Bitcoin has torn higher to start the year, but there is reason to think the gains could be unsustainable.
Dreamstime
Bitcoin
and other cryptocurrencies were on pause Wednesday as traders awaited a key decision on interest rates from the Federal Reserve. After the best January for Bitcoin in a decade, bad news out of the central bank has the potential to start February off on a sour note.
The price of Bitcoin has risen less than 1% over the past 24 hours, hovering around $23,000. The largest digital asset has roared higher to start the year, gaining 40% as cryptos benefited from an improvement in investors’ appetite for risk. While Bitcoin remains at just a third of its late-2021 high, traders are increasingly optimistic that the bottom of a brutal bear market already has been hit—in the wake of the shock bankruptcy of FTX in November—and that cryptos are poised to march higher.
“Crypto fundamentals are taking a backseat here and the primary driver is what the overall appetite is for risky assets,” said Edward Moya, an analyst at broker Oanda. “Bitcoin appears to have massive resistance at the $24,000 level, so if the rally stalls after the Fed and mega-cap tech earnings fireworks, a consolidation back towards $20,000 could happen.”
Indeed, earnings Wednesday from tech giant
Meta Platforms
(ticker: META)—and peers
Apple
(AAPL),
Alphabet
(GOOGL), and
Amazon.com
(AMZN) on Thursday—will hit sentiment for tech, likely leaking over to cryptos.
But the spotlight is on the Fed. Decades-high inflation and rising interest rates have been a key headwind for Bitcoin over the past year, with cryptos becoming more correlated with stocks against a macro backdrop that is unfavorable to risk-sensitive assets. Investors are hoping that the worst is over.
The Fed is expected to raise interest rates by a quarter of a percentage point on Wednesday. It’s another rate hike, but a marked slowdown in the pace of tightening financial conditions after a spate of much larger increases last year.
Crucially, investors want to see Fed Chairman Jerome Powell telegraph a more accommodative policy shift in order to keep momentum in the recent rally that carried the
Dow Jones Industrial Average
and
S&P500
—like Bitcoin—higher.
If Powell seems aggressive, expect a selloff. And it could be painful.
The recent rally in cryptos looks largely to be built on sand, with Bitcoin’s eye-popping jumps fueled by low liquidity and technical factors including a short squeeze pushing prices higher—not organic demand. Those same trends that have helped pump prices upward could accelerate a deep selloff. If the Fed falls short of investors’ hopes, Bitcoin may find itself spiraling downward.
Beyond Bitcoin, most other digital assets were on hold.
Ether
—the second-largest crypto—was less than 1% higher at $1,575. Smaller tokens or altcoins were a bit stronger, with
Cardano
2% in the green and
polygon
up 1%. Memecoins were leveling out after a recent, independent rally, with
A scene from the floor of the New York Stock Exchange last week.
Michael M. Santiago/Getty Images
The stock market just closed out a positive January. Coming on the heels of last year’s bear market, and combined with other recent moves, that is a particularly positive signal.
Tea
S&P500
finished January with a gain of just over 6%. Driving the rally was a declining rate of inflation, which indicates that the Federal Reserve could be close to ending the series of interest-rate increases it has rolled out in order to limit demand for goods and services.
The sooner the rate increases end, the less damage to corporate earnings and stock prices can be expected.
January rallies, on their own, are generally a good sign for the rest of the year. When the S&P 500 posts a gain for the month, it goes on to rise another 8.6%, on average for the rest of the year, figures dating back to 1929 show, according to Ned Davis Research. It posted further gains in just over three-quarters of the January rally years.
Other moves in the market this year and last are also a positive indicator for the rest of 2023. The S&P 500 also achieved a so-called trifecta: a rally for the final five trading days of a year and the first two of the next, a gain over the first five trading days of the new year, and a rally for January.
When the S&P 500 does all that after a year that saw a bear market, defined as a 20% drop or more from a high, the index’s average gain for the rest of the year is 13.9%. It posted positive returns in almost all of the 17 post-bear market trifecta years.
These may sound like mere statistics, but there’s some wisdom to be taken from them. Trifectas and January rallies are signs of confidence in the market. They indicate that ordinary people and professional money managers are buying stocks at lower, more attractive prices as they hope, or believe, that the conditions that caused the bear market will improve.
Today, that is certainly the hope. Federal Reserve Chairman Jerome Powell likely will reinforce that, or derail it, when he takes the podium to discuss interest rates and the state of the economy on Wednesday following a meeting of the central bank’s monetary-policy committee.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
It was the second consecutive quarter in which Boeing has generated positive free cash flow.
Logan Cyrus/Getty Images
Boeing
appears to have turned the cash flow corner. That’s good news, but the company still couldn’t turn a profit, as earnings missed expectations once again, which sent the stock lower in Wednesday trading.
Boeing
(ticker: BA), Wednesday morning, reported a fourth-quarter loss of $1.75 a share from $20 billion in sales.
Wall Street was looking for earnings per share of 17 cents from sales of $20 billion for Boeing. The earnings shortfall was driven mainly by special items totaling almost $800 million, up about $550 million compared with the fourth quarter of 2021. CFO Brian West highlighted “abnormal costs” on the company’s earnings conference call, including continuing supply chain problems.
The profit and loss statement is “still a mess” wrote Vertical Research Partners analyst Rob Stallard in a Wednesday report. The commercial aircraft, defense and lending units all missed his operating profit estimates. Quarterly free cash flow, however, at $3.1 billion, was in line with his forecast, and Stallard noted that Boeing paid down about $3 billion of debt in the quarter. He rates shares Hold and has a $175 price target for Boeing stock.
Q4 is the second consecutive quarter Boeing has generated positive free cash flow.
Before today’s results, Boeing had generated positive free cash flow in only two quarters out of the past 14, following the onset of the 737 MAX debacle and the Covid-19 pandemic. Plane deliveries plummeted as airlines struggled to stay afloat amid reduced demand for air travel.
Looking ahead, Boeing expects to generate between $3 billion and $5 billion in free cash flow during 2023. Wall Street is currently projecting $4.2 billion. Analysts expect the company to deliver roughly 600 planes, up from 480 delivered in 2022.
A lot of those deliveries will end up in China which just recently started flying the 737 MAX again. Boeing ended the year with about 250 MAX jets in inventory. About 140 of those are intended for Chinese customers, according to the company.
Boeing stock is down about 2.4% in midday trading. The S&P 500 and Dow Jones Industrial Average are off about 1.1% and 0.9%, respectively.
Coming into Wednesday trading, Boeing stock was up about 11% this year and up about 48% over the past three months. The S&P 500 was up about 5% so far this year and up about 6% over the past three months. The year-to-date and three-month change in the Dow Jones Industrial Average were 2% and 7%, respectively.
Bonds and stocks may be getting back to their usual relationship, a plus for investors with a traditional mix of assets in their portfolios amid fears that the US faces a recession this year.
“The bottom line is the correlation now has shifted back to a more traditional one, where stocks and bonds do not necessarily move together,” said Kathy Jones, chief fixed-income strategist at Charles Schwab, in a phone interview. “It is good for the 60-40 portfolio because the point of that is to have diversification.”
That classic portfolio, consisting of 60% stocks and 40% bonds, was hammered in 2022. It’s unusual for both stocks and bonds to tank so precipitously, but they did last year as the Federal Reserve rapidly raised interest rates in an effort to tame surging inflation in the US
While inflation remains high, it has shown signs of easing, raising investors’ hopes that the Fed could slow its aggressive pace of monetary tightening. And with the bulk of interest rate hikes potentially over, bonds seem to be returning to their role as safe havens for investors fearing gloom.
“Slower growth, less inflation, that’s good for bonds,” said Jones, pointing to economic data released in the past week that reflected those trends.
The Commerce Department said Jan. 18 that retail sales in the US slid a sharp 1.1% in December, while the Federal Reserve released data that same day showing US industrial production fell more than expected in December. Also on Jan. 18, the US Bureau of Labor Statistics said the producer-price index, a gauge of wholesale inflation, dropped last month.
Stock prices fell sharply that day amid fears of a slowing economy, but Treasury bonds rallied as investors sought safe-haven assets.
“That negative correlation between the returns from Treasuries and US equities stands in stark contrast to the strong positive correlation that prevailed over most of 2022,” said Oliver Allen, a senior markets economist at Capital Economics, in a Jan. 19 notes. The “shift in the US stock-bond correlation might be here to stay.”
A chart in his note illustrates that monthly returns from US stocks and 10-year Treasury bonds were often negatively correlated over the past two decades, with 2022’s strong positive correlation being relatively unusual over that time frame.
CAPITAL ECONOMICS NOTE DATED JAN. 19, 2023
“The retreat in inflation has much further to run,” while the US economy may be “taking a turn for the worse,” Allen said. “That informs our view that Treasuries will eke out further gains over the coming months even as US equities struggle.”
The iShares 20+ Year Treasury Bond ETF TLT, -1.62%
has climbed 6.7% this year through Friday, compared with a gain of 3.5% for the S&P 500 SPX, +1.89%,
according to FactSet data. The iShares 10-20 Year Treasury Bond ETF TLH, -1.40%
rose 5.7% over the same period.
Charles Schwab has “a pretty positive view of the fixed-income markets now,” even after the bond market’s recent rally, according to Jones. “You can lock in an attractive yield for a number of years with very low risk,” she said. “That’s something that has been missing for a decade.”
Jones said she likes US Treasurys, investment-grade corporate bonds, and investment-grade municipal bonds for people in high tax brackets.
Read: Vanguard expects municipal bond ‘renaissance’ as investors should ‘salivate’ at higher yields
Keith Lerner, co-chief investment officer at Truist Advisory Services, is overweight fixed income relative to stocks as recession risks are elevated.
“Keep it simple, stick to high-quality” assets such as US government securities, he said in a phone interview. Investors start “gravitating” toward longer-term Treasurys when they have concerns about the health of the economy, he said.
The bond market has signaled concerns for months about a potential economic contraction, with the inversion of the US Treasury market’s yield curve. That’s when short-term rates are above longer-term yields, which historically has been viewed as a warning sign that the US may be heading for a recession.
But more recently, two-year Treasury yields TMUBMUSD02Y, 4.126%
caught the attention of Charles Schwab’s Jones, as they moved below the Federal Reserve’s benchmark interest rate. Typically, “you only see the two-year yield go under the fed funds rate when you’re going into a recession,” she said.
The yield on the two-year Treasury note fell 5.7 basis points over the past week to 4.181% on Friday, in a third straight weekly decline, according to Dow Jones Market Data. That compares with an effective federal funds rate of 4.33%, in the Fed’s targeted range of 4.25% to 4.5%.
Two-year Treasury yields peaked more than two months ago, at around 4.7% in November, “and have been trending down since,” said Nicholas Colas, co-founder of DataTrek Research, in a note emailed Jan. 19. “This further confirms that markets strongly believe the Fed will be done raising rates very shortly.”
As for longer-term rates, the yield on the 10-year Treasury note TMUBMUSD10Y, 3.405%
ended Friday at 3.483%, also falling for three straight weeks, according to Dow Jones Market data. Bond yields and prices move in opposite directions.
‘Bad sign for stocks’
Meanwhile, long-dated Treasuries maturing in more than 20 years have “just rallied by more than 2 standard deviations over the last 50 days,” Colas said in the DataTrek note. “The last time this happened was early 2020, going into the Pandemic Recession.”
Long-term Treasurys are at “a critical point right now, and markets know that,” he wrote. “Their recent rally is bumping up against the statistical limit between general recession fears and pointed recession prediction.”
A further rally in the iShares 20+ Year Treasury Bond ETF would be “a bad sign for stocks,” according to DataTrek.
“An investor can rightly question the bond market’s recession-tilting call, but knowing it’s out there is better than being unaware of this important signal,” said Colas.
The US stock market ended sharply higher Friday, but the Dow Jones Industrial Average DJIA, +1.00%
and S&P 500 each booked weekly losses to snap a two-week win streak. The technology-heavy Nasdaq Composite erased its weekly losses on Friday to finish with a third straight week of gains.
In the coming week, investors will weigh a wide range of fresh economic data, including manufacturing and services activity, jobless claims and consumer spending. They’ll also get a reading from the personal-consumption-expenditures-price index, the Fed’s preferred inflation gauge.
‘Backside of the storm’
The fixed-income market is in “the backside of the storm,” according to Vanguard Group’s first-quarter report on the asset class.
“The upper-right quadrant of a hurricane is called the ‘dirty side’ by meteorologists because it is the most dangerous. It can bring high winds, storm surges, and spin-off tornadoes that cause massive destruction as a hurricane makes landfall,” Vanguard said in the report.
“Similarly, last year’s fixed income market was hit by the brunt of a storm,” the firm said. “Low initial rates, surprisingly high inflation, and a rate-hike campaign by the Federal Reserve led to historic bond market losses.”
Now, rates might not move “much higher,” but concerns about the economy persist, according to Vanguard. “A recession looms, credit spreads remain uncomfortably narrow, inflation is still high, and several important countries face fiscal challenges,” the asset manager said.
Read: Fed’s Williams says ‘far too high’ inflation remains his No. 1 concern
‘Defensive’
Given expectations for the US economy to weaken this year, corporate bonds will probably underperform government fixed income, said Chris Alwine, Vanguard’s global head of credit, in a phone interview. And when it comes to corporate debt, “we are defensive in our positioning.”
That means Vanguard has lower exposure to corporate bonds than it would typically, while looking to “upgrade the credit quality of our portfolios” with more investment-grade than high-yield, or so-called junk, debt, he said. Plus, Vanguard is favoring non-cyclical sectors such as pharmaceuticals or healthcare, said Alwine.
There are risks to Vanguard’s outlook on rates.
“While this is not our base case, we could see a Fed, faced with continued wage inflation, forced to raise a fed funds rate closer to 6%,” Vanguard warned in its report. The climb in bond yields already seen in the market would “help temper the pain,” the firm said, but “the market has not yet begun to price such a possibility.”
Alwine said he expects the Fed will lift its benchmark rate to as high as 5% to 5.25%, then leave it at around that level for possibly two quarters before it begins easing its monetary policy.
“Last year, bonds were not a good diversifier of stocks because the Fed was raising rates aggressively to address the inflation concerns,” said Alwine. “We believe the most typical correlations are coming back.”
Investors are trying to read the tea leaves in a choppy US stock market to gauge whether its recent run higher can continue after Federal Reserve Chair Jerome Powell unleashed bullish sentiment at the end of November by indicating its aggressive interest rate hikes could slow.
“The leadership of the stock market is telling you that the economy isn’t going to collapse under the weight of the Fed in the near term,” said Andrew Slimmon, a senior portfolio manager for equities at Morgan Stanley Investment Management, in a phone interview. “I think you’re going to get a strong market into year-end.”
Slimmon pointed to the outperformance of cyclical sectors of the market, including financials, industrials, and materials over the past couple months, saying that those sectors “would be rolling over dying” if the economy and corporate earnings were on the verge of collapse.
The US added a robust 263,000 new jobs in November, exceeding the forecast of 200,000 from economists polled by The Wall Street Journal. The unemployment rate was unchanged at 3.7%, the US Bureau of Labor Statistics reported Friday. That’s near a half-century low. Meanwhile, hourly pay rose 0.6% last month to an average of $32.82, the report shows.
The “resilience” of the labor market and “resurgence in wage pressures” won’t keep the Fed from slowing its pace of rate hikes this month, Capital Economics said in an emailed note Friday. Capital Economics said it’s still expecting the central bank to reduce the size of its next interest rate hike in December to 50 basis points, after a string of 75-basis-point increases.
“In the bigger picture, a strong job market is good for the economy and only bad because of the Fed’s mission to stifle inflation,” said Louis Navellier, chief investment officer at Navellier, in a note Friday.
The Fed has been lifting its benchmark interest rate in an effort to tame high inflation that showed signs of easing in October based on consumer-price index data. This coming week, investors will get a reading on wholesale inflation for November as measured by the producer-price index. The PPI data will be released Dec. 9.
“That will be an important number,” said Slimmon.
The producer-price index is much more driven by supply issues than consumer demand, according to Jeffrey Kleintop, Charles Schwab’s chief global investment strategist.
“I think the PPI pressures have peaked out based on the decline we’ve seen in supply chain problems,” Kleintop said in a phone interview. He said that he’s expecting that the upcoming PPI print may reinforce the overall message of central banks stepping down the pace of rate hikes.
This coming week investors will also be keeping a close watch on initial jobless claims data, due out Dec. 8, as a leading indicator of the health of the labor market.
“We are not out of the woods,” cautioned Morgan Stanley’s Slimmon. Although he’s optimistic about the stock market in the near term, partly because “there’s a lot of money on the sidelines” that could help fuel a rally, he pointed to the Treasury market’s inverted yield curve as reason for concern.
Inversions, when shorter-term Treasury yields rise above longer-term rates, historically have preceded a recession.
“Yield curves are excellent predictors of economic slowdowns, but they’re not very good predictors of when it will happen,” Slimmon said. His “suspicion” is that a recession could come after the first part of 2023.
‘Massive technical recovery’
Meanwhile, the S&P 500 index closed slightly lower Friday at 4,071.70, but still booked a weekly gain of 1.1% after surging Nov. 30 on Powell’s remarks at the Brookings Institution indicating that the Fed may downshift the size of its rate hikes at its Dec. 13-14 policy meeting.
“The bears disparaged” the Powell-induced rally, saying his speech was “hawkish and didn’t justify the market’s bullish spin,” Yardeni Research said in a note emailed Dec. 1. But “we believe that the bulls correctly perceive that inflation peaked this summer and were relieved to hear Powell say that the Fed might be willing to let inflation subsidize without pushing the economy into a recession.”
While this year’s inflation crisis has led investors to focus “solely on danger, not opportunity,” Powell was signaling that it’s time to look at the latter, according to Tom Lee, head of research at Fundstrat Global Advisors, in a note Friday morning. Lee already had been bullish ahead of Powell’s Brookings speech, detailing in a Nov. 28 note, 11 headwinds of 2022 that have ‘flipped.’
See: Stock market could see ‘fireworks’ through the end of the year as headwinds have ‘flipped,’ Fundstrat’s Tom Lee says
The S&P 500 has clawed its way back above its 200-day moving average, which Lee highlighted in his note Friday ahead of the stock market’s open. He pointed to the index’s second straight day of closing above that moving average as a “massive technical recovery,” writing that “in the ‘crisis’ of 2022, this has not happened (see below), so this is a break in pattern. ”
FUNDSTRAT GLOBAL ADVISORS NOTE FROM MORNING OF DEC. 2, 2022
On Friday, the S&P 500 SPX, -0.12%
again closed above its 200-day moving average, which then stood at 4,046, according to FactSet data.
Navellier said in a note Friday that the 200-day moving average was “important” to watch that day as whether the US stock-market benchmark finished above or below it could “lead to further momentum in either direction.”
But Charles Schwab’s Kleintop says he might “put a little less weight on the technicals” in a market that’s currently more macro driven. “When a simple word from Powell could push” the S&P 500 above or below the 200-day moving average, he said, “this is maybe not as much driven by supply or demand of equity by individual investors.”
Kleintop said he’s eyeing a risk to the equity market next week: a price cap on Russian oil that could take effect as soon as Monday. He worries about how Russia may respond to such a cap. If the country moves to withhold oil from the global market, he said, that could cause “oil prices CL.1, +0.45%
to shoot back up again” and add to inflationary pressures.
Read: G-7 and Australia join EU in setting $60-per-barrel price cap on Russian oil
Navellier, who said a “soft landing is still possible” if inflation falls faster than expected, also expressed concern over energy prices in his note. “One thing that may re-ignite inflation would be a spike in energy prices, which is best hedged by overexposure to energy stocks,” he wrote.
“Volatility is likely to remain high,” according to Navellier, who pointed to “the Fed’s resolve to keep tapping the brakes.”
US stocks have taken some big swings lately, with the S&P 500 climbing more than 5% last month after jumping 8% in October and sliding more than 9% in September, FactSet data show. Major benchmarks ended mixed Friday, but the S&P 500, Dow Jones Industrial Average DJIA, -0.10%
and technology-heavy Nasdaq Composite COMP, -0.18%
each rose for a second straight week.
“Keep the bias to quality earners,” said Navellier, “taking advantage to add on pullbacks.”
The November US jobs report on Friday showed the US economy gained 261,000 jobs last month, with the unemployment rate holding steady at 3.7%.
Economists polled by the Wall Street Journal had expected an addition of 200,000 jobs.
Wages jumped 0.6% in November, double the expected pace.
Below are some initial reactions from economists and other analysts as US stocks DJIA, -0.38%
SPX, -0.62%
traded lower and the yield on the 10-year Treasury note TMUBMUSD10Y, 3.585%
jumped following the data on nonfarm payrolls.
“You probably want to revise your view on inflation and it’s overall dynamic more based on today’s job report than any other data report this entire year. And not in a favorable direction,” said Jason Furman, economics professor at Harvard and former Obama White House economist.
“A stronger than expected 263,000 monthly payroll print plus the spike in wages…will reinforce the Fed’s assessment that the labor market remains very overheated, and rates will need to go higher for longer in order to bring it back into balance,” said Krishna Guha , vice chairman of Evercore ISI.
“The Fed will not like the renewed strength in wages,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“The US labor market has lost some momentum this year, but it’s still speeding ahead as we approach the new year. Continue to underestimate the momentum in the US labor market at your own peril. Job gains continue to be added at a pace that would have drawn cheers in 2019. The labor market might encounter some bumps in the road next year, but it’s heading into 2023 cruising,” said Nick Bunker, head of economic research at the Indeed Hiring Lab.
You can count on it, say our call of the day provided by Citigroup, though they say investors can’t expect as lofty returns.
“We see market rotation into energy equities as having further to run, even though names in our US coverage already sit at all-time highs,” a team of analysts led by Alastair R Syme told clients in a fresh note. “History says energy equities usually perform well in an earnings recession, Citi’s base-case for 2023.”
Citi
That bullish view comes after energy roared back into the spotlight on Monday, providing at least some distraction from the equity market’s endless bear-bottom debates.
Hitting a level not seen since January, crude tumbled to $75.08 a barrel on rumors OPEC was mulling a production increase. A swift denial from Saudi Arabia pushed prices back near $80, where they are sitting for Tuesday.
Oil’s tumble also briefly knocked the year’s best performing energy sector, via the SPDR Energy Select Sector ETF XLE,
to four-month lows before it recouped some losses. The ETF is still up a whopping 62% this year, beating all comers.
To be sure, the path for the commodity backing those stocks is a murky one, with crude struggling to make new highs since a summer run to over $109 a barrel.
But Citi’s Syme and the team say they can look past the fundamental oil picture, for now.
“Our view on the sector comes despite a view that commodity-price inflation, the story of 2021 and early 2022, is now largely behind us. We expect oil markets to begin to see inventory builds from next spring. Gas remains uncertain during the winter, but generally, we think the global energy system is adapting to accommodate Europe’s crisis,” said Citi.
As for Citi’s view that energy equities perform well in a recession, they admit that the highest returns usually come in the first year of the market rotation. However, Syme said outperformance will typically carry on until the earnings cycle turns. They lifted price targets on several energy names and upgraded BP BP
UK:BP
to buy.
“Without commodity price-inflation, growth and asset duration becomes a more important driver of relative equity performance, in our view,” said the analysts. Their three top picks in the energy sector are buy-rated BP BP
UK:BP
— upgraded by Citi on Tuesday — Spain’s Repsol ES:REP
REPYY
and Conoco Phillips COP.
Citi backed up its BP upgrade with some advantages it sees: valuations that put it over European peers; a lack of chemicals exposure, which they see as a key headwind for global peers in 2023; and the potential to differentiate around underlying growth, driven by upstream and marketing.
Citi lifted its target price for BP to 540 pence from 440 pence a share, while ConocoPhillips’ target was lifted 21% to $160 a share. Among neutral-rated names, Chevron’s CVX
target was lifted 16% to $180, Exxon’s XOM
was lifted 12% to $110, Shell’s UK:SHEL
SHEL
was boosted 9% to 2360 pence and Eni’s IT:ENI
was lifted 16% to €14. Repsol’s targets were lifted 3% to €17..
Note, Citi’s economists do see the global economy continuing to lose steam with the US tipping into recession by the third quarter of 2023 and Europe already there. The OECD also came out with its forecasts and not surprisingly, they were gloomy.
And they’ve got caveats for investors to consider when it comes to this dazzling sector. They say relative performance of energy stocks, while still positive, will start to diminish given that stocks have seen such a big run-up in 2022. Also, don’t get greedy, or “hold on too long,” said Syme and the team, who warned that when the demand-side collapse starts to really kick in, sector performance will start to suffer.
The markets
MarketWatch
Stock futures ES00
YM00
NQ00
are tilting a bit higher as bond yields slip and the dollar DXY
sweaters back. Oil prices CL
BRN00
are slightly higher after Monday’s tumultuous session. Gold GC00
and silver SI00
prices are firmer, and bitcoin BTCUSD
is slightly higher at $15,776.
The buzz
Saudi Arabia delivered the first World Cup upset, beating Argentina 2-1.
Dollar Tree DLTR
shares are down after the retailer beat forecasts, but delivered downbeat guidance. Dell DELL
is dropping after the PC maker’s weak forecast overshadowed an earnings beat. ZM-Zoom
also delivered upbeat results, but shares are down on disappointing guidance. HP HPQ
will report after the close.
Baidu shares BIDU
are rising after the Chinese internet giant delivered forecast-beating revenue.
Lordstown Motors RIDE
and Nikola NKLA
are among several stocks that Goldman warns are burning through cash and may need to raise capital soon. The bank also points out that Microsoft has now overtaken Amazon as the stock with the most long hedge-fund positions.
Days after China President Xi Jinping spoke of redistributing wealth, JD.com HK:9618
J.D.
said it would cut executive salaries by 10% to 15% to boost benefits for lower-level employees.
A speech from Kansas City Fed President Esther George is the only economic item of note for Tuesday.
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The chart
On the ever-busy crypto beat, comes this grim market-cap chart from @lanceroberts:
Twitter
Read: Bitcoin tumbles to fresh lows and Grayscale trust worsens discount as Genesis denies imminent bankruptcy
The tickers
These were the top-searched tickers on MarketWatch as of 6 am:
Ticker
Security name
TSLA
You’re here
EMG
GameStop
CMA
AMC Entertainment
NIO
Nio
AAPL
Apple
AMZN
Amazon.com
BBBY
Bed Bath & Beyond
MMAT
Meta Materials
MULN
Mullen Automotive
APE
AMC Entertainment preferred
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The latest message from former FTX chief executive Sam Bankman-Fried left onlookers puzzled and alarmed after the swift decline into bankruptcy for the cryptocurrency exchange he founded.
In successive tweets, Bankman-Fried merely stated, “What,” followed by the capital letter H.
Bankman-Fried has been an active tweeter throughout FTX’s demise, earlier having written that he was “shocked to see things unravel the way they did.”
Twitter and Tesla CEO Elon Musk, who’s also having some difficulties, tweeted with fire emojis to an attempt at a translation of the cryptic tweet.
Musk also tweeted his amusement at the claim that Bankman-Fried played a League of Legends game — the same game the executive infamously was playing when the venture capital firm Sequoia invested in FTX.
While the broader social-media sentiment was a wish for him to be jailed, there also was concern for his health.
FTX has filed for Chapter 11 bankruptcy protection, and over the weekend there also seems to have been a hack of customer funds. The securities regulator in FTX’s headquarters of Bahamas meanwhile said it had not requested the prioritization for withdrawals of funds for Bahamian clients.
Reuters reported the allegation Bankman-Fried had a “back door” that allowed him to mask the transfer of customer funds to his Alameda hedge fund, which Bankman-Fried told the news agency was just “confusing internal labeling.”
Billionaire Dallas Maverick’s owner Mark Cuban recently offered his perspective on the implosion of crypto platform FTX late this week.
“‘That’s somebody running a company that’s just dumb-as-fucking greedy.’”
—Mark Cuban
Cuban, speaking on Friday at a conference in Washington, DC hosted by Sports Business Journal, shared the view that avarice was at the root of the downfall of one-time crypto darling Sam Bankman-Fried, whose firm FTX Group just filed for chapter 11 bankruptcy.
“So what does Sam Bankman [Fried] do, he’s just–’gimme more, gimme more, gimme more.’ So I’m gonna borrow money, loan it to an affiliated company and hope and pretend to myself that the FTT tokens that are in there on my balance sheet are gonna to sustain their value.”
Check out: Mark Cuban says buying metaverse real estate is ‘the dumbest shit ever
FTX’s collapse marks a stunning turnabout for a company, which was once valued at $26 billion, and whose founder, Bankman-Fried was viewed by many in the crypto industry as a venerable actor in the Wild West of digital exchanges.
On Thursday, the 30-year-old entrepreneur tweeted: “I f—ked up, and should have done better,” referencing the collapse of his exchange.
Embattled FTX, short billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run. FTX, an affiliated hedge fund Alameda Research, and dozens of other related companies also filed a bankruptcy petition in Delaware on Friday morning. Boasting a nearly $16 billion fortune recently, Sam Bankman Fried’s net worth had all but evaporated in the wake of the FTX implosion, according to the Bloomberg Billionaires Index.
The price of FTX’s native token FTT went down about 88.8% over the past seven days to around $2.74, according to CoinMarketCap data.
The US Justice Department and the Securities and Exchange Commission are looking into the crypto exchange to determine whether any criminal activity or securities offenses were committed.
Regulators and are examining whether FTX used customer deposits to fund bets at Alameda Research, a no-no in traditional markets, according to reports.
Cuban, who is one of the stars of the investing show “Shark Tank” and owns the NBA’s Dallas Mavericks, is a big investor in crypto and blockchain-related platforms. According to a CNBC report, he has said that 80% of his investments that aren’t on Shark Tank are crypto-centric.
See: Tom Brady, Steph Curry and Kevin O’Leary set to lose big from FTX bankruptcy filing
For his part, Cuban is part of a class-action lawsuit accused of misleading investors into signing up for accounts with crypto platform Voyager Digital, which filed for bankruptcy in July. The suit alleges that Cuban touted his support for Voyager and referred to it “as close to risk-free as you’re gonna get in the crypto universe.”
Cuban mentioned Voyager in his Friday interview. Representatives for the billionaire investor didn’t immediately respond to a request for comment.
The Mavericks owner took to Twitter on Saturday to say that the crypto implosions “have been banking blowups. Lending to the wrong entity, misvaluations of collateral, arrogant arbs, followed by depositor runs.”
Cuban’s net worth is $4.6 billion, according to Forbes.
Tim Draper, founder and managing partner of Draper Associates and Draper University, balked at comparing the stunning implosion of crypto trading platform FTX to the notorious biotech startup Theranos, in a conversation with MarketWatch.
“It’s not like Theranos,” he said. In a Friday phone interview, Draper said he hadn’t been aware of anyone genuinely comparing the downfall of the embattled FTX, which filed for bankruptcy protection on Friday, with Theranos.
FTX founder Sam Bankman-Fried, the now-former CEO of the platform and its associated companies, was facing an $8 billion shortfall, The Wall Street Journal reported.
However, some have been drawing such comparisons, including Galaxy Digital BRPHF, -10.00%
CEO Mike Novogratz in an interview with CNBC: “You know, we basically have a situation that looks like Theranos,” he said on the business network on Thursday.
“I’m furious,” Novogratz said, referring to how FTX’s capsizing hurts confidence in the nascent crypto market, with bitcoin BTCUSD, +0.37%,
the progenitor of the current crypto, forming in the wake of the 2008-2009 financial crisis.
Theranos founder Elizabeth Holmes rose to prominence on the back of the belief that she had invented groundbreaking advancements in blood-testing technology. The company’s valuation grew to $9 billion as she attracted a wave of high-profile investors, including Draper, before it was uncovered that no such technology existed. She was convicted of fraud in January 2022.
For his part, Bankman-Fried, 30, announced his resignation from his position as the head of FTX on Friday. The SEC and DOJ are investigating FTX’s recent implosion, though at this point Bankman-Fried is not in any legal trouble.
The collapse comes as some had come to regard Bankman-Fried as a sort of savior to other beleaguered crypto firms earlier this year. SBF, as he’s sometimes known, was a member of MarketWatch’s list of the 50 most influential people.
Like Holmes, he was heralded as a phenom, appearing on the August/September cover of Fortune magazine as the “next Warren Buffett,” the legendary value investor.
The velocity of his downturn has also been stunning. His net worth had been estimated to be $15.6 billion before this week, according to the Bloomberg Billionaires Index. But now the vast majority of his fortunes has been wiped out, Bloomberg said.
According to WSJ, some $2 billion was poured into the three-year-old FTX with little oversight or sufficient scrutiny into its business.
The exchange lent billions of dollars to fund risky bets at its affiliated trading firm, Alameda Research, using money that customers had deposited at FTX, according to reports.
A spokesman for FTX declined to comment.
“This is about people who got ahead of their skis.” Draper said. He added, “I feel for those who got caught up in this mess.”
The venture capitalist and crypto enthusiast said he, for one, has never viewed SBF as the golden boy of crypto and has been broadly skeptical of platforms that don’t offer clear transparency regarding their holdings.
“I’ve been very cautious with DeFi [decentralized finance] and have avoided most of those,” said Draper, who is an investor in trading platforms Coinbase Global Inc. COIN, +12.84%
and Ledger.
“You’re better with good solid management, good solid performance,” Draper said.
“I tend not to follow the hype,” he added.
For the most part, cryptocurrencies, including Ether ETHUSD, -0.91%
and bitcoin, have been swooning as the FTX drama has unfolded. The stock market briefly jolted lower on Tuesday, with the Dow Jones Industrial Average DJIA, +0.10%
shedding more than 600 points on Tuesday, before the broader market — including the S&P 500 SPX, +0.92%
— bound back on Thursday, boasting a tremendous 1,200-point rally.
