Do Wall Street’s woes have anything to do with bitcoin’s bounce?
Bitcoin was one of the few winning investments in the worst first week of the year for U.S. stocks, according to The Wall Street Journal. The Dow Jones Industrial Average (DJIA) and the S&P 500 had their worst first weeks in history. Bitcoin, gold, the yen and natural gas were in growth modes.
At the close of trading Friday, the DJIA fell 6.2%, the S&P 500 lost 5.96%, and the Nasdaq was down 7.3%. In addition, 10-year Treasury yields fell 0.141 percentage points to 2.131% and Nymex crude oil dropped 10.48%.
The DJIA’s performance was the worst first five days in its history, surpassing its 5.6% decline of 1978.
The S&P 500 marked its worst first five-day stretch ever, outdoing its 5.3% fall in 2008.
The Nasdaq bucked the trend, only posting its worst first week since 2008. In 2009, it lost 8% for the period.
How important are the first five days to longer-term index performance? For both the S&P 500 and the DJIA, first-five-day declines foreshadowed full-year slides of 55% and 50%, respectively. When the indexes rose in the first five days, they increased 74% and 75% for the year.
Charlie Bilello, director of research at Pension Partners, said there have been weak starts for years that ended with bad returns. This most recently occurred in 2008 and 2000. There have also been poor starts to years that ended with good returns, such as 1991, 1982 and 1955. “The full story of 2016 has yet to be written,” he said.
A better indicator is to extend the time frame, The Wall Street Journal noted. After the S&P 500 increased to a high of 2110 in November, the index has fallen 8.9%. Since it peaked at its all-time 2131 high in May, it has fallen 8.9%.
Since the Federal Reserve closed quantitative easing (QE3) at the end of October 2014, the S&P 500 has been down 4.7%. The Fed voted to end its bond-buying stimulus program commonly known as QE3 and signaled it was not worried about global weakness, low inflation or a wobble in financial markets, according to MarketWatch.
Hope that U.S. markets would recover on account of the strong December employment report Friday did not materialize. Following an initial uptick, markets were back in the red by lunchtime. The downward trend continued to the close of trading.
Also read: Newsflash: Bitcoin price gallops beyond $450
Bitcoin, by contrast, posted a positive week, beginning on Monday at $433 and reaching $458 by Wednesday, finishing at $451 on Friday.
Investor fear over China’s stock market crash could have driven funds into bitcoin. The surge could be premature given the potential hardfork on Jan. 11. However, CCN.com’s Venzen Khaosan said bitcoin’s price trend chart looks “strongly bullish.”
The negative trading in U.S. markets is expected to carry into this week, traders told The Wall Street Journal. Portfolio managers and analysts said they expect fourth-quarter corporate earnings reports to be unimpressive. They expect swings in crude oil and energy prices. Other factors include ongoing Mideast turmoil and persistent concerns about the Chinese and U.S. economies.
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