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Market Update: U.S. Stocks in Meltdown as Bond Yields Set Multiyear Highs; J.P. Morgan Predicts Prolonged Trade War

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Stock traders hit the panic button on Thursday, sending U.S. equities into a downward spiral after bond yields set new multiyear highs. Meanwhile, one of Wall Street’s biggest banks has warned that a trade war with China is now the baseline forecast moving forward.

Stocks Plummet

All of Wall Street’s major indexes declined on Thursday in what amounted to the worst loss since late June. After back-to-back gains, the Dow Jones Industrial Average plunged 200.94 points, or 0.8%, to 26,627.45. It was down nearly 400 points earlier in the day.

 

The broader S&P 500 Index declined 0.8% to 2,901.61, with nine of 11 primary sectors finishing lower. The Nasdaq Composite Index sold off 1.8% to close at 7,879.51.

While most sectors finished lower, information technology and the newly formed communication services were the biggest decliners.

The CBOE Volatility Index, also known as the VIX, surged as much as 32% on Thursday to 15.33, its highest since early July. It would later settle at 14.22 for a gain of 22.5%. VIX typically rises when the S&P 500 Index falls.

Bond Yields Extend Climb

Investors are offloading U.S. Treasuries at a faster pace amid signs of an improving economy, which has led to a sharp increase in bond yields. The yield on the benchmark 10-year U.S. Treasury note peaked at 3.202% on Thursday, the highest since 2011. Short-term government bond yields also rose, with the two-year yield reaching its highest in a decade. Yields and bond prices move in inverse fashion.

Riding a tailwind of pro-growth optimism, corporate tax cuts and rising wages, the U.S. economy hasn’t looked this strong since before the financial crisis. For investors, this means the Federal Reserve is likely to adopt an assertive rate-hike path well into next year as inflationary pressures continue to build.

The Fed lifted its benchmark interest rate at its most recent policy meeting in February. Markets are pricing in an additional rate hike in December, bringing the number of yearly adjustments to four.

Trade War Now the Baseline Estimate: J.P. Morgan

J.P. Morgan Chase & Co is less optimistic that the United States and China will be able to avert a full-blown trade war. The mega bank on Wednesday lowered its outlook on Chinese equities to neutral from overweight after predicting a bigger slowdown for the world’s second largest economy next year.

“A full-blown trade war becomes our new base case scenario for 2019,” J.P. Morgan analyst Pedro Martins Junior said in a note to clients, as quoted by CNBC. “There is no clear sign of mitigating confrontation between China and the US in the near term.”

Trade talks between China and the U.S. broke down last month after President Trump moved ahead with a new round of tariffs targeting $200 billion of Chinese goods. Talks haven’t progressed any further, according to White House economic advisor Larry Kudlow. J.P. Morgan believes the tariffs could slash Chinese GDP by 1 percentage point.

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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4.7 stars on average, based on 772 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Pieces of April

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Hi Everyone,

An 86-year-old lady returns to work today after fracturing three ribs and removing several cancerous nodules from her left lung.

She isn’t a victim of social or economic injustice though. Ruth Ginsburg is a Justice on the United States Supreme Court and she is arguably holding the balance in a fragile legal system. So there’s a lot riding on her ability to perform. In fact, this was her first notably absence in 25 years.

President Trump has already managed to appoint two conservative Justices to America’s highest court. So there are now 5 conservative and 4 liberal judges serving. Should Ginsburg retire now or otherwise be unable to continue her work, it would give Trump the opportunity to sway the Supreme court to a 6 – 3 majority. Something that could very well shape US laws and policy for decades to come.

In this graph from The Economist, we can see conservatives enjoying a slight judicial bias since 1980. We would like to wish Ruth the best of success, may she live a very long and healthy life!

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • US-China trade deadline: 10 days | Days to Brexit: 38

Please note: All data, figures & graphs are valid as of February 19th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Now that a shutdown has been successfully averted…

Sixteen states have already formed a coalition to ask the courts to block the President from proceeding and this battle could play out for some time to come. However, as the amount of money they’re squabbling over is relatively small, this partisan bickering probably won’t have much impact on the markets, short of any major breakthroughs or escalation.

Markets were up earlier during the Asian session but by now they are decidedly down. Brexit concerns, US-China Trade, and an apparent European slowdown are taking their toll, despite pledges from the central banks to prop them up.

The United States will come back from their long weekend today so the first few minutes after Wall Street rings the opening bell will be fairly significant.

Gold Surges

The shiny yellow metal has reached fresh highs this morning and is now at levels not seen since last April.

Precious metals such as Gold, Silver, Copper, and Platinum are increasingly being seen as a viable hedge against all the geopolitical tension mentioned above.

Crypto Optimism Continues

The crypto market is once again capturing the imagination of traders across the globe as volumes have now reached levels not seen since last April.

One of the cool things is that the number one gainer over the last 24 hours is EOS. As I mentioned in a YouTube session with Thinking Crypto last week, EOS is the number one coin in my portfolio, simply based on the token economics.

Though it’s easy to get excited. Please remember that we’re still very much in a bear market. So please trade with caution. Always remember to diversify your portfolio with other assets in order to keep your risk to a minimum.

Special thanks to Three Dog Night for the title of today’s market update.

Have an amazing day ahead!!

Best regards,

Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan Twitter: @MatiGreenspan LinkedInMatiGreenspan |Facebook:MatiGreen

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 152 rated postsSenior Market Analyst at Etoro.com.




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U.S. Stock Futures Point to Tepid Tuesday Start as Democrats Vow to Fight Trump’s Emergency Declaration

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U.S. stock futures headed for modest gains on Monday, as the President’s Day holiday kept trade volumes subdued ahead of what’s expected to be an active week in the market. Meanwhile, cryptocurrencies exploded to the upside as trade volumes reached new highs for the year.

Stock Futures See Modest Gains

The U.S. futures market traded slightly higher in the holiday-shortened session. The Dow Jones mini futures contract edged up 14 points to close at 25,902.00. The benchmark Dow Jones index surged 1.7% on Friday en route to fresh three-month highs.

S&P 500 mini futures ticked up 1.25 points to settle at 2,778.25. The Nasdaq 100 mini contract rose 17 points to 7,080.75.

The New York Stock Exchange was closed on Monday for President’s Day. Regular trading hours are set to resume on Tuesday.

Further reading: Does this Chart Spell Doom for the S&P 500 Index?

Trump vs Democrats (Again)

As CCN reported earlier today, Democrats have vowed to fight President Trump’s emergency declaration to fund a new steel barrier on the southern border with Mexico. Trump exercised his executive powers on Friday shortly after signing $333 billion in new funding agreements that avoided a second costly government shutdown.

The new budget includes $1.38 billion in additional border funding, which is far less than the $5.7 billion Trump requested. By declaring a state of emergency, the president can divert funds from other programs to construct his new steel barrier.

According to The Wall Street Journal, the state of California has already announced plans to sue the Trump administration over the declaration. Xavier Becerra, the state’s Attorney General, told CNBC this weekend that he “definitely and imminently” planned to pursue legal action.

Crypto Bulls Ignite New Rally

Crypto markets put on a show Monday, as the asset class rallied more than $12 billion in the span of a few hours. The combined value of all cryptocurrencies peaked at $133.2 billion, according to CoinMarketCap. That’s the highest level in over five weeks.

The rally was sustained by an incredible surge in trade volume. Turnover spiked more than 66% to $33.4 billion, far exceeding the the volume surge that accompanied the mid-November selloff.

The top 40 cryptocurrencies all reported gains. Bitcoin, the largest of the digital assets, rose 8.4% to $3,932.72. Ethereum climbed 14.4% to $146.89. XRP climbed to $0.3232, having gained 7.6%.

EOS was the standout performer, as the price rocketed 23.5% to $3.48. The cryptocurrency is trading at its highest level since November.

Litecoin maintained its bullish posture, as the price surged 12% to $48.48. Bitcoin cash rallied 19.1% to reach $145.44.

For more on the Monday crypto rally, read: Cue the Crypto Recovery: Coins Surge $9 Billion Overnight as Ethereum, EOS Break Out.

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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4.7 stars on average, based on 772 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Who can Verify it?

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Hi Everyone,

This might be considered old news to some but I didn’t take it seriously myself until this article came out today on bitcoin.com.

Lately, we’ve been talking a lot about bitcoin’s rising transaction rate, which is now coming close to its all-time highest levels.

So, it seems that many of these transactions are coming from an entirely new bitcoin use case, other than just for sending money. It also seems that this is rapidly becoming the focus of hot debate among crypto spheres.

going into too much technical detail, what’s happening here is that some new projects are making use of Bitcoin’s stability as a network to maintain the stability of other crypto projects.

The use of crypto’s main Blockchain in this way has some upset that it could be “spamming the network” and by raising the amount of data stored it could increase the fees.

Proponents of the concept, on the other hand, feel that this is actually just another real use case of bitcoin and the ability to store data in this way is built into the code for a reason.

No matter what side you’re on, at this point we can take comfort in the fact that transaction fees in bitcoin are at a two year low at the moment, despite the added traffic.

As well, real-world use of bitcoin continues to rise, whether or not you consider the above as such. For example, in Indonesia, cryptoassets have just been legally recognized as a trading commodity.

Last week, we noticed a large spike in Indonesian volumes on P2P site Local Bitcoins. Well, that figure has continued on to double this week.

With the size of the Indonesian remittance market topping $2.7 billion in Q3-2018, this is quickly becoming a crypto market to watch.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • US-China trade deadline: 11 days | Days to Brexit: 39
  • Presidents Day (Reduced Volumes)
  • Crypto Markets Rising

Please note: All data, figures & graphs are valid as of February 18th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Markets continued to rise on the news that another US government shutdown has now been averted. This morning, Asian markets are celebrating the completion of the last round of trade talks and optimism for what’s to come.

The timetable for Brexit may have just been shortened. As we know the deadline for Article 50 is on March 29th. However, it seems that the final deadline for May to close a deal has now been shortened by Parliament.

The US session will be partially shut down today in celebration of President’s Day. Check for market hours on the assets you’re trading at this link.

Cryptos Rising

Crypto markets have risen nicely over the weekend. A move that has largely been led by Ethereum.

In this graph, we can see ETH (white line) against a basket of other cryptoassets. Notice the sudden spike yesterday morning, which was followed by a full retracement. After which, Ethereum continued to rise throughout the afternoon and by the evening turned into a market-wide rally.

I was able to put out a short tweetstorm this morning with several graphs and the highlight, in my opinion, is the rising volume across changes. In this chart from coincheckup.com, we can see that global volumes had bottomed out around $14 billion on February 8th but have now come up as high as $27 billion today.

Movements that happen on strong volume tend to be more meaninful in the market as it shows the flows have power behind them.

Let’s have an amazing week ahead!

Best regards,

Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan Twitter: @MatiGreenspan LinkedInMatiGreenspan |Facebook:MatiGreen

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 152 rated postsSenior Market Analyst at Etoro.com.




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