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Market Update: U.S. Stocks Sputter in Final Hour as Morgan Stanley Warns on Tech Shares

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U.S. stocks declined on Thursday, with the Nasdaq giving back earlier gains after Morgan Stanley issued a fresh warning on overstretched technology companies.

Nasdaq Recoils from Record Territory

The Nasdaq Composite Index closed at 7,891.78, where it was virtually unchanged compared with the previous close. The tech-driven index is by far Wall Street’s best performing average this year, rising 14.3% since January.

The broader S&P 500 Index edged down 0.1% to 2,853.58, with losses mainly concentrated in energy, financials and industrials shares. A total of six S&P 500 sectors finished in negative territory.

Dow industrials fell 74.52 points, or 0.3%, to close at 25,509.23. A total of 16 index members finished in negative territory.

Morgan Stanley Warns on Tech Stocks

U.S. investment bank Morgan Stanley has issued a fresh warning on semiconductor stocks, adding to an already negative outlook on the technology sector.

Cyclical indicators are flashing red,” analysts wrote in a report, as quoted by Bloomberg. “Elevated inventory and stretched lead times leave no margin for error as any lead time adjustment or demand slowdown could drive a meaningful correction.

The high-flying tech sector ran into volatility last month amid mixed corporate earnings and a gradual shift away from growth stocks. The sector remains by far the best performing S&P 500 component of the past year but could face headwinds now that China is ramping up its trade war rhetoric.

Cryptocurrency Market Bounces from Yearly Low

Cryptocurrency prices including bitcoin staged a modest relief rally Thursday after a 24-hour selloff wiped more than $35 billion from market values.

The cryptocurrency market’s total capitalization reached a high of $230.3 billion after bottoming near $219 billion earlier in the day. Trade volumes averaged more than $13 billion, according to CoinMarketCap.

All major crypto assets in the top-ten reported gains Thursday. Bitcoin added 2.6% to $6,509, Ripple XRP gained 2.8% to $0.345 and bitcoin cash finished 2.2% higher at $604.

Although the market remains in a firm downtrend, reaction to the SEC’s decision to delay a ruling on a bitcoin exchange-traded fund was likely overdone. Bitcoin and other cryptos are still entrenched in oversold territory, which suggests that a short-term recovery is possible. Long-term holders should take solace in the fact that crypto assets are attracting a bigger market with the introduction of custody services and the entry of major stock exchange operators into the space.

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 542 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: Stock Volatility Lingers; Ethereum Hits 14-Month Lows

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U.S. stocks declined Monday, as volatility surged to six-week highs in the wake of a diplomatic row between Washington and Turkey that sparked a new all-time low for the lira. Meanwhile, Ethereum saw its price sink to 14-month lows as a battered crypto market struggled to see the light.

Stocks Fall

The S&P 500 Index declined 0.4% to close at 2,821.95, with losses mainly concentrated in energy, materials and financials stocks. The Dow Jones Industrial Average closed down 125,58 points, or 0.5%, at 25,187.56. Dow industrials were down by as much as 150 points earlier. Meanwhile, the technology-driven Nasdaq Composite Index slipped 0.3% to 7,819.71.

A measure of implied volatility known as the CBOE VIX surged to six-week highs Monday, a sign that the equities rally was losing steam. The so-called “fear index” peaked at 15.02 on a scale of 1-100 where 20 represents the historic mean. It would later settle at 14.76 for a gain of 12.2%

Wall Street is coming off a highly volatile Friday session that saw the Turkish lira plunge by as much as 20%. The dollar rose another 9% against the lira on Monday, trading as high s 7.21.

Oil Prices Rocked by Saudi Arabia

U.S. oil prices approached two-month lows on Monday following news that Saudi Arabia has scaled back its crude production in a coordinated effort to boost demand.

The OPEC kingpin reported it had cut its output by an average of 200,000 barrels per day last month. In June, the OPEC cartel agreed to scale back output caps following a year-long recovery in oil prices.

U.S. West Texas Intermediate (WTI) futures traded as low as $65.71 a barrel in New York, which would have marked the lowest settlement since June 21. Prices would later recover at $67.33 a barrel, down 30 cents, or 0.4%.

ICE Brent futures, the international futures benchmark, bottomed at $71.04 a barrel before recovering at $72.74.

Crypto’s New Low

The search for an elusive bottom in crypto prices continued Monday, as Ethereum plunged to its lowest level in over a year.

The ether price bottomed at $284.25, its lowest since June 2017. EOS, XRP and bitcoin cash also declined sharply.

Bitcoin also traded lower on Monday but losses were contained to 1-2%. The leading digital currency consolidated at $6,257, bringing its total market share to 52.3%.

At the time of writing, the combined market value of all cryptocurrencies was $205.3 billion, according to CoinMarketCap. Earlier in the day, coin values fell below $205 billion for the first time in a year.

Investor psychology has been damaged by news that the U.S. Securities and Exchange Commission (SEC) will postpone its ruling on a keenly-awaited bitcoin exchange-traded fund (ETF). The announcement, which was made last Tuesday, has triggered a $50 billion reversal in prices.

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 542 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: Turkish Crisis Escalates

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Emerging market assets are under heavy pressure yet again, with the Turkish Lira being in the epicenter of the troubles. The USD/TRY pair blasted higher after a chaotic Friday session, with the Turkish currency hitting significant all-time lows against the Dollar and the Euro alike. With the USD/TRY hitting 7, the Lira is down by 40% just this month, and in only one year, the Dollar more than doubled in Lira terms.

USD/TRY, Daily Chart Analysis

Emerging market currencies are definitely feeling the contagion effects, with the Argentinean Peso the Brazilian Real, and the Russian Ruble all being down big time in the last few days. So far, the Turkish leadership failed to calm the market, rather they fueled the fire with the aggressive rhetoric, and the seeming ignorance of the basic macroeconomic rules. Coupled with the political tensions between the US and Turkey, the background for the currency crisis is bleak.

Also, given the self-fulfilling properties of the Turkish situation (as the falling Lira deepens the fundamental problems, causing a vicious cycle of trust), a quick change is needed to prevent a complete currency meltdown. As investors are well aware of the prior emerging market crisis, which usually led to wide-spread capital flight out of the most vulnerable countries, the current environment has the potential to turn into a deeper correction across markets and asset classes.

Nasdaq 100 Futures, Daily Chart Analysis

The relative strength of the US indices continues to impress, as after the pre-market weakness, the major benchmarks opened mixed and flat, still being just slightly off their all-time highs, despite Friday’s clear risk-off shift. That said, as the other key markets are much weaker compared to their Wall Street peers, and a deep emerging market crisis could further curb global growth, and coupled with the monetary tightening cycle, developed markets won’t remain safe forever.

Dollar Edges Lower Against Majors After Strong Rally

DXY, 4-Hour Chart Analysis

While emerging market currencies are volatile and mostly bearish today, the Dollar is actually slightly lower compared to the Euro, the Pound, and the Yen, and it is notable off its overnight highs. The lack of broad contagion is positive news for bulls, and Chinese markets held up well today after being weak for months.

Gold, 4-Hour Chart Analysis

On another risk-positive note, gold is not showing signs of financial distress, as the precious metal is actually lower today, testing its 15-month lows near $1200. Commodities are mostly flat elsewhere and the recently vulnerable commodity-related currencies are also stable, thanks to the weakness in the Dollar. Copper is still closely following Chinese assets, holding up above its long-term support zone near $2.70, while WTI crude is trading near the $67 per barrel level consolidating after last week’s volatile price action.

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 316 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

Spillover Emerging

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Hi Everybody,

Plenty of interesting moves in the markets lately. Top of every investor’s mind is the Turkish Lira and its ongoing slide. Also, the Russian Ruble, Mexican Peso, and the South African Rand are making massive movements

Some experts are calling it an emerging market currency rout. The thing is, emerging market currencies shouldn’t necessarily correlate with each other.

The only thing they really have in common is that they’re traded against the US Dollar. This lends to the theory that the entire story is actually driven by the US Federal Reserve. As Jerome Powell is forced to react to rising inflation at home, other economies that rely on Dollar stability are bearing the brunt.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Japanese Spillover
  • Look at the Lira
  • Emerging Cryptos

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

Traditional Markets

To think, this situation with the Turkish Lira started with Trump imposing sanctions on August 1st, in relation to a detained pastor who Erdogan refuses to release.

Now it seems that neither is willing to back down and the showdown is affecting most major currencies. The most major of which is the Japanese Yen, which is being seen as a safe haven from this currency conundrum.

With the Yen gaining, the Nikkei 225 is taking a hit as a stronger Yen tends to harm Japanese exports.

Look at the Lira

Earlier this morning, the Turkish central bank did come out with some strong words to try and minimize the damage.

This type of rhetoric can sometimes have an impact on sentiment. Most famously when Mario Draghi stated that they would do “whatever it takes” to save the Euro in 2012. However, investors today were looking for a bit more than words from the central bank.

Later today we’ll also hear from the new finance minister. This recently appointed figure is actually the son-in-law of Recap Tayyip Erdogan. So he will have to put on a helluva show if he’s to impress anyone.

As I write, we see the USDTRY testing 7.

Those of you who are avid readers will recall that this whole thing started with a strong break above 5 Liras to the Dollar.

So similarly, if we get a break of 7, things could get even uglier.

Crypto Spillover

As we’ve stated before, crypto-assets tend to correlate most closely with high-risk markets. So it would stand to reason that a sell-off in stocks, might have a negative effect on crypto.

Looking at the numbers however, it seems the crypto markets are rather unaffected by the emerging market currency rout and are showing a mixed performance.

Crypto-enthusiasts now want to know if Turkish citizens are turning to crypto as a stable store of value in the face of a rapidly depreciating currency.

Well, it seems there have been some sources that seem to indicate this is the case.

Indeed, some Turkish exchanges are reporting that their volumes doubled in the last few days. Still, as they weren’t trading at incredible volumes to begin with, an increase of 100% somehow doesn’t seem to me to be a massive increase that would indicate mass adoption.

No doubt there are some who have turned to bitcoin. Many citizens are doing their best to get their wealth out of Lira’s by any means possible and there are even reports of large queues at luxury shopping malls.

Because it’s not clear how Turkish people access bitcoin, it will be difficult to verify if there has been any uptick in adoption. What I’m waiting for are the weekly stats from coin.dance, that should come out over the next few days.

Let’s have an excellent week 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

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 121 rated postsSenior Market Analyst at Etoro.com.




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