The US stock market is primed to jump higher on Monday after increased optimism over the state of the US-China trade negotiations caused Dow futures to leap nearly 100 points. The bitcoin price, however, continues to bleed lower in the wake of its failed attempt to clear a key resistance level.
As of 8:47 am ET, Dow Jones Industrial Average futures had bounced by 94 points or 0.36 percent, implying a rise of around 100 points at the opening bell. S&P 500 and Nasdaq futures also traded up, with the former gaining 0.34 percent and the tech-heavy Nasdaq jumping 0.56 percent.
On Friday, the Dow recovered from early-week losses to rise by 110.32 points or 0.43 percent to close at 26,026.32. However, the end-of-week rally was not enough to rescue the index’s weekly winning streak, which ended at nine after the Dow failed to close above its Feb. 22 mark of 26,031.81.
Nevertheless, sustaining the 26,000 level gave the bulls to cheer about, and the Dow wasn’t the only US stock market index to close above an important milestone. The S&P 500 edged past 2,800 before the bell after a 0.69 percent surge propelled it to 2,803.69.
Dubbed “the place where S&P 500 rallies go to die,” 2,800 had presented strong psychological and technical resistance for nearly four months. Before Mar. 1, the S&P 500 had not closed above that mark since Nov. 8, 2018.
The Nasdaq also had a banner day, racing to a 62.82 point or 0.83 percent gain and outperforming its peers. Unlike the Dow, the Nasdaq succeeded in extending its weekly winning streak, which began in December and has now reached ten consecutive weeks.
Analysts attributed Monday morning’s Wall Street optimism to yet another round of reports suggesting that the US and China are on the verge of signing a new trade deal.
According to the Wall Street Journal, the two economic superpowers are close to a compromise, with China offering to reduce tariffs and limits on American farm, auto, and chemical exports and the Trump administration discussing erasing most or all of the sanctions it had placed on Chinese goods in recent months.
Commenting on the news, Paul Nolte, a Kingsview Asset Management portfolio manager, observed:
“This quote has been making the rounds for the past few weeks. We have seen each time the news of getting close hits the tape, stocks have reacted positively. Depending upon how close is close, stocks should jump at the open. It will do wonders for China, which could reignite global growth, likely held back by trade and tariffs.”
To Nolte’s point, reports that the US and China are close to a fresh trade agreement have circulated for weeks, and each one has helped buoy the stock market as it recovers from its late 2018 implosion.
However, one wonders how long the Dow and its sisters can continue to climb on mere rumors of a deal, and cautious traders must consider the possibility that a comprehensive US-China trade agreement will have already been baked into the stock market by the time it finally arrives.
Led by bitcoin, cryptocurrency prices took another step down heading into Monday’s US trading session.
The markets had been quiet for the majority of last week, but the bulls failed to make it through the weekend unscathed. Late Sunday night, the bitcoin price began to creep lower, and the decline snowballed into a sell-off that drove the flagship cryptocurrency as low as $3,670 on Bitstamp.
Bitcoin is currently trading at $3,698 on that exchange, representing a 24-hour decline of 2.65 percent. Most large-cap altcoins took heavier losses, with ethereum slipping by 5.99 percent, ripple (XRP) dropping by 2.88 percent, EOS cratering by 8.68 percent, and litecoin enduring a 5.35 percent decline. Among top-10 cryptocurrencies, only stellar outperformed bitcoin, with the “poor man’s ripple” losing 1.23 percent against the USD but gaining 1.46 percent against BTC.
The cryptocurrency market cap now sits below $126 billion, having declined more than $18 billion since peaking near $144 billion on Feb. 23.
Analysts were at a loss for fundamental factors that could have triggered the sell-off, though eToro Senior Market Analyst Mati Greenspan suggested that an offhand comment during US President Donald Trump’s marathon CPAC speech might have played a minor role.
“I want a strong dollar,” Trump told the audience of young conservatives, “but I want a dollar that does great for our country, not a dollar that’s so strong that it makes it prohibitive for us to do business with other nations and take their business.”
Trump’s whipsaw statement was followed by an initial decline in the value of the dollar; however, USD quickly began to climb on Monday while the gold price pointed down.
Like gold, bitcoin tends to have an inverse relationship with the dollar, and previous short-term crypto market pullbacks have been attributed to the greenback flexing its muscles. However, the consensus seems to be that the current sell-off is technical, not fundamental.
Specifically, the crypto market is continuing to grapple with the bitcoin price’s inability to break through resistance at $4,200. A strong push past that mark would likely be seen as an indication that bitcoin is closing the book on its longest-ever bear market. However, the ongoing correction seems to imply that the flagship cryptocurrency instead intends to add another excruciating chapter.
Last modified: July 2, 2020 8:14 PM UTC