After weak economic data was announced this morning, stocks rose as Treasury yields fell, signaling that interest rates have reached their peak. The rally was driven by the Nasdaq. The fear gauge VIX fell to bull market levels. The upward trend in oil prices continued. The announcement that a Bitcoin ETF may be closer than expected sent Bitcoin, a key risk asset, up 7%. The US dollar fell, reflecting the perception that yields on dollar-denominated assets may decline in the future.
The bottom line is: there is high risk!
Today’s Big News
US Economy Appears to be Slowing Down
The Fed’s monetary policy is likely to favor inflationary prospects by weakening the labor market and eroding consumer confidence, which could prevent the need for higher interest rates or perhaps lead to a rate cut. Job vacancies fell significantly in July, and consumer confidence fell in a warmer-than-normal August. The probability of a rate hike in September fell to 13% from a total of 20%, according to CME’s Fedwatch program, which predicts the likelihood of a rate hike. All eyes are on the non-farm payroll data for this Friday.
Reduced job Opportunities Indicate a Significant Economic Slump
- Today’s Job Openings and Labor Turnover Survey (JOLTS) reported that the number of job openings at the end of July was “only” 8.827 million, well below expectations. 9.55 959 million
- The July number fell from an all-time high of twelve million in March last year to its lowest level since March 2021.
- According to the revised figures, December recorded 9.165 million openings, down from 9.582 million previously reported.
Summertime Heat Weakens Consumer Confidence
- The Conference Board’s consumer confidence index for August registered at 106.1, below the forecast value of 116.5 and below the downwardly revised 114.0 in July.
- Consumers are concerned about rising prices, especially higher prices for groceries and gasoline.
More Stocks Continue to Rise as a Result of Chinese Stimulus
Chinese markets rose on speculation that China’s central bank may soon consider lowering its bank reserve requirement ratio to stimulate the economy. That could be negative for the yuan, which was relatively steady at $7.29 against the dollar early in today’s trade. China’s real estate market is struggling, as sales in four top-tier cities fell nearly 23 percent in July, while inventories rose a little more than 2 percent in the remaining eight sampled cities. Shenzhen, where unsold homes rose nearly 7 percent month-over-month, and Shanghai, where they rose 5.6 percent, are the two cities with the biggest inventory pressures. Three-quarters of the average consumer’s assets are invested in real estate, so a sluggish real estate market lowers consumer confidence and, in turn, lowers consumer spending. To break this vicious cycle one has to lose the financial situation.
Is a Bitcoin ETF a Possibility?
The Securities and Exchange Commission (SEC) was ordered to review the denial of Grayscale Investments’ request to convert its Grayscale Bitcoin Trust (GBTC) to an ETF by a federal appeals court. Many organizations are competing to introduce Bitcoin ETFs, which would give regular investors access to the digital commodity. Grayscale’s argument was supported by Circuit Judge Niomi Rao, who said: “In seeking review of the Commission’s denial order, Grayscale maintains that its proposed bitcoin exchange-traded product materially replaces bitcoin futures. Similar to exchange-traded products (which were approved) and should have been approved for trading on NYSE Arca.” Traders were of the view that this decision would open the door to converting GBTC into an ETF. GBTC rose 17%, reducing its discount to net asset value (NAV) from 25% to 17%.
Today’s Major Market News
Equity Markets Rise on Expectations of Reduced Rates
- Equity markets rose this morning, with the Nasdaq, Russell 2000, and S&P 500 each up 1.7%, 1.4%, and 1.3%.
- The FTSE 100 rose 1.7% overnight, the DAX added 0.9%, and the Nikkei 225 added 0.2%.
- The VIX, a measure of fear on Wall Street, fell to 14.6.
Bonds Advance while the Dollar Declines
- Bond yields fell again, to 4.91% and 4.12%, for 2- and 10-year bonds, respectively.
- At 103.5, the dollar index fell 0.5 percent.
- Against the dollar, the yen, euro, and sterling all gained 0.5%, 0.5%, and 0.4%, respectively.
Oil and Gold Prices are Rising
- Crude oil rose 1.3 percent to $81.1 a barrel.
- Silver rose 2.0 percent to $24.7 an ounce, while gold gained 0.9 percent to $1,964 an ounce.
- Wheat prices triggered extended technical selling after they stopped selling below recent lows.
- Corn and soybean losses were kept to a minimum as reports from the field continued that crops were still failing.
