Call it a bit of air escaping from what could be an AI bubble, or the Federal Reserve engineering a liquidity squeeze into a growing economic slowdown, or some combination of the two, but markets are pulling back again on Thursday.
Just before noon on the East Coast, the Nasdaq was down 2% and the S&P 500 was down 1.2%.
Cryptocurrency prices, in the unfortunate position these past few weeks of being uncorrelated with stocks when they were rising every day, but perfectly correlated when stocks sell off, are once again coming to grips with the situation. Bitcoin is down 3% in the last 24 hours and threatens to fall below $100,000. Ether , solarium and doge (DOGE) are lower by 2% to 6%.
Cryptocurrency-related stocks are having an even worse time. Robinhood (HOOD) is down 8.5% a day after reporting a sizable jump in profits, in part due to increased cryptocurrency trading. Among other exchanges, Coinbase (COIN) was down 5.6% and Gemini (GEMI) was down 3%. Bullish (BLSH) is down 8% and Galaxy Digital (GLXY) is down 5.1%.
Capital continues to flee to the digital asset treasury sector, led by a 5.9% drop in the pioneer strategy (MSTR). At $238, MSTR is now 6.8% lower year-over-year and down 56% since soaring to $543 in the days following President Trump’s 2024 election victory.
Bitcoin mining stocks, many of which have soared this year thanks to a pivot to become providers of artificial intelligence infrastructure, are not spared. Hut 8 (HUT), IREN (IREN) and Cipher Mining (CIFR) are among those that fell more than 8%.
Does he become aggressive at the wrong time?
Markets continue to reel from the Fed’s surprise hawkish turn last week, which saw Chairman Jerome Powell throw a big bucket of cold water on the already established idea that the central bank would cut rates at its December meeting.
Many other Fed members have since echoed Powell’s sentiments. Worried about flying blind as the government shutdown means there are no official economic statistics, the central bank could miss or choose to ignore what has now become a raft of other data that points to underlying weakness.
The latest came Thursday with one of Challenger’s worst job layoff reports in more than two decades, along with a worrying outlook from used-car sales leader CarMax (KMX). The CEO of that company also resigned unexpectedly: the stock fell 20%. A day ago, McDonald’s warned about the economic pressure its customers are feeling, a sentiment echoed by chains like Chipotle and Cava.
The continuing federal government shutdown also appears to extend much longer than most previously expected, according to the latest odds from Polymarket. People can complain about deficits and bloated government all they want, but the shutdown means that many billions of dollars that would otherwise flow through the economy (and markets) are not.
