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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.

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.

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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4.6 stars on average, based on 494 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

Market Update: U.S. Stocks Rise Following Bank Earnings; Nasdaq Ekes Out New Record

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U.S. stocks advanced Friday, with the Nasdaq eking out a fresh record high as earnings optimism kept trade jitters at back.

Stocks Finish Mostly Higher

Equities concluded a positive week in the black with the Dow Jones and S&P 500 recording their sixth gain in seven days.

Dow industrials rose 94.52 points, or 0.4%, to 25,019.41. Wallgreens Boots Alliance Inc. (WBA) led the advance, with shares of United Technologies Corp (UTX) and Walt Disney Co (DIS) following closely.

The broader S&P 500 Index climbed 0.2% to 2,802.56, with five of 11 primary sectors reporting gains. Industrials and consumer staples led the uptrend with gains of 0.6% apiece.

The technology-driven Nasdaq Composite Index gave up virtually all of its gains by the close, but still managed to notch its second consecutive record high. The benchmark closed up 2.06 points at 7,825.98.

A measure of implied volatility known as the CBOE VIX trended in the opposite direction of stocks, reaching a session low of 11.62. The so-called “fear index” settled down 3.1% at 12.19 on a scale of 1-100 where 20 represents the historic average.

Bank Earnings

Wall Street’s earnings season began in earnest Friday after a trio of banks reported second-quarter results.

J.P. Morgan Chase & Co (JPM) earned $2.22 per share on revenue of $26.8 billion, beating both top and bottom line estimates. Citigroup Inc. (C) also reported better than expected results with per-share earnings of $1.63 on $4.5 billion in sales.

Wells Fargo & Co (WFC) was the worst performer relative to Wall Street’s forecasts. The bank earned $0.98 per sare on revenue of $21.6 billion. Analysts had called for an EPS of $1.12.

Bank earnings continue next week, with Bank of America (BAC), Goldman Sachs Group (GS) and Morgan Stanley (MS) scheduled to report between July 16-18.

Cryptocurrencies Edge Higher as Bitcoin Defends $6,000

Bitcoin’s successful defense of the $6,000 support level spurred a modest rally for cryptocurrencies on Friday. The total market cap of all coins reached a high near $251 billion, according to CoinMarketCap. That represents a gain of roughly $6 billion from the previous day.

At the time of writing, the total market was valued at roughly $247 billion.

The bitcoin price reached a session high of $6,310 before backtracking later in the session. BTC/USD is currently valued around $6,193, taking 43.1% of the total market. The largest cryptocurrency by market capitalization has held above $6,000 for the past two weeks, a sign that prices may have bottomed.

Bitcoin cash rose 1.7% to $693. Ethereum Ripple and EOS were little changed compared with 24 hours ago.

The digital currency market remains in limbo with retail traders on the sidelines and institutions waiting for greater regulatory clarity before taking the plunge. Trading volumes continue to fluctuate between $11-$12 billion on Friday.

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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4.6 stars on average, based on 494 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: Dollar Jumps as Chinese Troubles Mount

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Global stock markets are a tad higher today following the US open, with the main US indices lagging behind somewhat after a hectic overnight session. With forex markets stealing the show yet again, equities tried to maintain their bullish momentum from yesterday, but the after-hours gains were mostly erased thanks to the renewed rally in the US Dollar.

S&P 500 Futures, 4-Hour Chart Analysis

With the economic calendar being empty in Europe and the US, all eyes were on some of the big US banks that reported earnings before the bell, kicking off the earnings season. Wells Fargo (WFC) missed expectations, while JP Morgan (JPM) and posted better than expected numbers, but for now, the market’s reaction is muted, and the two giants have already been diverging in line with today’s surprises in recent months. Citigroup (C) also beat the consensus estimates, but the stock opened lower as the guidance disappointed investors.

WFC, 4-Hour Chart Analysis (JPM Comparison)

Reported earnings are set to hit record highs thanks to the tax cuts and the modest growth in the US, but as usual, the market’s reaction will be more important than the actual numbers, especially given the strong global divergences that we have been monitoring in recent months.

Commodities Mixed as Yuan Tumbles but Dollar Rally Looms

The Chinese trade balance release made the biggest waves so far today, as the record high level of the indicators points to a widening momentum difference, with regards to growth between the two largest economies of the planet. The recent trade conflict between the US and China seems to be hurting the latter country more, and if we look at asset prices, the divide is even more apparent.

USD/Yuan, 4-Hour Chart Analysis

The Chinese Yuan got close to its recent lows against the Dollar after the release and the reserve currency gained ground compared to most of its peers, which is another bad news for emerging market currencies, which remain under pressure.

Copper Futures, 4-Hour Chart Analysis

With the Greenback’s strength weighing on commodities, the relative strength of copper is worth noting, as the battered metal remains above the key support zone that we pointed out earlier this week. Despite the bounce, Dr. Copper is still signaling troubles for the global economy, with the Chinese woes especially hurting the global growth narrative. In the meantime, crude oil is virtually unchanged after the recent volatile period, while gold is testing its recent low near $1240, trying to stabilize in the face of the strong Dollar.

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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4.6 stars on average, based on 291 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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Market Overview

Spooky Economy

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Hi Everyone,

Happy Friday the 13th!!

If you live and work in the United States and didn’t get a raise of 2.9% this year, you’re actually making less than you did last year.

The CPI data released yesterday showed a rather nasty increase bringing the rate of inflation to just under 3%.

Unfortunately for American workers, the average hourly earnings that were published a week ago showed a growth of only 2.7%.

That means that all the increases American’s received in their salaries over the last year have been completely wiped out by inflation.

So, is the US economy really doing great?

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Stocks are Fearless
  • Running out of Gold
  • New Crypto Billionaire

Please note: All data, figures & graphs are valid as of July 13th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

US Treasury Secretary Steven Mnuchin was again playing down the trade war:

Perhaps with Trump out of town at the moment, Steven may even get away with this remark. Of course, if Trump or any other White House official decides to downplay Mnuchin’s remarks, it wouldn’t be the first time.

Speaking of contradictions, it seems there’s a bit of divergence between what world leaders have understood from the recent Nato Summit.

Regardless of all the above, the markets are having a green day with most stock indices showing gains. Outperforming by far is the Nikkei 225 in Japan, which is up 1.79% today. Despite a sizable gap down on Wednesday morning, it’s having a fantastic week.

The Nasdaq is at a new all-time high and while the @OutsmartNSDQ copyfund strategy didn’t outperform in the last few days, it’s still sitting pretty.

Heavy Metals

The metals slide continues. If you’ve been reading diligently over the last week, you’ll know that I’ve been looking for an explanation for this.

Yesterday, one finally approached me and the answer was a lot closer to home than I expected. My esteemed colleague and regional manager of eToro’s Arabic department, George Naddaf, explains that due to outstanding tariffs which specifically target the metal markets, global suppliers are being forced to adjust their prices to meet the current demand.

Still, the tariffs imposed were specifically on steel and aluminum at a rate of 25% and 10% respectively. I get that the industrial metals are taking a hit and that the sectors are correlated but this doesn’t quite explain why precious metals like gold is down 9%, silver is down 8.8%, and platinum is down 12.8% from their respective peaks in mid-April.

My feeling is that there might be a case to consider adding some of these assets, especially if the trade dispute is in fact about to end.

New Crypto Billionaire

Some people are billionaires because they hodled crypto and some people hodl crypto because they’re already billionaires.

Steven Cohen is definitely in the second group. The details of his investment were supposed to remain private but it does seem that they were leaked.

Nobody really needs to ask Cohen why he’s interested in crypto. That much is clear. The interest in this new asset class is through the roof, but only just recently is it starting to catch the imagination of the already wealthy.

Cryptos are up today led by Dash, which has risen 6.5%. As we discussed in our in depth research paper, Dash is one of the most well-established cryptocurrencies and is making significant moves on the ground, especially in the emerging markets where it is needed most.

However, in a strange way, the market has been preferring more experimental and “under-construction” cryptos that are less established.

Here, take a look at this graph of the last year. Dash is actually below the price it was trading in September. This really makes no sense, when other cryptos have made significant gains in this same period.

Wishing you a safe and pleasant weekend!

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

Connect with me on….

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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4.7 stars on average, based on 114 rated postsSenior Market Analyst at Etoro.com.




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