So the shock and agony over the US April inflation data lasted just one day – pointing to the uselessness of much of the reaction and analysis.
Wall Street saw a solid gain Thursday after three days of selling – The Dow rose 1.28% or 434 points (it was up well over 500 points at one stage). The S&P 500 and Nasdaq Composite gained 1.22% and 0.72%, respectively.
Those gains trimmed the week’s losses for the major market measures. The Dow is now down 2.18% for the week, while the S&P if off 2.84%. Tech stocks have borne the brunt of the selling (which was going on before the inflation data release on Wednesday) with the Nasdaq down 4.56% for the week.
But it seems a bargain can’t be resisted and justifying the rebound on Thursday were reasons such as the March quarter earnings season has been stronger-than-expected leading many analysts to believe the market has more room to run and investors should take advantage of any dips.
“The corporate turnaround is strong enough to keep markets rising, even as bond yields increase in anticipation of central bank tightening,” Robert Buckland, equity strategist at Citi, said in a note.
“So buy any short term dips, as we may be seeing now. There is a time to turn more cautious but that may be next year, not this.
“Higher inflation is likely to remain in the spotlight as the post-pandemic recovery accelerates,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note to clients on Thursday.
“But while we expect inflation fears to generate bouts of volatility, and we continue to position for reflation, we also see such market swings as an opportunity to build exposure to structural winners.”
Economists at Moody’s estimated that of the 0.8% rise in inflation in April from March, 0.46% was due to ’transitory’ factors such as the impact chip shortages are having on new car prices, the rise in used car prices and other temporary boosts from Covid related factors.
So buyers will be winners – but on cryptos the biggest bull, Tesla’s Elon Musk, has made a massive about turn and is now confronting reality?
Cryptos like Bitcoin all fell sharply after Elon Musk said Tesla would not be using them because of the way cryptos chew up electricity produced from fossil fuels).
For someone responsible for the popularisation of electric storage batteries and especially electric vehicles, the about face on Bitcoin and other cryptos was stunning and more than a touch hypocritical.
Musk said the electric-vehicle manufacturer is suspending purchases with Bitcoin, triggering a slide in the value of the digital currency.
In a post on Twitter Wednesday, Musk cited concerns about “rapidly increasing use of fossil fuels for Bitcoin mining and transactions.” The move comes after Tesla disclosed in February that it had purchased $US1.5 billion in Bitcoin and planned to accept it as a payment for its cars.
Bitcoin fell 9% and the fake crypto, Dogecoin dropped 40% after Musk’s tweet.
Tesla won’t sell its Bitcoin — the EV maker is sitting $US2.5 billion of the digital coin (which is falling in value)— and Musk said it intends to resume transactions with bitcoin once mining “transitions to more sustainable energy.” Whenever that is.
According to a CNBC report, Musk’s tweet has had a big impact on the crypto market – more than the April inflation report, it seems.
“At around 6 p.m. ET on Wednesday when Musk made the announcement, the value of the whole cryptocurrency market stood at around $2.43 trillion, according to data from Coinmarketcap.com. By 8:45 p.m., the market capitalization had dropped to around $2.06 trillion, wiping off around $365.85 billion,” CNBC reported.
“The market has since pared some losses, and by around 3:00 p.m. on Thursday, the cryptocurrency market had seen around $290 billion wiped off its value since Musk’s tweet. Bitcoin was down 10.6% at around $48,500, according to Coin Metrics data, its first time below the $50,000 since Apr. 24,” CNBC said.
