it does seem like we're in a period where the reactions... Oil is something we talked about like six months ago, and it hasn't turned out to be a huge deal. Is this a huge deal, or is this just kind of the day-to-day volatility that we always see in the market?
So oil has spiked to levels that are still below June 24th prices, just to give some perspective here. A lot of this is headline writing and a lot of this is ignore the noise. I mean, and I don't think we should over read into anything like, you know, with all respect, I would be shocked if investors were really worried that oil will change the Fed.
Well, a couple of drops in the stock market and it seems like the policy decisions turn pretty quickly.
Right. Well, I mean, I think what's probably going on is uncertainty. Plus that, yes, if if Iran is back on, then they already fragile consumer could become further stressed, which is a much bigger deal than interest rates. So there is like thought processes here. But look, we're up nine percent for the year. NASDAQ is up more than that. We are doing just fine. This is normal. We're coming into earnings season. I think, you know, look, there's a real risk that the market will be green by the time anyone hears this podcast. You know, it's so important not to just overthink any one day. I had in the early days of Twitter, I made a little bot that just said every day the market is either up or down. And it just pulled the top headline on Yahoo Entertainment as the reason why.
So every day it said stocks crawl or fall on Taylor Swift releasing new album. And that to me made more sense than most of the headlines I see explaining why stocks move on any given day.
Lou, I wanted to get your thoughts on a dynamic that I think I see in the market that may or may not be confirmed.
Could higher oil push inflation and keep rates higher for longer?
We'll know this in hindsight. But it seems like, you know, when I started investing in the 90s, you can go back to the all the way back to the Great Depression. And things were relatively correlated, right?
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:02–0:57
2
Why did oil spike and how did markets react today?
0:57–3:57
3
Could higher oil push inflation and keep rates higher for longer?
3:57–9:38
4
Is today's market pullback a meaningful shift or just short-term volatility?
9:38–15:47
5
Why are certain tech and memory stocks showing extreme winners and losers?
15:47–22:33