Bad News in the Markets: S&P 500 Falls, Bitcoin Goes Under $19,000

The S&P 500 is on track for its worst performance in over 50 years. Meanwhile, Bitcoin is on the brink of collapse Thursday morning, exposing fault lines in the crypto indsutry.

There’s bad news in store for investors Thursday morning. For one thing, the stock market is continuing its choppy trend of jumping slightly before plunging steeply. The S&P 500 index is down this morning, meaning the index is on track for its worst first half of a year since 1970, 52 years ago. The S&P 500 dropped roughly 1% this morning, putting it on pace for its third straight day of losses.

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The other two major indexes followed suit, too. The Dow Jones Industrial Average slumped 1.1%, while the tech-heavy Nasdaq Composite index lost 1.3% of its value. This leaves the market in an awkward position, as investors shuffle to get their assets out of stocks in favor of bonds. With these negative downturns in the performance of stocks, it’s evident that a recession could soon pressure the US economy.

Read More: Check out the latest Mind Your Dollars stock and financial news.

The bad news has also spilled over into the crypto industry. In addition to stocks slumping, digital currencies like Bitcoin and Ether have struggled since the start of the year. This morning, Bitcoin dipped under $19,000 for the first time in months, having lost 37% of its value so far this month. That represents Bitcoin’s worst performance since December 2018 and shows a shocking lack of investor confidence in the token.

Stock Market Struggles

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The stock market is struggling amid unprecedented inflation and historic-high labor tightness. Companies are hesitant to let employees leave and have offered higher salaries and more lucrative benefits to keep their workforces fully staffed, but these pressures are only worsening with the inflation rate. As labor and shipping costs soar, the average consumer is slowing their spending to keep their money for sky-high expenses like gas and groceries. 

There is some good news in the market this morning. Headline inflation slowed slightly in May, dropping to a 6.3% annual rate–matching April’s rate. While that’s a high number, the fact that it hasn’t risen since the previous month is significant. Notably, this doesn’t change the situation for many US workers: real personal spending fell around  0.4% in May, surprising economists and showing that the economy is now slowing even as inflation might start cooling down.

The Federal Reserve is scrambling to stabilize prices by hiking interest rates and shedding its balance sheet. “Is there a risk we would go too far? Certainly, there’s a risk,” Fed Chair Jerome Powell said during the European Central Bank’s annual conference in Portugal yesterday. “The bigger mistake to make — let’s put it that way — would be to fail to restore price stability.”

Biden Won’t Compel Saudis to Produce More Oil

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Meanwhile, many economists expected US President Joe Biden to ask oil producers in Saudi Arabia to ramp up their output to help deal with the recent supply constraints in the global oil market. Thursday morning, the pressure on gas prices abated slightly, with the price of West Texas crude oil futures slipping back under $110 per barrel. 

“All the Gulf states are meeting. I’ve indicated to them that I thought they should be increasing oil production generically, not the Saudis particularly, and I think that we see them in their own interest concluding that make sense to do,” the president explained during a NATO summit on Thursday. These comments struck some analysts in the US as bizarre, given that US gas prices are hovering near record highs right now.

The average price for a gallon of gasoline in the US topped $5 earlier this month. While prices have slipped slightly in the intervening weeks, there’s still a lot of pressure on American paychecks at the gas pump. From a purely psychological standpoint, this is a massive drain on the average consumer’s sentiment regarding the overall health of the economy. Notably, many Americans perceive high gas prices as a side-effect of the president’s foreign policy, a perception that Biden is likely aware of.

Bitcoin Price Collapses Thursday Morning

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The crypto industry is still in the grip of a steep sell-off. On Thursday, Bitcoin, the most popular cryptocurrency, dropped under a key psychological level, dipping under $19,000 per token for the first time in months. This sell-off coincided with the SEC’s refusal to authorize exchange-traded funds proposed by crypto exchange firms Grayscale and Bitwise. 

“Bitcoin continues to be under pressure as other assets are. The mix of high inflation, rising interest rates and recession weigh on cryptocurrencies,” SEBA Bank’s head of research, Yves Longchamp, tells reporters. Bitcoin was trading at its all-time peak in November 2021, when it briefly reached $68,990.90 before beginning its slow climb back down to its current level.

This price crash has exposed a key weakness in the crypto industry: highly leveraged lenders don’t have enough liquidity to deal with swings this wild. This liquidity crisis is already pressuring some hedge funds, like the crypto-focused Three Arrows Capital.

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