Stocks soared to record highs on Tuesday as the U.S. Senate took a necessary step to passing legislation aimed at re-writing the tax code.
Wall Street Hits New Highs
All of Wall Street’s major indexes climbed to new highs on Tuesday, with the S&P 500 Index rising 1% to close at 2,627.04. Ten of 11 sectors contributed to the rally, with financials surging 2.6%.
The S&P 500’s telecommunications index rose 2.2%. Shares of industrials companies added 1.5%. Consumer discretionary also rose 1.1%.
Real estate was the lone decliner on Tuesday. The index’s newest component closed down 0.3%.
The Dow Jones Industrial Average surged 255.93 points, or 1.1%, to close at 23,836.71. Twenty-seven of 30 companies contributed to the gains.
The technology-heavy Nasdaq Composite Index also reached new highs, rising 0.5% to 6,912.36.
A measure of implied volatility known as the CBOE VIX edged higher on Tuesday, a rare feat given the massive upsurge in equities. The Wall Street ‘fear index’ added 1.6% to 10.03 for its first double-digit settlement in over a week.
The VIX typically looks to the S&P 500 for direction, and usually moves in the opposite direction of the large-cap index.
Tax Reform Gains Momentum
The Senate Budget Committee approved lawmakers’ tax plan on Tuesday, bringing Congress one step closer to a floor vote that could take place as soon as Thursday. President Donald Trump has vowed to pass a new tax law before Christmas and has been working over time to pick up key Republican votes.
On Tuesday, Trump was able to convince senators who were previously at odds with the new tax plan. This included GOP senators Ron Johnson and Bob Corker, who had previously held out for more concessions. The president said the Republican caucus was “united” after a closed-door meeting with fellow GOP members.
With respect to the new tax code, Trump said, “I think it’s going to pass and it’s going to be very popular.”
Key measures included in the bill are permanent corporate tax cuts and the temporary reduction of individual tax rates.
The Budget Committee passed the tax measure in a 12-11 vote that was executed on party line.
Powell Backs Rate Hikes
Incoming Federal Reserve Chairman Jerome Powell is leaving little doubt about his intent to raise interest rates. In a Senate confirmation hearing on Tuesday, Powell gave a strong indication that the central bank would continue to normalize interest rates under his guidance.
He also implied that the Fed is on track to hike interest rates at the forthcoming meeting in September.
“The case for raising interest rates at our next meeting is coming together,” Powell told the Senate Banking Committee. “I think the conditions are supportive of doing that.”
Policymakers have voted to raise interest rates twice this year, with the last hike occurring in June.
The Federal Open Market Committee (FOMC) will hold its final policy meeting of the year Dec. 12-13 in Washington. The rate decision will be accompanied by a quarterly summary of economic projections covering GDP, unemployment and inflation.
Disclaimer: Author has an investment stake in U.S. equities.
Featured image courtesy of Shutterstock.
Asian Market Update – Thursday: Ethereum Extends Rally; Asian Stocks down After US Rates Hike
The Big Question: Is ethereum finally catching up with bitcoin?
Bitcoin, ethereum and litecoin were all pointing higher on Thursday morning in Asia, with large gains seen in ethereum, and slight gains in bitcoin and litecoin.
By midday, ethereum had edged up 5.68 percent to $752. Although a bit more subdued than litecoin, ethereum has also made huge gains over the past a few days. Etheruem is now up about 67 percent over the course of the week.
Litecoin also surged 1.22 percent to $316 as of midday Thursday in Asia, following a correction yesterday that brought the prices on Coinbase and Bitfinex closer together.
Litecoin gained more than 130 percent on Monday and Tuesday, reaching as high as $420 at one point on Coinbase, before falling back. On Wednesday, litecoin dropped about 11 percent on Coinbase while it was up around 1 percent on Bitfinex.
Bitcoin was also up 0.66 percent to $16,799 at midday on Thursday. The slight gain came after big losses on Wednesday. The virtual currency dropped about 6 percent on Wednesday, after a 16 percent increase over the previous two days.
Outgoing US Fed Chair Janet Yellen voiced criticism against bitcoin on Wednesday, saying the cryptocurrency is a “highly speculative asset” and “not a stable source of value,” according to media reports.
Main Market Movers – Mid-day Asian Trading Session
|Indexes||Value at Midday||Daily Change|
|Japan- Nikkei 225||22,704||-0.24%|
|China-Shanghai Composite Index||3,296||-0.20%|
|Hong Kong –Hang Seng||29,216||-0.02%|
|S&P 500 E-Mini Futures||2,670||0.06%|
Major Asian equities were narrowly down on Thursday morning, following the US Fed delivering a much-anticipated US rate hike, but voicing concern over inflation next year and rate hikes in China and Hong Kong.
In Japan, the Nikkei 225 Index was off 0.24 percent to 22,704 at midday. The loss, though small, came even after fresh data out on Thursday suggested positive signs in the Japanese economy. The Markit/Nikkei Japan Manufacturing Flash Purchashing Managers Index rose to 54.2 in December, up from 53.6 in November – the highest reading in more than three years.
On the Chinese mainland, the Shanghai Composite Index edged down 0.20 percent at midday on Thursday to 3,296. That came after the People’s Bank of China raised the country’s short- and medium-term interest rate by 5 basis points on Thursday morning, in response to the US rate hike. Though the move was unexpected, the increase was minimal and will likely not make any significant impact.
In Hong Kong, the Hang Seng Index was down 0.02 percent to 29,216 at midday. The Hong Kong Monetary Authority also raised the base rate by 25 basis points on Thursday after the US Fed’s rate hike.
Down under, the ASX 200 was down a slight 0.02 percent to 6,020 after midday in Australian trading.
Stocks in South Korea edged up on Thursday morning. At midday, the Kospi was up 0.92 percent to 2,503 at midday.
The S&P 500 E-Mini Future was up 0.06 percent to 2,670.
The Fed on Wednesday raised interest rates for the third time this year as expected, while maintaining a projection of three more rate hikes in 2018. However, the thing that got the attention of investors was concerns raised by the Fed about the low inflation, downplaying expectations for a tightening in 2018.
The Japanese yen lost 0.04 percent against the US dollar at midday Thursday, changing hands at 112.56 per dollar.
The Chinese yuan firmed 0.07 percent against the US dollar to 6.62084 per dollar.
The Australian dollar firmed 0.43 percent on the dollar, changing hands at 1.3035 per dollar at midday.
WTI Oil gained 0.09 percent to $56.70 per barrel.
Brent Crude edged up 0.22 percent to $62.79 per barrel.
Gold was up 0.24 percent to $1,258 an ounce.
News across Asia
In China, investment in the real estate sector cooled in November, following a slew of measures from the government to crack down on speculation in overheated real estate markets. New figures out on Thursday showed that property investments grew 4.6 percent in the month, slower than the 5.6 percent growth in October.
Take away: Though the government measures, which include tough mortgage rules and sales regulations, could contain the overheated housing market, it could also very well weigh on the overall economic growth in China.
In Japan, the government is reportedly expected to reduce new bond issuance for the fiscal year 2018. Total bond issuance could fall as much as several hundred billion yen in 2018 from the current 34.37 trillion yen, the Nikkei reported.
Take away: The decision is likely to have been supported by rising tax revenues from the government following a recovery in economic growth in recent months.
Featured image from Flickr.
Disclaimer: The author owns bitcoin, ethereum and litecoin. He holds investment positions in the coins, but does not engage in short-term trading.
Daily Analysis: Dollar Falls, Gold Jumps after Yellen’s Final Move
Wednesday Market Recap
|Asset||Current Value||Daily Change|
|WTI Crude Oil||56.65||-0.68%|
The Federal Reserve hiked interest rates as expected today, and although the central bank’s monetary statement was slightly more hawkish than expected, the market’s reaction didn’t reflect the much-anticipated move. The worse than expected Core CPI reading that underlined the low-inflation narrative weighed on the recently strong Greenback, while stocks were unchanged after decision and bonds gained ground as yields retreated.
EUR/USD, 4-Hour Chart Analysis
The major indices are hovering near their all-time highs with the DOW leading the way higher, hitting a new record for the second day in a row. While volatility Is expected to remain low as we approach the end of the year, market internals and valuation levels are still concerning from a long-term perspective, and stocks outside the US are also negatively diverging. The action in crude oil could be slightly more interesting as the commodity is starting to act in a slightly bearish manner after a grinding multi-month rally.
WTI Crude Oil, 4-Hour Chart Analysis
The Brexit process is still in the center of attention in Europe, although volatility took a nosedive on the old continent as well, and it’s unlikely that the Christmas period will be much different, given the predictable drop in volumes and trading activity. The date of the next election in the financially and politically troubled Italy has been set to March 4th next year, and the early date caused some turmoil in the countries assets, which dragged the Euro Stoxx 50 lower today, together with the DAX and the other major indices.
As the total market cap of the crypto-market crossed the incredible $500 billion mark, Ripple, NEO, and Ethereum made headlines with lofty gains in the face of the severely overbought readings elsewhere in the segment. While XRP and NEO are still not overbought from an investment perspective, Ethereum reached our final target for its break-out and triggered a long-term sell signal.
ETH/USD, 4-Hour Chart Analysis
The previously surging IOTA continued its correction, Litecoin consolidated in a relatively narrow range, while Dash, ETC, and Monero scored marginal new highs before turning lower together with BTC. The most valuable coin that has lost some of its momentum “mojo” in recent days fell back below last week’s highs, and that could mark a failed break-out and a start of the deeper correction that seems more and more likely.
BTC/USD, 4-Hour Chart Analysis
Key Economic Releases on Wednesday
|11:30||UK||Claimant Count Change||5,900||3,300||6,500|
|15:30||US||Crude Oil Inventories||-5.1 mill||-3.6 mill||-5.6 mill|
|21:00||US||Fed Rate Decision||1.5%||1.5%||1.25%|
Featured image from Shutterstock
What’s Behind the Cryptosurge
If you’re reading this you’re probably aware of the unimaginable gains that have been seen across the crypto market this year. Last night we saw a new and very important milestone that has provoked some interesting commentary.
The total value of all digital assets as listed on coinmarketcap.com has surpassed $500 Billion for the first time. To think, this number has grown from just $14.5 Billion one year ago today making for an unbelievable percentage growth of 3448%.
These numbers spark a lot of questions. Ethereum’s founder and one of the most notable figures in the crypto-space Vitalik Buterin posted a lot of these questions on his twitter feed this morning.
Mostly, Vitalik wants to know if this valuation is justified and more importantly how are we changing the world for the better?
What cryptotraders like myself want to know is how long will this current surge last and what is likely to drive the market going forward.
eToro, Senior Market Analyst
Insane Inflation hits UK
Urgent Crypto Updates
Please note: All data, figures & graphs are valid as of December 13th. All trading carries risk. Only risk capital you can afford to lose.
Though I realize that many of you are here for crypto, there are some huge things happening in the traditional markets that we need to get out of the way first. At the end of the day, I’m a markets man and as such cannot ignore Fed Day.
This evening, the US Federal Reserve Bank who has been the biggest driver of market prices over the last decade will raise their interest rate from 1.25% to 1.5%. In Forex markets this type of move is usually a really big deal as we can see many large players moving their funds into Dollars in order to take advantage of the bigger rate.
However, as the market has already been certain that this move will come over the past month the increase of 0.25% is already priced into the markets. What investors really want to know is how much will they increase rates going forward?
Even though the Fed has boldly lied to us about how fast they will be raising the rates many times in the last few years, somehow what they say still holds meaning and so we must listen.
Overall, the Fed is on an extremely gradual pace to make money more expensive. US Dollars have been cheap and easy since the financial crisis of 2008, a policy that many say is causing some bubbles in the stock markets and imho is a major contributing factor to the current boom in cryptocurrencies.
This graph shows the expectations of 16 Fed members over the next few years. Each one places one dot for each year telling us where they think rates will be at that time. As we can see, even the most aggressive member is still expecting the rates to remain below 4% by 2020. So money is likely to remain extremely cheap.
Hyperinflation Is Happening Already
All this cheap money is extremely unsettling and even dangerous, for some regions more than others. Especially when there is an external event that suddenly changes the picture.
For example, a political crisis in Zimbabwe or Venezuela. But it’s not just the third world anymore. Yesterday the Bank of England announced a shocking inflation report showing that prices are up 3.1% in the last year.
Particularly concerning is the price of specific goods. Fish is up 15%, olive oil 9.3% and butter is up 23% over the past year.
Meanwhile, salaries in the UK have not gone up nearly enough to cover these higher prices. Today the UK will release their Average Earnings Report, which analysts are forecasting has risen just 2.5%.
Forex traders will react directly to the data as it comes out in real time. Though crypto-investors will not be reacting in such a methodical way, they are being affected by the overall trend and certainly feel their pockets getting pinched by the flawed system that increasingly favors the ultra-wealthy at the expense of Mr. Joe Public.
What’s next on this CRYPTO Surge?
It’s been a powerful run in the crypto market, especially over the last few weeks. Traders seem to be taking turns with the different top cryptos buying up one at a time, in many cases doubling or tripling the value within a 48 hour window.
It started with Ether Classic, then Dash, then IOTA, then Litecoin, and last night we saw Ripple nearly double in 12 hours.
Here’s a few important updates that may drive prices going forward…
–Internet giant eBay is now considering to add bitcoin!! = Huge news if they do it!!
–UBS and several others using Ethereum for MiFID compliance. MiFID 2 is a huge deal right now in the financial world and many large banks have announced a pilot to start storing data on the Ethereum Blockchain.
–Emergency Crypto Meeting in South Korea. South Korea is by far the largest buyer of cryptocurrencies. Updates about what will happen in this meeting on Friday are sure to move the markets.
Have an awesome 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.
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