U.S. Stocks Resume Selloff Ahead of Fed; Cryptocurrencies Stage Convincing Rally

U.S. stocks extended their slide on Monday, with the Nasdaq joining its peers in negative territory for the year as investors turned their attention to the Federal Reserve’s upcoming policy meeting. Cryptocurrency prices rebounded $15 billion from their weekend lows, with bitcoin gaining nearly 10%.

Stock Rout Intensifies

All of Wall Street’s major indexes posted big losses at the start of the week. The Dow Jones Industrial Average, which officially entered correction territory on Friday, fell 507.73 points, or 2.1%, to 23,592.78. The blue-chip index last traded below 24,000 in May.

The much broader S&P 500 Index plunged 2.1% to 2,545.94, its lowest of the year. After a record-setting run in the third quarter, the large-cap index is down more than 12% from its peak and has returned -4.6% in all of 2018.

All 11 primary sectors registered losses, led by real estate, utilities and consumer discretionary shares. Ten of 11 sectors registered losses of 1% or more.

The technology-heavy Nasdaq Composite Index declined 2.3% to 6,753.73, where it joined the Dow and S&P 500 in negative territory for the year.

Small-cap stocks also fell hard on Monday, with the Russell 2000 index approaching bear-market territory. The index fell 2.6% to 1,374.80.

Fed Watch

The Federal Reserve will begin its final policy meeting of the year on Tuesday, with an official interest rate announcement scheduled for the following day. Nearly three-quarters of traders expect the Fed to hike interest rates on Wednesday for the fourth time this year, according to the Fed Fund futures prices.

However, for most traders, the focus is on the official rate statement and quarterly summary of interest-rate expectations. Rising borrowing costs, plunging oil prices and softer economic data have raised concerns that the central bank is raising rates too aggressively. U.S. President Donald Trump has been a vocal opponent of the Fed’s tightening schedule and on Monday tweeted that it was “incredible” policymakers were considering hiking rates again.

The quarterly summary of economic projections on Wednesday will showcase policymakers’ outlook on GDP, inflation and unemployment in 2019 and beyond.

Cryptos Stage Convincing Rally

Cryptocurrency prices rebounded sharply on Monday, as bargain hunters re-entered the market following the latest brush with yearly lows.

The combined cryptocurrency market capitalization reached a high of $115.4 billion, having gained $15 billion from the bear-market low on Saturday. As Hacked reported earlier, EOS was by far the best performer, gaining 23% to $2.40. Stellar XLM, Litecoin, bitcoin cash and XRP each recorded double-digit gains.

Bitcoin, the leading digital currency by market cap, surged 9.9% to $3,597. The bitcoin price briefly traded below $3,200 over the weekend, forming a new bottom with the rest of the market.

It’s not yet clear whether the latest recovery effort represents the end of the downtrend or a period of consolidation before the bears reassert their control. If recent history is any indication, the latter trend is to be likely to prevail for now.

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.

Chief 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