Selling rallies, strong durable data supports further Fed tightening, bitcoin weakens

Wall Street is poised for a drawn-out period of sluggish economic activity and that has stock traders steadily fading all rebounds that emerge. ​ Today’s volatile durable goods order reading was rather impressive and while it is only one reading, it suggests the economy is still chugging along and could probably stomach more Fed rate hikes than are being priced in. With a bear market likely at the end of 2023, it is hard to be optimistic about the second quarter rebound that still seems likely despite a lackluster global economic situation.

US stocks declined as traders continue to fade all rallies as multiples continue to slide as recession fears mount. ​ Stocks can’t win right now, either the economic data softens and the economy is much weaker than we thought or robust readings pave the way for the Fed to be more aggressive with their inflation fight.

Normally, my coverage does not include the Saudi central bank (SAMA), but that quickly changes when liquidity becomes an issue. Saudi Arabia had to inject ~USD 13 billion with commercial lenders as a troubling liquidity crunch emerged. ​ The Fed’s rapid rate hiking cycle is providing liquidity problems and that could be troubling for risky assets abroad. ​

US Data

Durable goods orders and shipments data for May showed business are still spending. Any chance of technical recession has been removed as the second quarter will likely post a strong snapback from the negative growth reading for the first three months of the year.

The May durable goods order headline rose 0.7%, a strong beat of the 0.2% estimate, and downwardly revised 0.4% prior reading. ​ There is still a lot of strength in the US economy and that should allow the Fed to stick to its aggressive rate hiking cycle. ​

Cryptos

Bitcoin remains stuck in the USD 20,000 mud as risk aversion returns on Wall Street. Bitcoin remains a risky asset with a strong correlation to equities, which means it probably won’t be seeing any support anytime soon. ​ The mood for risky assets is to fade all rallies, which means bitcoin should remain trapped in its tight trading range a little while longer. ​

Solana’s news that they will go mobile with a Web3-focused Android mobile phone, reminded traders that crypto can break into anything. ​ Solana has had a fair share of problems with security, but with each upgrade they are making progress and are still leading the scalability race. ​ Crypto traders are skeptical of the launch into mobile and Solana’s price has edged lower following the news. ​

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