Stocks bounce back, Bullard and Kaplan, Chicago Fed, bitcoin lower

Fed expected to hike rates in 2023

Wall Street is still feeling the impact of the Fed’s hawkish tilt.  US stocks are finding some footing as the growth outlook for the rest of the year is extremely robust, with growth targeting 8-10% and around 5% in 2022.  Despite all the hawkish spin from last week, the Fed will still likely move in 2023 and that means the US economy could still see another 18 months of support.  Inflation concerns will likely moderate, with many traders needing hot prints at the end of the year to prove pricing pressures are becoming persistent.  Stocks still have a clear path higher, but some traders will wait to buy a deeper pullback.  This week is filled with a wrath of Fed speak that could show many policymakers shift a step closer to the hawkish side.

This morning, Fed’s Bullard and Kaplan spoke at the OMFIF Policy Panel.  Bullard stated that no one really knows how this is going to unfold but needs to be ready for upside risks to inflation.  Fed’s Kaplan noted that last week’s dot plots reflect a ‘dramatically improved’ outlook.  Bullard is one of the most hawkish Fed speakers and Kaplan was one of the handful of members that was willing to kick start the taper discussion.

The Dow Jones Industrial Average is leading the charge higher after posting nearly twice the drop last week.  The S&P 500 index is rising following a four-day losing streak.  The Nasdaq is underperforming as mega-cap tech takes hit from surging Treasury yields across the curve.

Chicago Fed

The Chicago Fed National Activity Index improved to 0.29 in May, a miss of the 0.70 consensus estimate, but much better than April’s -0.09 reading. Personal consumption broadly deteriorated, while housing indicators improved.  Overall, three of the four broad categories made positive contributions.  Today’s report is nothing to brag about but does show the economy in the Midwest is headed in the right direction.

Bitcoin

Bitcoin needs to expedite transitioning mining out of China.  Over the weekend, Bitcoin was under pressure on continued measures against bitcoin creators in Sichuan, which uses hydropower.  The cryptocurrency mining community is rushing to get out of coal-fired power plants but losing clean energy sources is extra bitter.

MicroStrategy announced another purchase of bitcoin, this time 13,005 Bitcoin worth USD489 million at an average price of USD37,617 per Bitcoin.  MicroStrategy has been under pressure as many investors doubt owning shares of MSTR is the best way to get your crypto exposure.  If you have a buy-and-hold mentality for crypto, you might prefer directly buying bitcoin than buying shares of MicroStrategy, which appears poised to consistently be buying bitcoin going forward.

Bitcoin remains trapped in the USD30,000 to USD41,000 range, but downside risks are catching the eyes of everyone.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya