Dow Plunges, Bitcoin Rises as Fed’s Powell Stresses Central-Bank Independence
The Dow and broader U.S. stock market drifted lower on Tuesday after Federal Reserve Chairman Jerome Powell emphasized downside risks to the economy in public remarks delivered in New York. Bitcoin was unaffected by the remarks as the price hit new yearly highs near $11,500.
Dow Drops; S&P 500, Nasdaq Follow
All of Wall Street’s major indexes reported declines on Tuesday, with the Dow Jones Industrial Average falling by as much as 199 points. The blue-chip index would eventually settle down 179.32 points, or 0.7%, at 26,548.22.
The large-cap S&P 500 Index drifted 1% lower to close at 2,917.38. Nine of 11 primary sectors reported declines, led by communication services and information technology.
Sliding tech and communication shares weighed heavily on the Nasdaq Composite Index. The tech-laden benchmark dropped 1.5% to 7,884.72.
Powell Says Trump Can’t Bully the Fed
Jerome Powell says the Federal Reserve won’t bow to “short-term political interests” when it comes to formulating monetary policy and that interest rates will be adjusted only when the data support it.
In a speech at the Council on Foreign Relations in New York, Powell maintained that the central bank will maintain a “patient” approach to monetary policy despite ongoing pressure from President Trump to lower interest rates. At the same time, Powell said he and his colleagues are monitoring ongoing risks to the economy, such as below-trend inflation, a U.S.-China trade war and slowing global growth.
“The crosscurrents have reemerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy,” Powell said, according to CNBC. “Our contacts in business and agriculture report heightened concerns over trade developments.”
Bitcoin’s Dominance Grows
The price of bitcoin remained elevated on Tuesday, reaching its highest level in 15 months as the fear of missing out continued to drive interest in the leading cryptocurrency. Bitcoin reached a session high of $11,470 on Bitstamp, having gained some 4% during the session. It was last seen hovering just above $11,375, up 3.1%.
The broader cryptocurrency market has failed to keep up with bitcoin’s rapid ascent. The largest cryptocurrency has added a quarter to its value over the past week, bringing its dominance rate back above 60%. The last time bitcoin’s dominance rate held comfortably above 60% was October 2017.
Bitcoin’s massive rally is coming as more hedge funds bet against the dominant cryptocurrency. As the Wall Street Journal reports, CME Group’s bitcoin futures market has more bearish positions than bullish. Data from the Commodity Futures Trading Commission show that hedge funds and other money managers held roughly 14% more short positions than long positions last week. Other large traders were even more bearish.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Charts via Stockcharts.com and TradingView.