Stocks drift lower, Empire impresses, dollar higher with yields, Biden/Xi, bitcoin sideways

US stocks tried to rally after manufacturing rebounded in the Empire State, the Dubai Air Show optimism signaled the recovery is improving, Chinese activity improves, and on expectations tensions may start to ease between the US and China. The US economy is a story of two economies that has an overall strong growth outlook for the next year.  Broad-based price increases are hurting several Americans and tomorrow’s retail sales report could show signs that the consumer is weakening.

Inflation will likely get the Fed hiking quickly but then they can stop after a few hikes and markets can calm down. At some point, the Fed will have to tighten financial conditions and that has some investors hesitating remaining full tilt with stocks.

Stocks drifted lower with the Nasdaq leading declines as Treasury yields jumped on expectations the Fed may have to deliver a faster taper.


Wall Street is awaiting some positive spin to come out of the virtual summit between the two world’s largest economies. President Xi is coming in with some momentum now that it appears he has secured his place at the top indefinitely. The relationship between the US and China will unlikely see any major breakthroughs as the redlines over Taiwan and human rights will not move. If Biden wants a win, he could ease on some of the Trump tariffs that are still impacting the US consumer.

Empire Manufacturing survey climbs sharply

Business activity in the Empire State is roaring back. The November Empire manufacturing survey rebounded from 19.8 to 30.9.  Hiring jumped to a record high, as growth remains strong in the manufacturing sector. The outlook for the six-month outlook fell as delivery times lengthen, prices continue to surge, and as improved hiring leads to higher costs. The Empire State survey showed demand is robust and some signs of easing pricing pressures are emerging.

If inflation continues to show strong signs it will run hot a lot longer, the Fed may be forced to accelerate tapering. When the time is right, the Fed can’t move too much because an acceleration with rate hikes would trigger panic in the junk bond market. The likelihood the Fed will deliver a couple or few rate hikes and then stop has prevented the Treasury curve from steepening too much.

The long-term trend for Treasury yields is still lower as Wall Street becomes more convinced the Fed will hurt the economy by raising interest rates sooner. The dollar is benefiting from rising Treasury yields and as some investors still seek protection from growth concerns across the Atlantic.


Bitcoin prices were supported after a key weekend upgrade helped pave the way for directly providing smart contracts. It is a nice upgrade for bitcoin, but won’t really deter smart contract usage from ethereum and solana.  Bitcoin is still primarily a store of value trade that should benefit from persisting inflationary pressures.

Bitcoin and ethereum have had amazing runs this year, up 121% and 521% respectively. Many crypto traders are now turning their attention towards NFTs and that broadening interest is great for long-term growth for the crypto space but might not necessarily mean higher prices for bitcoin and ethereum.

Major resistance for Bitcoin remains the USD 70,000 level.

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, 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