Call it some air slipping out of what could be an AI bubble, or the Fed developing a tightening of liquidity into a growing 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%.
Crypto prices – in the unfortunate position of being uncorrelated with stocks in recent weeks as they rose every single day, but perfectly correlated when stocks sell off – are once again taking it on the chin. Bitcoin is down 3% over the past 24 hours and threatens to fall back below $100,000. Ether , solana and doge (DOGE) is lower by 2%-6%.
Crypto-related stocks have it even harder. Robinhood ( HOOD ) is down 8.5% a day after reporting a significant earnings beat, in part due to surging crypto trading. Among other exchanges, Coinbase (COIN) is lower by 5.6% and Gemini (GEMI) by 3%. Bullish (BLSH) is down 8% and Galaxy Digital (GLXY) down 5.1%.
Capital continues to flee to the financial sector for digital assets, led by a 5.9% decline in Pioneer Strategy ( MSTR ). At $238, MSTR is now down 6.8% year-over-year and down 56% since hitting $543 in the days following President Trump’s 2024 election win.
Bitcoin mining stocks — many of which have soared this year thanks to a pivot to becoming AI infrastructure providers — are not spared. Hut 8 (HUT), IREN (IREN), and Cipher Mining (CIFR) are among those down more than 8%.
Do you get hawkish at the wrong time?
Markets continue to reel from the Fed’s surprisingly hawkish pivot last week, when Chairman Jerome Powell threw a big bucket of cold water on the settled idea that the central bank would cut interest rates at its December meeting.
Powell’s sentiments have since been echoed by several other Fed members. Concerned about flying blind, as the government shutdown means no official economic statistics, the central bank may be missing or choosing to ignore what has now become a raft of other data pointing to underlying weakness.
The latest came Thursday with one of Challenger’s worst job layoff reports in more than two decades, along with a troubling outlook from used-car retailer CarMax ( KMX ). That company’s CEO also resigned unexpectedly – shares are down 20%. A day ago, McDonald’s warned of the financial pressure felt by its customers, sentiments previously echoed by chains such as Chipotle and Cava.
The continued federal government shutdown also looks set to stretch far longer than most previously expected, according to the latest Polymarket odds. People can carp about deficits and bloated government all they want, but the shutdown means many billions of dollars that would otherwise flow through the economy (and markets) do not.
