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Market Update: Stock-Rally Fizzles on Hawkish Fed; Cryptos Stabilize After Tumultuous Five Days

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U.S. stocks shed gains Wednesday after the Federal Reserve delivered its first interest-rate hike under Jerome Powell and signaled the continuation of policy tightening throughout the year. On the cryptocurrency front, markets stabilized after a volatile five-day stretch, with bitcoin holding near $8,900.

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Fed Stays the Course

The Federal Reserve raised its benchmark interest rate to 1.75% from 1.5% on Wednesday as part of a broader initiative to normalize monetary policy. The verdict gave a clear signal that rates will continue to rise throughout the year, with officials forecasting a steeper path in 2019 and 2020.

“The economic outlook has strengthened in recent months,” the Federal Open Market Committee (FOMC) said in a statement Wednesday. Officials also said they anticipate “further gradual adjustments in the stance of monetary policy.”

Officials gave a favorable view of the economy and labor market, commenting on the strong pace of hiring in recent months.

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However, not everyone is convinced the Fed will be able to maintain such an assertive course. The Atlanta Fed’s GDP tracker is forecasting economic growth of just 1.9% year-over-year in the first quarter, down from a prior estimate of 5.4%. Another big concern is how consumers will react to rising interest rates. Indebted households have restricted their spending in recent months, as evidenced by retail sales data. Higher interest rates will make it costlier to service those debts.

Stocks Whipsaw After Fed

U.S. stocks opened in positive territory and traded higher for most of the day, with markets giving a favorable first read of the FOMC statement because it made no mention of a fourth rate increase this year.

All the major indexes declined on Wednesday. The large-cap S&P 500 Index fell 0.2% to 2,711.93, with seven of 11 sectors finishing lower. The index had gained as much as 0.8% earlier.

The Dow Jones Industrial Average declined 44.96 points, or 0.2%, to close at 24,682.31. Meanwhile, the Nasdaq Composite Index shed 0.3% to close at 7,345.29.

The CBOE VIX fear index fell slightly on Wednesday, closing down nearly 2%% at 17.86. Vol touched a session low of 16.26 on a range between 1 and 100.

Cryptocurrencies Flat

When viewed collectively, the crypto market was little changed on Wednesday, with total values hovering near $345 billion. Movement within the top-five was narrow by the afternoon, with bitcoin, Ethereum and Litecoin holding steady, according to data provider CoinMarketCap.

However, there was sharp divergence beyond the top-five, with Cardano and EOS rising more than 7% apiece. ICON was the biggest percentage gainer after South Korea’s Bithumb exchange announced it has added the cryptocurrency to its listing.

On the opposite side of the spectrum, Stellar, NEM and Ripple XRP struggled in mid-week trading.

Bitcoin’s dominance index weakened slightly on Wednesday but continued to hold near 44% of the market. The world’s biggest cryptocurrency hit a high above $9,000 on Tuesday but has since consolidated below that level.

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.

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 353 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Market Overview

Decentralize

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There’s a fine line between celebrity and politician as we’ve seen clearly with the election of reality TV star Donald Trump.

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Now it seems that famous rapper Kanye West is taking a more proactive stance on politics and has recently had several very public interactions with President Trump on Twitter.

But it’s not just politics. Kanye’s Twitter account has a total of 220 tweets yet it seems that most of them have been posted in the last 48 hours. One of those tweets was a single word. A buzzword in the crypto-community that had a lot of blockchain enthusiasts excited.

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Not that Bitcoin needs the Yeezy’s endorsement but I don’t think it hurts.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Draghi Day
  • DB Big Miss
  • Ether Chain Split?

Please note: All data, figures & graphs are valid as of April 26th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Stock markets are rather quiet today as we await the announcement from Mario Draghi and the European Central Bank (ECB).

The ECB is currently injecting about €30 Billion of stimulus into the economy each month. Though this is far less than they were doing at the peak of global QE a few years ago the feeling is that they’ll need to reduce it further going forward.

The issue is that despite the massive amount of stimulus the Eurozone has been showing signs of weakness.

Of course, it would be very difficult for any central banker to admit that their respective economies are slowing down. So even though nobody expects any concrete changes to the ECB’s monetary policy, investors today will be watching like vultures.

Here we can see that the Euro has been gaining strength against the USD ever since the French elections in April. After running into some resistance at 1.25 it now seems that this strong trend is under question.

Earnings Continue

Yesterday’s announcements on Wall Street weren’t too bad. Facebook managed to defy the calls of #DeleteFacebook and has even managed to gain new users, and even Twitter managed to put up a profitable quarter for the second time in history.

Over to Europe, things are not looking so hot in the financial sector. Barclays faced a quarterly loss of £764 million but the big news rocking the markets today is that Deutsche Bank, which was expected to announce a Q1 profit of €376 Million, disappointed investors with profits of only €120 Million.

Even though this is a massive miss, it might not be as bad as some think. You’ll recall that DB recently switched CEOs right at the beginning of Q2, so there is a clear scapegoat here.

The new CEO Christian Sewing seems to be treating the below-expected earnings as an opportunity rather than a setback and has announced some massive reforms that he feels can improve the bank’s profitability.

At the moment, DB has more than 100,000 employees in 70 countries. From today, many of those outside of Germany will expect to receive notice as DB consolidates its business to try and focus on its core market.

Sewing was brought in to be the gunman when Crayn simply couldn’t pull the trigger. Now it seems that a lot of people are about to get fired.

Will Ethereum Split?

Though the DNS hack yesterday was shocking the damage was rather contained. Ethereum enthusiasts have a much bigger concern on their minds at the moment, the aftermath of the last major Ether hack.

We discussed the Parity hack that froze about 514,000 ETH in a previous market update titled Security & Stability (dated November 8th, 2017). Now the owners of those tokens are doing whatever they can to try and get them back.

Ethereum Improvement Proposal EIP-999 proposes that the upcoming hard fork that is planned to move Ethereum to the Casper protocol will also be used to release the frozen tokens from the Parity hack.

After a week-long vicious vote, the results are in and it seems Parity is out.

In the wake of this narrow yet clear vote not to go ahead with EIP-999 it seems that some of the top developers plan to go forward anyway.

True to character, Vitalik Buterin has been notably silent on this issue. He generally prefers to allow the community to come to some sort of decentralized resolution without the aid of his authority.

Mind you, even if we do see a chain split it might not have a negative effect on the price of Ethereum. There is a distinct possibility that we could see a new coin created that is different from the original like we did with Ethereum Classic and Bitcoin Cash, both of which seem to have generated wealth for token holders.

Let’s have an amazing day ahead!!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,

Mati Greenspan
Senior Market Analyst

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 71 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

Market Update: Stocks Recover Slightly on Upbeat Earnings; Cryptocurrencies Give Back $30 Billion in Gains

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U.S. stocks finished mostly higher on Wednesday, with the Dow snapping a five-day losing after Boeing shattered earnings expectations with its first-quarter report.

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Meanwhile, cryptocurrencies corrected sharply lower as investors took profits following two weeks of steady gains.

Stocks Mostly Higher

Wall Street recovered from a sharp selloff after the open to trade mostly higher on Wednesday. The Dow Jones Industrial Average posted gains of 59.70 points, or 0.3%, to close at 24,083.83. The index was down 200 points earlier in the day.

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Shares of Boeing Co (BA) surged 4.2% after the defense contractor posted much stronger than expected corporate earnings. The company delivered per-share earnings of $3.64 on revenue of $23.38 billion. Analysts in a consensus forecast called for EPS of $2.58 on $22.26 billion in revenue.

The broader S&P 500 Index advanced 0.2% to close at 2,639.40, with eight of 11 primary sectors reporting gains. Energy and telecommunication were the biggest gainers, rising 0.8% apiece.

Meanwhile, the technology-heavy Nasdaq Composite Index was back in negative territory by the close, falling 0.1% to 7,003.74.

The CBOE Volatility Index, commonly known as the VIX, edged down a mere 1% to close at 17.84. The so-called “fear index” touched a session high of 19.84 after the open.

Cryptocurrencies Correct Lower

The cryptocurrency market suffered a brisk selloff on Wednesday, as bitcoin and the altcoins shed as much as $50 billion.

Cryptocurrencies as a whole bottomed near $381 billion before recovering at $403 billion, according to CoinMarketCap. Despite the decline, daily trading volumes eclipsed $40 billion, rounding out one of the most active sessions in months.

 

Several major altcoins reported double-digit percentage losses, including Ripple’s XRP, which fell 11.7% to $0.83. Litecoin plunged nearly 10% to $148.25. Bitcoin cash, the market’s top performer over the past week , gave back nearly 9% to settle near $1,336.

Stellar, Cardano and IOTA were all down at least 10% on Wednesday.

Meanwhile, bitcoin hovered near $9,100 by the early evening, where it was down 3.6% from the previous close. However, its share of the total crypto market edged up to 38.3%.

Prior to the selloff, crypto assets had risen by a combined $180 billion in less than three weeks.

Coins failed to rally even after the CEO of Nasdaq said the stock exchange would be open to hosting cryptocurrencies in the future. In an interview with CNBC, CEO Adena Friedman said Nasdaq “would consider becoming a crypto exchange over time,” provided that appropriate regulations were in place to safeguard investors.

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.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 353 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Pre-Market: Stocks Up Slightly After Plunge but Sellers Clearly in Control

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Global stocks continued the bearish trend that initiated last week, while volatility increased significantly yesterday during the US session. The major US indices plunged by more than 2% and dragged global benchmarks lower as well, so suddenly the correction lows are in sight again. The momentum of the move suggests that we will see at least a test of the lows, as the charts continue to show bearish pressures across the board.

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NASDAQ 100 Futures, 4-Hour Chart Analysis

Today, stock futures have been slightly above the lows from yesterday, but the short-term charts are clearly wounded and any bounce should be treated as a counter-trend move here. While significant new correction lows are not guaranteed here, bulls should wait until a short-term trend change rather than guess the bottom, as the risks of a deep downswing are high.

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US 10-Year Treasury Yield, 4-Hour Chart Analysis

The rising trend in Treasury yields is among the catalysts of the move, as we painted out several times, and with the whole yield curve still drifting higher to new multi-year highs, the short-term trend could continue. European stocks are holding up well compared to their US peers, and the Japanese Nikkei is also relatively strong, and all of that could be attributed to one thing, the Dollar’s strength.

EUR/USD at Make-Or-Break Level

EUR/USD, 4-Hour Chart Analysis

Forex markets are very active these days, as the massive move in yields boosted the Dollar, which has been gaining ground compared to all of the majors. The most-watched EUR/USD pair is just above the March low, very close to hitting a 3-month minimum, with only 30 pips of cushion remaining for bulls.

Dollar Index, 4-Hour Chart Analysis

The trend in the Dollar index suggests a breakdown in the coming period, as the broader measure broke out from a range that has been intact for several months. Of course, a hawkish ECB statement tomorrow could save Euro bulls here, but given the bearish positioning regarding the Dollar, the “pain trade” would probably be a strong Dollar rally.

Commodity currencies continue to trend sharply lower, despite the stability in the price of oil, and as we noted several times, the Australian Dollar and the Canadian Dollar have been reliably leading risk assets in the last couple of months, so this trend doesn’t bode well for equities.

The same goes to the negative reaction of the most-watched quarterly earnings releases (Google parent Alphabet, Caterpillar), so for now, caution is the name of the game for equity investors.

Featured image from Shutterstock            

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 233 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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