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Market Update: Stocks Fall After Hawkish Fed Raises Interest Rates

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Federal Reserve Building

U.S. stocks drifted lower Wednesday after the Federal Reserve raised interest rates and signaled that two more increases are likely this year.

Stocks Sputter

Wall Street finished mostly lower in a session marked by tepid trading conditions. The large-cap S&P 500 Index traded 0.4% lower t9 close at 2,775.63, with nine of 11 primary sectors contributing to the decline.

Shares of telecommunication services plunged more than 4% after a federal judge permitted AT&T’s takeover bid for Time Warner.

Stocks tied to materials and real estate also finished sharply lower on Wednesday.

Dow industrials closed down 119.53 points, or 0.5%, at 25,233.65.

The technology-driven Nasdaq Composite Index reveesed gains to settle down 0.1% at 7,695.70.

Implied volatility, as conveyed by the CBOE VIX, edged higher on Wednesday but continued to trade well below its historic norm. The so-called “fear index” climbed nearly 5% to 12.94.

Fed Hikes Interest Rates

The Federal Reserve lifted interest rates on Wednesday and set the stage for two more upward adjustments this year, a sign policymakers were becoming more convinced about the direction of the economy.

Federal Open Market Committee (FOMC) members voted to lift the target for the benchmark rate to 2% from 1.75%. In communicating their decision, policymakers revised key terminology by stating economic growth has been “rising at a solid rate.” In May, the Fed described economic expansion as being “moderate.”

The Fed’s guidance vindicates an earlier forecast by Goldman Sachs, which called for a total of four rate hikes this year. The forecast was posited at a time when the majority of analysts had expected only three rate adjustments for 2018.

Cryptocurrencies Extend Collapse

Digital assets on Wednesday shed another $14 billion in market capitalization, as bitcoin eyed February lows and the broader altcoin universe continued its freefall.

By the late afternoon, the cryptocurrency market was valued at $267 billion, according to CoinMarketCap. Daily trade volumes picked up to around $17 billion but remain well off year-to-date averages.

A combination of investor fatigue, negative news headlines and regulatory bottlenecks have all been suggested as possible reasons for the market’s latest collapse. In the absence of bullish sentiment, negative news coverage has only heightened investors’ frustration.

Crypto prices have declined more than $70 billion since Friday and are fast-approaching their year-to-date lows.

Bitcoin is down more than 4% from Tuesday levels and is currently trading around $6,317. Its share of the total market has increased to over 40% as altcoins continue to bleed. With the exception of Tether, a dollar-backed stablecoin, all major cryptocurrencies in the top-20 booked losses on Wednesday.

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 461 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: Technology Stocks Power Nasdaq to Record High; OPEC Meeting in Focus

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Technology stocks propelled the Nasdaq Composite Index to record highs on Wednesday, as investors eyed potentially improving trade relations between the United States and European Union.

Technology Stocks Rally

The technology sector outperformed Wednesday as shares of Netflix (NFLX) and Facebook (FB) set fresh record highs. The large-cap S&P 500 Index rose 0.2% to 2,767.32. Its IT component advanced 0.4%. Meanwhile, real estate rose 1.1% and discretionary shares added 0.5%.

The Nasdaq climbed 0.7% to close at 7,781.51. The tech-driven index is up 4.6% for June, having set record highs on half a dozen occasions.

Dow industrials extended their slump to seven days, falling 42.41 points, or 0.2%, to close at 24,657.80.

Dow blue-chip Disney Co (DIS) upped its bid for Twenty-First Century Fox (FOXA) assets to $38 per share, or $71.3 billion, surpassing an earlier offer made by Comcast. Last week, the NBCUniversal parent offered $65 billion in cash.

Expected volatility over the next 30 days declined on Wednesday, as calm trading conditions returned to Wall Street. The CBOE Volatility Index fell 4.1% to 12.80. The VIX trades on on a scale of 1-100 where 20 represents the historic mean.

U.S.-EU Trade Rift Thaws

Investors received some reprieve Wednesday from trade-war rhetoric amid reports that the U.S. and European Union were working out a new deal on automobiles.

According to The Wall Street Journal, the U.S. ambassador to Germany has met with German automakers BMW, Volkswagen and Daimler, where they proposed the idea of ending car tariffs between the U.S. and its EU allies. Germany has reportedly offered to scrap the EU’s 10% tax on EU automobiles  as part of a broader pact involving industrial goods.

Stocks have been pressured all week by the threat of all-out trade war between the United States and China after President Trump announced tariffs on up to $50 billion worth of Chinese goods. The president late Monday directed his administration to identify $200 billion worth of Chinese goods for additional duties after Beijing threatened counter-tariffs on American-made products.

OPEC Meeting in Focus

A Saudi-led plan to boost oil production is being met with resistance by Iran ahead of a high-profile OPEC meeting later this week.

Iran’s oil minister Bijan Zanganeh called the cartel an “American organization” and signaled his country’s opposition to higher production quotas. Earlier, the Islamic Republic had reportedly agreed to make a compromise on a small increase in output.

“OPEC is not an organization to receive its instruction from President Trump,” Zanganeh said upon his arrival in Vienna, Austria, the venue of the upcoming meeting.

“The U.S. president has blamed OPEC for the price hike. Indeed, the real responsibility for the current oil price hike lies with the U.S. president himself,” he added, as reported by the Financial Times.

Saudi Arabia is scrambling to convince fellow members of the Organization of the Petroleum Exporting Countries to pass a resolution relaxing production cuts as the kingdom seeks to maintain market share.

Russia, which openly backs a production hike, wants OPEC and its allies to boost output by a combined 1.5 million barrels per day.

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 461 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

What Doesn’t Kill you Makes you Stronger

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Hi Everyone,

This is it. After months of wheeling and dealing in the UK government, Prime Minister May’s showdown with her own party comes to a head this evening.

They’ve already decided that parliament should have a say in what Brexit will look like. Today we’ll get a better understanding of what level of authority that “say” will carry. In other words, do they have an advisory role or are they the decision makers.

Opponents of the “meaningful vote” amendment say that it will weaken May’s hand. Proponents say that, if passed, the amendment will weaken May’s hand. May has maintained that “no deal is better than a bad deal.” It would seem that most economists and authorities disagree, so this parliamentary vote is about blocking the no-deal option.

Though the average citizen maybe feeling fatigued by now, the EU negotiators will be keeping a keen eye on the countdown timer, which is now set for just nine months.

As far as the markets g, their concerns are aligned with the economists. Any chance of a no-deal Brexit could hurt confidence in local companies and in the Pound.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Please Remain Calm
  • Metals Melt & Oil Leaks
  • Another Crypto Hack

Please note: All data, figures & graphs are valid as of June 20th. All trading carries risk. Only risk capital you can afford to lose.

Etch-a-Sketch Markets

Whatever trade war concerns may have been in the market yesterday seems to be completely gone by now. The People’s Bank of China might have had something to do with that.

The following headline may be translated in laymen’s terms as: don’t worry about trade, take some cash and settle down.

The amount of the cash injection may also be symbolic. Even though ¥200 billion is only worth 15% of the $200 billion proposed tariffs, the number itself is more than enough to raise eyebrows.

The CEO of Goldman Sachs, Lloyd Blankfein was also on Bloomberg this morning playing down the trade risks. Saying basically that Trump has made his point but he’d need to be crazy to carry out the threat and that this is more likely just a reminder to China that the U.S. has more available tariff firepower.

In any case, here we can see that stock indexes this morning are all green.

Platinum Got Smelted

In the weirdest way, during the height of the trade tensions yesterday gold took a massive plunge.

This strange behavior is something we mentioned in Monday’s update as well (Title: Let’s Break the Internet). Gold usually acts as a safe haven and goes up during times of uncertainty, but now it seems to be doing the opposite.

I still haven’t heard any convincing theories as to why this might be. The best I got was a few reassurances that the world isn’t about to end and therefore there’s no demand to hold physical gold.

The effect on Platinum seems to have been even more dramatic, as it got slammed down to the lowest level in 2.5 years, and is now relatively close to its lowest point in a decade.

It is also important to note the three day OPEC meeting in Vienna. Though any final decisions are usually reserved for the end of the meeting, there’s a strong possibility that we could get some leaks or even a complete breakdown.

Some countries want to start increasing output and some would rather decrease it. Both from a fundamental and technical perspective, this could go either way. Will be interesting to watch what happens.

What Crypto Hack

Less than two weeks ago, mainstream media was attributing a $1,000 drop in bitcoin prices to a minor hack attack on a previously unknown Korean crypto exchange.

Last night, the largest, most well known, crytpo exchange in South Korea got hit and cryptotraders across the globe woke up to this

The price of bitcoin however, seems to have barely budged. Here we can see the time of the bithumb news circled in purple and the drop following the Coinrail hack in yellow. What’s wrong with this picture?

One disadvantage to bitcoin is its immutability. Once a transaction happens, it can never be undone, which is one of the reasons cryptocurrencies can be a target for hackers.

However, immutability is also one of bitcoin’s most attractive qualities. The fact that it operates transparently and independently is a clear advantage for many.

The industry is certainly getting better at dealing with these types of attacks as well. Bitcoin’s high level of transparency makes it easier for authorities and businesses to track any illicit activity or stolen goods and eventually return them to their rightful owner. Very likely, we’ll continue to see more emphasis and development around security and the trusted custody of cryptocurrencies and that’s ultimately a good thing for the industry.

As always, please feel free to connect with me at the links below. I’m always glad to hear any questions, comments, and feedback. 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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4.7 stars on average, based on 103 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

Market Update: Dow Drops Nearly 300 Points on Trade War Threat

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U.S. stocks extended losses Tuesday, with Dow industrials registering their fifth consecutive decline after President Trump signaled to his administration that an additional round of Chinese tariffs could be on the way.

Stocks Tumble

All of Wall Street’s major indexes headed for losses as trade and political risks kept equity investors on the sidelines. The Dow Jones Industrial Average plunged 287.26 points, or 1.2%, to 24,700.21. Boeing Co (BA), Caterpillar Inc. (CAT) and DowDuPont (DWDP) were among the biggest decliners, falling at least 2.6%.

The broader S&P 500 Index headed for a loss of 0.4% to close at 2,762.57. Six of 11 primary sectors contributed to the declines, with industrials and materials each falling more than 1.8%.

The technology-driven Nasdaq Composite Index declined 0.3% to 7,725.58.

The CBOE Volatility Index, commonly known as the VIX, surged to its highest level in about three weeks. Wall Street’s preferred measure of investor anxiety jumped 8.5% to 13.35 on the scale of 1-100 where 20 represents the historic mean. The fear index touched a session high of 14.68.

Trade War Threat Escalates

U.S. President Donald Trump has warned China not to retaliate to Washington’s first round of export tariffs, which target up to $50 billion in Chinese goods.

Trump has asked his administration to prepare an additional list of $200 billion in Chinese goods that could be subject to tariffs should Beijing follow through with its threat to tax U.S. exports. This so-called second tranche of goods would be taxed at a rate of 10%. The first round of levies, which was confirmed Friday, will subject Chinese goods to a tax of 25%.

“Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship,” the U.S. president said in a statement.

China has vowed to implement a tariff policy of equal force and measure to the one Washington announced last week.

Earlier on Tuesday, the Senate passed a measure reinstating a ban on purchases of U.S. components by Chinese telecommunications giant ZTE Corp. that nearly shuts down the company. President Trump had sought to overturn the ban.

Cryptocurrencies Show Poise

Digital currencies continued to hold gains after prices jumped $13 billion in one hour of trading Monday afternoon. At the time of writing, the combined value of all crypto assets in circulation is $291.4 billion, according to CoinMarketCap.

Five of the top-ten coins by market cap are reporting gains over the last 24 hours, led by Tron’s more than 8% surge.

Bitcoin reached a high of $6,843.03, its best levels in a week. The largest cryptocurrency by market cap was last trading at $6,776.

Ethereum peaked at $542.35, its strongest showing in more than a week. Ether prices were last up 3.7% at $537.

The digital currency market has rebounded $27 billion from last week’s swing low. Much of the recent gain has been attributed to New York’s approval of a crypto trading app on Monday. The Department of Financial Services has granted Square’s Cash app a virtual currency license, which gives state residents the opportunity to buy and sell bitcoin on platform.

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
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4.6 stars on average, based on 461 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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