Wall Street opened the week on a sour note. Stocks and bitcoin tanked in a rush to risk-off sentiment, sending shockwaves of downward pressure through the markets. That’s despite the fact the broader S&P 500 index was down by 1.15% and rising investor unease is palpable. Bitcoin skyrocketed past $126,000 at the start of the month. Since then it has crashed to a little under $92,000, a decline of over 25% in the last six weeks.
Investors are already looking beyond the drought. They’re delving into sectors that have missed the uptick and appear more reasonably priced, leaving the soaring technology stocks in the dust. That’s difficult to determine as tech stocks took a drubbing last week and overall were down sharply. Investors swooped in on Friday to snap up the cheaper stocks. Meanwhile, the 50-day moving average has been a significant line of defense support during this stormy phase.
Chris Larkin, managing director at Morgan Stanley’s E-Trade, said it’s hard to overstate the importance of Nvidia’s earnings report due out on Wednesday.
“The monthly jobs report would normally dominate this week’s economic calendar, but with the AI trade struggling the past couple of weeks, Nvidia’s earnings are once again looking like a key piece of the market’s momentum puzzle,” – Chris Larkin, managing director at Morgan Stanley’s E-Trade.
With the abundant uncertainty present in the market right now, this earnings report has the potential to serve as a catalyst for movement. Traders think there’s a 45% probability that the Federal Reserve will begin cutting interest rates by December. We get this perspective from CME FedWatch data. This marks a dramatic turnaround from a 94% likelihood only a month ago.
At the same time, one of the world’s largest cryptocurrency exchanges, Coinbase, announced an 8% fall in its trading shares, adding to the crypto market’s woes. This steep decline in bitcoin has highlighted the extreme boom and bust cycle that is common within the crypto world. For investors, a watchful eye should be cast even as they cut their teeth across these new and exciting dynamics.
According to Sam Stovall, chief investment strategist at CFRA Research, it’s a market unlike any that we’ve seen in recent times.
“This rotation is both expected and welcome, as it should unwind some of the frothiness … and allow this bull market the opportunity to catch its breath before resuming its advance,” – Sam Stovall, chief investment strategist at CFRA Research.
All market participants are busy re-positioning themselves while they wait on Nvidia’s earnings. The next few days will be critical in determining whether this new phase of rotation will hold up or unleash further turbulence.