Stocks, Bitcoin Dive to Start the Week with Fed Meeting Ahead

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Key Takeaways

• Stocks on Wall Street and in Europe dive on Monday and remain pressured Tuesday
• Bitcoin price slides to $47,000 as traders await key Fed press conference on Wednesday

What’s on Focus in the Markets?

Stocks and bitcoin fell ahead of a major two-day Federal Reserve meeting that ends Wednesday with a conference by Chair Jerome Powell. That said, the S&P500 retreated from its record high set Friday and lost almost 1% to kickstart the trading week.

In addition, the tech-heavy Nasdaq Composite and the Dow Jones Industrial Average also pulled back and closed lower. The three leading benchmark indexes in the US were joined in their decline by a falling bitcoin.

The original cryptocurrency was not able to hold onto its weekend gains of 8% and turned to the downside. As a result, the price of bitcoin slipped about 7% and closed Monday’s session just below $47,000.

Further, the broader cryptocurrency market posted a losing day yesterday. Ether, for example, dived over 10% to a session low of $3,670 per coin. Later, however, some tailwinds supported the second-largest coin and its price closed the day near $3,770.

What’s New Around the Markets?

Financial markets, crypto-assets included, continue to feel the selling pressure in early Tuesday. As US traders anticipate the opening bell in New York, European markets already extended their decline into a second day.

In detail, the Europe-wide Stoxx 600 slipped further to the downside after posting a loss of about 0.5% on Monday. Also, country-specific indexes across Europe are mostly in the red today.

In a similar fashion, cryptocurrencies like bitcoin and ether drifted lower to kick off first Tuesday deals. Bitcoin, on the one hand, dipped under $47,000 per token and is just at the 200-day moving average. In other words, at a keenly-watched technical support level. Ether, on the other hand, slid about 1.5% from its opening price and is currently hovering near $3,700 per coin.

The gloomy sentiment across financial markets is likely a result of traders taking a defensive stance ahead of what is coming tomorrow.

What’s Next for Traders and Investors?

On this note, Wednesday will be defined by the conclusion of the Federal Reserve’s final meeting of 2021. More specifically, the US central bank is gathering today and tomorrow to discuss any final shifts in the monetary policy before the end of the year.

Moreover, traders and investors will be looking for clues into the Fed’s initiated taper, or reduction, of monetary stimulus. Now that inflation has hit a 39-year high, analysts expect the Fed may unwind its support at a much faster rate. Policymakers at the Fed are now withdrawing their support by $15 billion a month. With this in mind, the extraordinary monthly support of $120 billion should be exhausted by mid-2022.

Also, markets will be waiting to see if Chair Jerome Powell addresses any changes to interest rates. In previous speeches, Mr. Powell has reiterated the Fed intends to hike rates in late 2022. A surprising announcement over an earlier rate increase could ignite high volatility in stocks, currencies, and even cryptocurrencies.

Today’s Economic Calendar (EST times)

• 08:30 am, USD, PPI (MoM) (Nov)
• 02:00 pm, NZD, RBNZ Gov Orr Speaks

Check our calendar right here.