Market Update: Stocks Recover from U.S.-China Trade Doubts Lingering as Crypto Assets Plunge
U.S. stocks reversed losses Wednesday after the minutes of the Federal Reserve’s latest meeting showed no urgency from policymakers to raise interest rates.
Wall Street spent much of Wednesday in the red as lingering trade risks dampened investor sentiment. The major indexes reversed course in afternoon trading, the S&P 500 Index advancing 0.3% to 2,733.28. Six of 11 primary sectors finished higher.
The Dow Jones Industrial Average reversed declines to finish up 0.2% at 24,886.74. Dow industrials were down triple digits earlier in the day.
The technology-focused Nasdaq Composite Index swung into positive territory, adding 062% to close at 7,425.96.
Equity markets got some reprieve after FOMC meeting minutes showed the central bank was in no hurry to hike interest rates even as the economy and inflation continued to improve. Nevertheless, the Fed is widely expected to raise interest rates by a quarter point at its next meeting in June.
Trade Tensions on Multiple Fronts
President Trump’s pledge to help telecom giant ZTE get back to work has been challenged by the Senate Banking Committee, which on Tuesday approved a host of measures targeting exports and Chinese companies.
Senate lawmakers have agreed on new rules to bolster national security reviews of Chinese technology firms as well as strengthen export controls. This includes limiting the Trump administration’s ability to lift penalties imposed on ZTE.
Stocks rallied Monday on signs the Trump administration would suspend its plans to tax $150 billion worth of Chinese imports.
Reports of a stalemate over NAFTA also sent jitters throughout Wall Street as it became apparent that the U.S., Canada and Mexico would not reach an agreement in time for the Mexican elections this summer.
In a statement released last week, Trump’s top trade negotiator Robert Lighthizer said “NAFTA countries are nowhere near close to a deal,” pointing to “gaping differences” on a number of key issues.
Crypto Markets Plunge
Cryptocurrency prices declined sharply on Wednesday, with bitcoin threatening a bearish reversal following weeks of lateral moves.
The cryptocurrency market shed more than $50 billion, reaching a low of around $324 billion. That was the weakest reading since early April.
Bitcoin values fell more than 6% to $7,620, its lowest since April 12. Total trade volume in BTC was valued $6.1 billion, which is equivalent to roughly 31% of total daily turnover.
Although bitcoin declined heavily, its share of the total market improved to 39.5% as altcoins registered significant losses. With the exception of bitcoin, every major asset in the top ten recorded double-digit percentage losses. Declines ranged between 11% and 20%.
Ethereum prices plunged to $591, Ripple XRP declined to $0.61 and bitcoin cash touched down below $1,000 before recovering at $1,033..
There was no immediate catalyst for the price decline, which suggests that a broad consolidation trend is afoot. Some researchers have called for the general unwind to continue through the summer before accumulation returns in the fall.
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.
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