Call it air escaping from what could be an AI bubble, or the Fed staging a liquidity crunch in a deepening 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 is down 2% and the S&P 500 is down 1.2%.
Cryptocurrency prices – in the unfortunate position in recent weeks of being uncorrelated with stocks when they were rising every day, but perfectly correlated when stocks sell off – are taking it on the chin again. Bitcoin is down 3% in the last 24 hours and threatens to fall back below $100,000. Ether , Solana and doge (DOGE) are 2 to 6% lower.
Crypto-related stocks are facing an even tougher time. Robinhood (HOOD) is down 8.5% a day after reporting a big jump in profits, driven in part by a surge in cryptocurrency trading. Among other exchanges, Coinbase (COIN) is down 5.6% and Gemini (GEMI) is down 3%. Bullish (BLSH) is down 8% and Galaxy Digital (GLXY) is down 5.1%.
Capital continues to flow into the digital asset treasury sector, led by a 5.9% decline in Pioneer Strategy (MSTR). At $238, MSTR is now down 6.8% year over year and 56% since surging to $543 in the days following President Trump’s 2024 election victory.
Bitcoin mining stocks – many of which have soared this year on their push to become AI infrastructure providers – are not immune. Hut 8 (HUT), IREN (IREN) and Cipher Mining (CIFR) are among those down more than 8%.
Becoming hawkish at the wrong time?
Markets continue to be reeling from the Fed’s surprise hawkish turn last week, in which Chairman Jerome Powell threw a big bucket of cold water on the well-established view that the central bank would cut rates at its December meeting.
Powell’s sentiments have since been echoed by many other Fed members. Fearful of flying blind, the central bank could be absent or choose to ignore what has now become a series of other data pointing to underlying weakness.
The latest came Thursday with one of the worst reports of layoffs at Challenger in more than two decades, as well as a worrying outlook for used car sales, the CarMax (KMX) barometer. The CEO of this company also resigned unexpectedly: the shares fell by 20%. A day ago, McDonald’s warned of the economic pressure felt by its customers, sentiments previously echoed by chains like Chipotle and Cava.
The continued federal government shutdown also appears to extend much further than expected, according to the latest ratings from Polymarket. People can complain all they want about deficits and bloated government, but the shutdown means that billions of dollars that would otherwise flow through the economy (and markets) are not circulating.
