Markets
An impending stock market “correction” warning suddenly turns red, as Nvidia, Apple and Tesla tumble again
Update 07/11 below. This post was originally published on July 10
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.
Sign up now to Forbes Cryptocurrency and Blockchain Advisor and “discover the blockchain blockbusters poised to gain more than 1,000%” after the Bitcoin halving earthquake!
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 HouseAn analyst has highlighted the unexpected presence of a red light in the stock market.
Sign up now for free Cryptocode—A five-minute daily newsletter for traders, investors and cryptocurrency curious that will keep you updated and abreast of the bull run in the bitcoin and cryptocurrency market
Forbes Biden’s sudden retirement odds rise amid $230 million bet on Trump
Federal Reserve Chairman Jerome Powell helped push stock markets higher, with the S&P 500 index … [+] Nasdaq and Dow hit new all-time highs.
Getty Images
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.
Update 11/07: The S&P 500 and indexes fell sharply on Thursday, posting their worst performance since late April, as recent winners in tech giants including Nvidia, Apple and Tesla took a nosedive.
The decline came after the latest inflation data accelerated expectations of a Federal Reserve interest rate cut in September, with interest rate futures now showing traders anticipating a greater than 90% chance that the Fed will cut rates by its September meeting, up from about 74% on Wednesday, according to CME Group’s Fedwatch.
“It is clear that the continued downward trend in headline inflation will lend weight to the case for a Fed rate cut, as widely expected by markets in the fourth quarter of this year,” Adrian Li, managing director of corporate finance advisory firm Centrus, said in emailed comments.
“However, the exact timing of a rate continues to remain uncertain and may ultimately depend on the Fed balancing inflation risks against the perceived risk of elevated rates for the continued strength of the US economy. All eyes will now be on further direction-of-travel indications ahead of the rate decision later this month, with the next unemployment and nonfarm payrolls rates not due until early August.”
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.
Sign up now for Cryptocode—A free daily newsletter for cryptocurrency lovers
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.
Forbes Digital Assets
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.