Markets Weekly Recap
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- Stocks swing wildly as investors are trying to make sense of rising inflation
- Bitcoin drops on Elon Musk tweet saying Tesla suspends car purchases with Bitcoin
Tumultuous times full of volatility and mood changes defined the financial markets this week. To kick off the weekly trading, US stocks declined on Monday, dragged down by investors’ fears that the consumer price report on Wednesday would not spare them a high reading. On a similar note, Tuesday also brought dark clouds over the equity market as all three benchmark indexes turned negative while market participants tried to find a haven amid the uncertainty.
The thunder, as expected, arrived with the consumer price data on Wednesday. The reading showed inflation for April grew 4.2%, the highest inflation growth since 2008. Since investors expected a less pronounced figure, stocks across the board ended the day significantly in the red, with the S&P500 and the Dow Jones posting their worst three-day performance in almost seven months. The tech-focused Nasdaq Composite recorded its biggest one-day selloff for the past three months.
Anticipation for Fed’s Indications
Near the end of the week, regular trading brought some green into the market as investors rushed to buy the dip with consumer staples gaining the most, while tech stocks also received a boost.
Market participants are looking to the Federal Reserve to get a clue about where the economy is headed from here. Now that inflation concerns have materialized, the central bank should decide whether to leave its ultra-loose monetary policy unchanged or to lean against the economy to prevent it from overheating. On the cryptocurrency front, Elon Musk made waves with his tweet announcing Tesla is no longer accepting Bitcoin as payment for its electric vehicles. Citing environmental concerns, the billionaire CEO said the EV maker is “also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction.”
As a result, the value of Bitcoin dropped over 10%, continuing the downtrend that was to a large extent synchronized with the decline in the stock market. Bitcoin reached below $46,000 this week, while Ether pulled back from its all-time peak of $4,400 and traded around $4,000 for most of the week. Dogecoin, in contrast, received a strong boost on Thursday, again by the self-coronated “Dogefather”, Elon Musk. In a tweet, he said he is working with “Doge devs to improve system transaction efficiency”. The comment immediately flared up a rally in Dogecoin’s price which was lifted more than 25% to levels above $0.50.
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