Markets
A warning of an impending stock market “correction” suddenly turned red, just as the S&P 500, Nasdaq and Dow hit record highs
Stock markets are rising after Federal Reserve Chairman Jerome Powell raised hopes of an interest rate cut in September—immediately 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 fears of debt spiral troubling traders.
Now, as uncertainty looms over the White HouseOne analyst highlighted a surprise stock market warning as if it had just started flashing red.
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Federal Reserve Chairman Jerome Powell helped push stock markets higher, with the S&P 500 index … [+] Nasdaq and Dow hit new all-time highs.
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The recent crash in bitcoin and cryptocurrencies, which saw the combined market lose $500 billion in just over a month, could be poised to trigger “an imminent summer correction in the S&P 500,” said Barry Bannister, managing director and chief equity strategist at Stifel, said Market observatory.
Bannister highlighted the correlation between Bitcoin and stock markets, particularly 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 single dovish pivot over the past 13 years has seen bitcoin rise sharply, 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 to Congress this week, Fed Chair Powell said he has “some confidence” that inflation is coming down, but he is 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, head of market techniques 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 dramatically 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 on stocks, as traders continue to bet on interest rate cuts from the Federal Reserve.
“Growing confidence in U.S. rate cuts has kept sentiment positive and gains broad-based,” said Dan Coatsworth, investment analyst at brokerage AJ Bell, in emailed comments.