Daily News | Wall Street Surges on Bank Performance, while FOMC Rate Decision and Market Factors Loom
Crypto Daily Digest: Wall Street sees rebound in stocks and banks surge, but uncertainty looms over Fed’s rate decision
Good morning, traders! Let’s seize this Wednesday relentlessly and make the most of it! 🚀
Wall Street’s VIX, which is a gauge of volatility, fell as stocks rebounded and banks surged. The assurance from authorities that recent financial turmoil would not lead to a full-blown crisis eased concerns. But there is still uncertainty over the Federal Reserve’s decision on whether to raise rates. The risk of a credit crunch is increasing, and the S&P 500 might find a floor at 3,800. Companies have also been investing in the US investment-grade bond market, which is another worrisome development.
In Asia, shares are expected to rise as investors prepare for the Federal Reserve’s interest-rate decision. Stocks rose in Australia, and futures for benchmarks in Japan and Hong Kong advanced. While the selling in government bonds alongside rising stock prices indicates fresh appetite for risk-taking, some experts remain cautious.
Bitcoin surpassed $28,000 as the Federal Open Market Committee began its two-day monetary policy meeting to decide on whether to increase the interest rate again. Ether also rose nearly 2%. Traditional markets also turned green amid a banking rally and improved investor Optimism.
Coinbase’s stock has risen for the seventh consecutive session, reaching its highest level since August at $84 a share, driven by the surge in Bitcoin‘s price. Other crypto-exposed stocks also rallied. However, Coinbase is still down 53% from last year due to regulatory pressures and industrywide contagion fears. Coinbase argued at the US Supreme Court on Tuesday that its disputes over forcing customers into arbitration should freeze the courts while the arguments play out. This could be significant for Coinbase and other crypto companies when they clash with clients, as it could prevent embarrassing information from coming to light during arbitration.
Topic of the Day: Pre-FOMC Rate Decision - Considerations for Traders
Over the weekend, Credit Suisse sold its 100+ year old asset management business, Credit Suisse Asset Management (CSAM), to UBS for $3 billion. Rumors suggest that CSAM suffered significant losses due to overexposure to risky derivative trades. The sale has raised concerns about the stability of other financial institutions and questions about who else may be at risk.
Investors are also considering the impact of the Federal Reserve’s expected 25 basis point interest rate hike in March, with differing opinions among investment banks. While Goldman Sachs predicts the Fed will not raise rates again, JPMorgan analysts predict the opposite.
The recent turmoil in the banking sector is causing disinflationary trends and tightening financial conditions. This is equivalent to a significant rate hike, which increases the risk of a sharper economic slowdown. (Data Per Apollo Global Management)
Despite recent bank failures and market volatility, US stocks slightly rebounded on Monday and Tuesday, with the Dow Jones outperforming the Nasdaq. However, investors should remain cautious as a weak rebound may indicate further risk of a significant market downturn, particularly if technology stocks weaken. BTC’s correlation to the Nasdaq stood high at 0.76 as of this writing.
Less than 20% of investors are currently bullish on the market, which is the lowest percentage since September 2022. Meanwhile, bearish sentiment has increased for the fourth time in the last few weeks, reaching the highest reading of the year at 48.4%. (Data Per The American Association of Individual Investors)
The US dollar has continued its decline, falling below a key technical support level of 103.5. The sale of CSAM to UBS may benefit the euro as the dollar weakens further. Gold prices experienced a small correction after a brief surge following the bank failures, but it remains to be seen whether it will continue to rise in the coming days.
Gold prices are rising and hitting new 52-week highs, with a significant uptick in demand for the safe haven asset. Gold is approaching all-time highs in various currencies and is still in a multi-year range between $1,680/oz and $2,060/oz in US dollars. The next objective for gold is the 2020/2022 all-time highs of around $2,070/oz. Other precious metals, particularly silver, will also be worth watching for confirmation of the upward trend in gold. (Data Per Grindstone Intelligence)
Traders and investors should consider several points before the Federal Open Market Committee’s (FOMC) interest rate decision:
The cause of Credit Suisse’s significant losses that led to the sale of its asset management business to UBS for $3 billion is unclear, but speculation suggests overexposure to risky derivative trades.
Concerns are raised about other financial institutions and the possibility of unexpected collapses that could further harm the market, with rumors circulating about JPMorgan and Goldman Sachs being involved in similar transactions to Credit Suisse.
There is uncertainty about the Federal Reserve’s future direction after consecutive bank crises. The Fed is expected to raise interest rates by 25 basis points in March, but investment banks hold different expectations, with Goldman Sachs predicting no further rate hikes while JPMorgan analysts predict otherwise. The lack of consensus suggests that whatever policy the Fed adopts, some may not be satisfied, and the market may experience short-term volatility.
