It was supposed to be a very quiet stock market session ahead of a pivotal inflation report and the last FOMC meeting of the year. There was a lot of positive news to start the week and that helped push equities higher. A key driver for stocks was the NY Fed survey that showed inflation expectations are coming down. Corporate news had two positive stories; Amgen will buy Horizon Therapeutics in a cash deal valued at $27.8 billion and Boeing is getting a boost on hopes it might secure a massive aircraft order from Air India. Stocks will now play the waiting game until tomorrow’s inflation report.
Last night Treasury Secretary Yellen said, “I believe by the end of next year you will see much lower inflation if there’s not … an unanticipated shock.” Yellen emphasized that we have a healthy banking system and a healthy business and household sector. She does not believe we need a recession to bring down inflation. Yellen gave a strong argument for the soft landing outcome, but traders will need to see what happens with inflation over these next few inflation reports. A recession is still the likely base case scenario, but there still is a chance it can be avoided.
Stocks are going to struggle over these next few months as the focus shifts to earnings.
The spotlight is on Binance. Reportedly US prosecutors are looking at possible charges against Binance during their early days. Binance issued a statement, “In the final months of 2021, Binance started to build what would arguably become the industry’s most robust security and investigations team. In fact, given the people we now have, and the tools at our disposal, it’s possibly even the strongest in the entire financial sector.” Binance claims to have already responded to over 47,000 law enforcement requests.
Binance is the world’s largest crypto exchange and traders will pay close attention to the spotlight that is on it. The DOJ prosecutors supposedly have evidence that could justify filing charges over possible money laundering and criminal sanctions violations. Crypto traders are more concerned about insolvency risk and right now these AML and sanctions violations accusations seem like they might only lead to fines and not be the domino that triggers a mass exodus of this exchange.
The Binance investigations are not really a surprise as every company will be investigated post-FTX collapse. The main concern for crypto traders is if clients’ funds were mishandled or if the books don’t add up, and we have yet to hear anything about that.
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