Markets Move Higher Despite Suez Canal Blockage

Friday, March 26, 2021 4:48 PM | Neal Farmer

Markets were mostly higher this week with the S&P 500 gaining 1.57% while the tech-heavy NASDAQ on the other hand lost 0.58%. Late in Wednesday’s trading and early Thursday saw markets fall followed by a recovery to end the week. The big news towards the end of the week was the blocking of the Suez Canal by a large container ship and the impact that is currently having and will have.

Suez Canal

A container ship named the Ever Given got stuck in the Suez Canal in Egypt in the middle of a sandstorm that caused low visibility. The ship ran aground on Tuesday and remains stuck at the moment, experts expect the ship to remain stuck for days if not weeks. There have already been various attempts to dislodge the ship with dredgers focusing on removing sand and mud around the port side of the boat, but nothing has worked yet. More than 160 ships are currently waiting to pass through the canal carrying fuel and cargo. The next step, according to officials, is to remove cargo from the Ever Given and attempt to move it at high tide, then if necessary dig away the sand banks where the ship is currently stuck.

Due to the uncertainty of how long it will take to free the ship and allow access to the canal once more, many cargo ships have begun sailing around Africa instead. Operators that have already decided to re-route their ships to go around Cape of Good Hope are adding more than a week of additional sailing. The Suez Canal connects the Red Sea and Mediterranean Sea, significantly reducing distance and time for cargo ships that are shipping between Europe and Southern Asia/Australia. For example, the canal reduces the shipping distance between London, England and Mumbai, India to roughly 7,000 miles as opposed to about 12,000. The canal handles about 12% of global trading and according to Lloyd’s List, the blockage is disrupting more than $9 billion worth of goods each day.

Vaccine Distribution

Markets are continuing to rise with many investors moving to "reopen" trades as the weather improves, quarantine measures are lifted, and vaccine distribution continues to ramp up. President Biden set a new goal on Thursday to deliver 200 million doses of coronavirus vaccinations within the first 100 days of his presidency. Currently just over 177 million doses have been distributed and 89.6 million people have received at least one dose. Additionally, almost 46 million have been fully vaccinated for the COVID-19 virus. Over 110 million doses have been delivered since Biden was inaugurated, and with more than 30 days until 100 days in office, the goal for 200 million seems very reasonable. Roughly 2.5 million doses would need to be distributed a day and the U.S. is already averaging 2.5 million per day over the past couple weeks. That rate is only expected to increase as Johnson & Johnson’s (JNJ) vaccine starts to rapidly expand distribution while other vaccine candidates are still possible to be approved. The doses per day had been growing at a high rate but has stagnated around that 2.5 million number for about two weeks.

In other vaccine news, AstraZeneca (AZN) had a strong start to the week after receiving better-than-expected results in a U.S. clinical trial. However, the stock fell the next day after the U.S. Data and Safety Monitoring said AstraZeneca possibly used outdated information and an incomplete assessment of the vaccine's efficacy. Finally, AstraZeneca confirmed the vaccine’s effectiveness on Thursday when it concluded that the vaccine was 76% effective as opposed to the 79% efficacy touted earlier. The FDA still needs to sign off on the vaccine before it can be used in the United States but it is already being administered in Europe. The drugmaker has not been able to meet production commitments and has already faced plenty of criticism for its slow rollout.

Finally, Germany was forced to extend lockdown measures an additional month as the result of a recent upward trend in coronavirus cases.

All told, the S&P 500 rose 1.57%, the Dow Jones Industrial Average gained 1.36%, and the NASDAQ lost 0.58%.

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