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A warning of an imminent stock market ‘correction’ suddenly flashed red — as Nvidia, Apple and Tesla retreated
Updated 11/7 below. This post was originally published on July 10th
Stock markets are on the rise after Federal Reserve Chairman Jerome Powell fanned the flames of interest rate cut hopes in September.right after issuing a “critical” warning.
The S&P 500 and Nasdaq hit new all-time highs, following in the footsteps of the Dow, which peaked in May. despite new debt spiral fears unsettling traders.
Now, as uncertainty looms over the White HouseAn analyst has highlighted a surprising warning light in the stock market that has started flashing red.
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Federal Reserve Chairman Jerome Powell helped boost stock markets, with the S&P 500, the … [+] Nasdaq and Dow Jones hit new all-time highs.
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The recent rout in bitcoin and cryptocurrencies, which has wiped $500 billion from the market combined in just over a month, could be about to trigger “an imminent summer correction for the S&P 500,” said Barry Bannister, managing director and chief equity strategist at Stifel. counted Market observation.
Update 11/7: The S&P 500 and indexes fell sharply on Thursday, posting their worst performance since late April, while recent big tech winners — including Nvidia, Apple and Tesla — retreated.
The pullback came after the latest inflation data accelerated expectations for a Federal Reserve interest rate cut in September, with interest rate futures now showing traders see a more than 90% chance the Fed will cut rates by its September meeting, up from about 74% on Wednesday, according to CME Group’s Fedwatch.
“Clearly, the continued downward trend in headline inflation will lend weight to the case for a Fed rate cut, as is widely expected by markets in the fourth quarter of this year,” Adrian Li, managing director at corporate finance consultancy Centrus, said in emailed comments.
“The exact timing of a rate cut remains uncertain, and may ultimately depend on the Fed’s balance of inflation risks versus the perceived risk of higher rates to the continued strength of the U.S. economy. All eyes will now turn to any further indications on the direction of travel ahead of the rate decision later in the month, with the next unemployment and nonfarm payrolls rates not due until early August.”
Bannister highlighted bitcoin’s correlation with stock markets, and specifically the tech-heavy Nasdaq, in recent years.
“It’s the availability of cheap liquidity from the Fed that drives the price of bitcoin,” Bannister said. “Every dovish pivot over the past 13 years has marked a sharp rise in bitcoin, and bitcoin is a non-interest-bearing asset that thrives on lower interest rates and available liquidity” — much like stock markets.
In his second day of testimony before Congress this week, Fed Chairman Powell said he had “some confidence” that inflation was falling but was not ready to declare the war on inflation won.
“Bitcoin has been a good leading indicator for the Nasdaq-100 over the years,” Jonathan Krinsky, chief market technician at BTIG, wrote in a note ahead of the S&P 500, Nasdaq and Dow rally this week.
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The price of bitcoin has fallen sharply in recent weeks, fueling fears that stock markets could follow suit… [+] lower, even as the S&P 500, Nasdaq and Dow hit all-time highs.
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For now, the momentum is in stocks as investors continue to bet on interest rate cuts from the Federal Reserve.
“Growing confidence in U.S. rate cuts kept the mood upbeat and gains broad-based,” Dan Coatsworth, investment analyst at brokerage AJ Bell, said in emailed comments.