Bitcoin And Ethereum Sell Off As The 10-Year Yield Touches 1.81% On Monday

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key takeaways:

  • Stocks Sell and Rebound on Monday’s Roller Coaster of Day One
  • Cryptocurrency sell-off continues as investors shy away from riskier assets
  • Gold failed to join defense groups or hedge against inflation
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Equity index futures are pointing higher as investors expect a build on Monday’s rebound. Monday was a very volatile day, with the stock market maintaining its roller coaster reputation. However, with Federal Reserve Chairman Jerome Powell meeting with the Senate today, investors may still be a bit hesitant.

The stock sold out at the open, down 1.85% in the first hour of the S&P 500 (SPX), but closed intraday lows to cover most of its losses. The S&P 500 closed down just 0.14 per cent. Nasdaq
NDAQ
The Composite (COMP:GIDS) led the sell-off with a decline of 2.5% in the first hour of trading and easily broke the 14,900 support level. The next level of support will be around the October 2021 low of 14,200. However, the bulls refused to obey the line and pushed back to allow the Nasdaq to close 0.05% higher on a crazy day of trading. After rising more than 23, the VIX (Cboe Market Volatility Index) rallied back below 21 as shares rallied from their mid-day lows and closed at 19.33.

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As expected on a fall day, defensive areas performed best in the morning when every field was in the red. Utilities, health care and consumer staples were among the lowest. However, by the end of the trading day, healthcare and technology closed in the green. Last week, the energy and financial sectors were among the strongest in oil prices and the 10-year yield (TNX) continued their respective five-week rallies, but both investments are reaching a historic level of congestion that could stifle some growth. can stop.

Despite healthcare being one of the strongest sectors, Cardinal Health
CAH
(CAH) fell 10% but narrowed its losses to 5.92%. The company issued weaker-than-expected earnings guidance, leading to the decline. Cardinal wasn’t the only S&P 500 component that fell so much, Ulta Beauty (Ultrade)
ULTA
) fell 4.04% and Tapestry (TPR) fell 4.68%. Moderna (mRNA) was one of the best-performing S&P 500 constituents, rising more than 9% on news that the company was collaborating with Charisma on a new product.

Some other stocks in the news included Airbnb (ABNB), which dropped 3.22% after being downgraded by Piper Sandler. nike
Of
(NKE) was downgraded by an HSBC analyst over concerns about Nike’s ongoing supply chain issues, causing the stock to drop 4.16%. Coinbase Global (COIN) fell more than 4% after several cryptocurrencies were lower due to bitcoin and ethereum. Zynga. Take-Two (TTWO) fell over 13% after announcing plans to buy
ZNGA
(ZNGA) in a deal worth $12.7 billion. Zynga rallied over 40% on the news.

This morning, Illumina
ILMN
(ILMN) is up more than 5% in premarket trading after posting a new selling record. The company provided a sneak peek into the earnings saying it expects to set a record in revenue. juniper network
JNPR
(JNPR) also rose 5% in premarket trading after BofA Securities was upgraded from “underperform” to “buy”.

earning interest

Coming back to interest rates, Goldman Sachs
gs
Analysts have changed their Fed forecasts and are now seeing the Fed raise rates four times in 2022, target the federal funds rate of 1%, and begin shrinking its $8.8 trillion balance sheet. This appears to be in line with the market forecasts; The CME FedWatch tool is now predicting an almost 80% chance of the Fed raising rates from 0.25% to 0.50% in March.

Goldman isn’t the only investment firm seeing higher interest rates. JPMorgan (JPM) CEO Jamie Dimon told CNBC he would be surprised if the Fed raised interest rates only four times in 2022. The 10-year yield jumped to 1.81% before closing at 1.77%.

With interest rates and inflation on everyone’s mind, today’s Senate Banking Committee hearing presenting Federal Reserve Chairman Jerome Powell will likely draw a lot of eyes. Consumers and voters’ attention to rising inflation has put a kink in President Joe Biden’s Build Back Better plans and disappointed many politicians seeking re-election in November 2022. And while it’s still too early, a weak stock market may add to the growing list of disappointments. Therefore, Tuesday’s hearing is likely to see questions on party lines. The real test may be on Wednesday when the Consumer Price Index (CPI) is released, and the latest inflation numbers are showing.

On the positive side, after yesterday’s roller coaster, several major houses reiterated their higher targets for the S&P 500 in 2022.

cryptos is bit

Investors increasingly appear to be more risk-averse and are selling value stocks on the energy side and growth stocks on the technology side. Investors are also selling cryptocurrencies. Bitcoin, the largest cryptocurrency, fell 6% on Monday morning, briefly trading below 40,000 to match September lows. The second-largest crypto is Ethereum, which fell as much as 7% on Monday morning, briefly breaking below $3,000. In contrast, Bitcoin and Ethereum topped in November 2021 at $67,130 and $4,761 respectively. Bitcoin was able to right ship throughout the day and the stock was up 0.03% at market close. Ethereum made some losses but was still down around 2.02%.

Despite the “risk off” tendency, small-cap stocks haven’t been hit as hard as other riskier assets. Don’t get me wrong, the Russell 2000 (RUT) fell 0.40% on Monday after rallying from a loss of 1.52% for the day. The small-cap index is still down about 4.5% since opening last Monday. However, this performance isn’t really that much different from the S&P 500. Additionally, the index has tested the same level of support it held during 2021 and bounced back from this level once again on Monday. If the support continues, it could be good news for small caps.

The common denominator here could be the strength of the US dollar. The US Dollar Index ($DXY) traded 0.22% higher on Monday and is up more than 7% against a basket of currencies, including cryptocurrencies, throughout 2021. As the name suggests, the cryptocurrency is an alternative currency and is generally expected to move against the US Dollar. while it is No That having happened, it appears that rising US Treasury yields, which strengthened the dollar, have weakened crypto at least in recent months.

In addition, small-cap stocks tend to outperform during a strong dollar because they are less likely to rely on global sales than large, multinational competitors. Instead, they generally focus on US home sales. A stronger dollar makes American-made products more expensive for foreign buyers, which may result in lower sales as consumers seek cheaper alternatives.

Take a closer look: Looking at sectors from a more sophisticated perspective, investors were buying retail food, biotechnology, tobacco, gold and pharmaceutical stocks. Looking at the S&P 500, we can recognize that some of these companies include Kroger . Are included
KR
(KR), General Mill
GIS
S (GIS), and Kellogg
K
(k) In the dining place. Moderna (mRNA), Amgen
AMGN
(AMGN), Gilead (Guild), and Pfizer
PFE
(PFE) were higher in the biotech and pharmaceuticals groups. Philip Morris (PM) and Altria
MO
(MO) rally in tobacco companies. Finally, Newmonte
No
(NEM), a gold mining company, also rallied.

All of these companies fall into defensive groups except Newmont as it falls under the content area. While the material isn’t generally considered a defensive move, many investors view gold as a safe harbor when it’s raw, so a gold mining company like Newmont makes sense in this context.

Gold Coasting: Investors have traditionally looked to gold as a hedge against inflation, but in the past year, we have seen a lot of inflation but not a lot of gains in gold. While gold futures traded higher on Monday and have experienced some major swings over the past year, it is still trading around 3% lower than a year ago.

The attractiveness of the cryptocurrency’s potential may be to blame for gold’s poor performance at a time when it is usually expected to shine. Normally the money that goes into gold can be in bitcoin, ethereum or any other cryptocurrency. However, if investors are buying gold mining companies, gold may not be far behind.

TD Ameritrade® Commentary for educational purposes only. Member SIPC.

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