Nasdaq Hits a New High, Bitcoin Jumps After a Dip Below $30,000

23 Jun 2021 · 3rd Party Analysis


In Summary

  • Stocks advance on Tuesday propelled by Jerome Powell’s reassuring comments
  • Bitcoin and cryptos experienced another leg of a sell-off, market struggles to recover

Nasdaq Hits a New High, Bitcoin Jumps After a Dip Below $30,000

Wall Street stocks rallied Tuesday as a sign that investors are not panicking over last week’s Fed statement calling for higher rates and potential tapering. The renewed positive sentiment sent US benchmark indexes higher with the Nasdaq Composite closing at an all-time high.

Stocks yesterday extended Monday’s gains. Shares of big tech companies gathered the most attention as investors rotated to growth as opposed to value, which was the preferred sector on Monday. Stocks like Netflix and Facebook soared by more than 2%, while Amazon’s 1.5% jump brought it close to its record high in September. Microsoft’s market cap landed at $2tn for the first time as the stock climbed 1.1%, or $2.88, to $265.51 a share.

Tuesday’s race to higher grounds came as Federal Reserve Chairman Jerome Powell reassured investors that the recent spike in inflation would most likely prove temporary. Delivering his testimony before a House subcommittee, Mr. Powell reiterated the central bank will remain committed to supporting the US economy and will wait for more months of inflation data before deciding whether to scale back its asset purchases.

The relatively dovish tone in Mr. Powell’s comments signaled the Fed will not be moving aggressively to hike interest rates. As a result, investors’ fears faded as they resumed their buying spree for a second straight day, erasing last week’s losses.

Higher Interest Rates, Sooner Than Expected

Last Wednesday, Fed officials indicated they are preparing to raise the interest rate one year earlier, in 2023. They also upgraded inflation expectations for this year to 3.4%, a whole percentage point higher than the estimate in March. The new Fed projections initially sent the financial markets into a tizzy. By Friday, Dow Jones had fallen 3.45% on the week.

By Tuesday, the blue-chip index had pared the losses while the other two benchmarks approached and even surpassed their all-time peaks. The S&P500, on Tuesday, rose 21.65 points, or 0.51%, to 4,246.44. The broad-based average hovers just 0.25% below its record in mid-June. The Nasdaq Composite closed at a new record high after gaining 111.79 points, or 0.79%, to finish the day at 14,253.27. The blue-chip Dow Jones Industrial Average climbed moderately, adding 68.61 points, or 0.20%, to 33,945.58.

In cryptocurrencies, Bitcoin tumbled below $30,000 for the first time since late January. The digital asset dropped to a low of $28,800 and briefly traded negative for the year as the performance was down 1.5%. Bitcoin fell as much as 12% during yesterday’s sell-off. The bitcoin market, however, was quick to snap back and close the day in the green, higher by 1% to $32,900.

A crackdown by Chinese officials has prompted cryptocurrency miners to leave the Sichuan region, the second most-preferred area in China for Bitcoin mining operations. In addition, the Chinese government issued an order earlier in the week that prohibited banks and payments companies from dealing in cryptocurrencies in any way.

The news triggered a sell-off that cascaded across the cryptocurrency market and knocked alternative coins such as ether and dogecoin. The Ethereum token slid to a March-low as the price dropped 15% on Tuesday and reached $1,700. Over the past two days, Dogecoin has erased over 42%, or roughly $20bn, from its valuation. Dogecoin is currently trading around $0.21, down 72% from its peak in April.

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