Crypto Stocks Drag Wall Street Down, Jeopardizing 5-Day Winning Streak

U.S. stocks faced a downturn on Monday as cryptocurrency values plummeted, jeopardizing a five-day winning streak. The S&P 500 index decreased by 0.4%, while the Dow Jones Industrial Average fell by 204 points, also a 0.4% drop. The Nasdaq Composite Index slipped by 0.5%, reflecting broad losses across major stock indices.

Catalysts Behind Market Movements

The previous week’s market optimism stemmed from increasing anticipation that the Federal Reserve would lower interest rates in its upcoming meeting. Currently, trader predictions on rate cuts stand at nearly 88%, according to the CME Group. However, the bond market responded differently, as longer-term Treasury yields increased.

Impact of Rising Yields

The rise in yields comes after indications from the Bank of Japan regarding potential interest rate hikes. Higher yields make bonds more attractive to investors, often leading them away from riskier assets such as stocks and cryptocurrencies. Consequently, bitcoin recently fell below $86,000, marking a decline of over 5% from the previous day’s prices. This decline triggered a broad selloff in the cryptocurrency sector.

Cryptocurrency and Stock Reactions

• Coinbase Global saw a decrease of 3.7%.
• Robinhood Markets fell by 4.6%.
• MicroStrategy, now known as Strategy, experienced an 8% decline after announcing it raised $1.44 billion through stock sales.

On the other hand, Synopsys reported gains, rising by 3.9% due to a significant investment from Nvidia, which contributed to a modest gain of 0.9% after an earlier loss.

Consumer Spending and Economic Uncertainty

Mixed reactions marked the holiday shopping season. Amazon’s stock rose by 0.4%, whereas Best Buy fell by 1.9%. Despite expected strong consumer spending during Black Friday and Cyber Monday, uncertainty looms over the economic landscape.

International Market Reactions

Global markets experienced fluctuations as well. France’s CAC 40 index declined by 0.3%, partly due to a 5.1% drop in Airbus’s stock following a software issue impacting their A320 fleet. Japan’s Nikkei 225 index fell by 1.9%, spurred by concerns about impending interest rate hikes.

Bond Market Developments

In the bond market, yields rose, with the 10-year Treasury climbing to 4.08%, up from 4.02% on Friday. Manufacturing activity in the U.S. showed signs of contraction, prompting concern about job stability in the sector. Manufacturers expressed frustration over ongoing tariffs and lingering supply chain issues, suggesting the business environment remains challenging.