Stocks hover near records, Fed speak, Musk tweet sinks Tesla, cryptos surge

The US stock market rally is showing signs of exhaustion, but the catalysts remain mostly bullish after the House passed Biden’s infrastructure plan, China slowdown fears eased after exports surged, expectations Chinese President Xi’s crackdowns are easing as he looks to secure a third term, and as investors find safety in equities after struggling to assess the moves in fixed income.  Global bond yield chaos has traders unwinding aggressive tightening bets for both the Fed and BOE.  This week is all about inflation and a wrath of the central bank speak that could shift the markets closer to the inflation is transitory camp.

Fed

Fed chair Powell spoke at the Fed Gender Symposium, noting that the pandemic has widened deep-rooted inequities in the economy. Powell’s comment is directly about monetary policy, but it served as a reminder it will take a complete economic recovery for him to signal liftoff with interest rates.

The biggest news from the Fed today was the resignation of Randy Quarles. Quarles four-year term as Vice Chair of Supervision ended in October and has faced constant scrutiny from progressive democrats, including Senator Warren.  Biden will have to quickly make a decision on not just Quarles spot, but also what he will do with Fed Chair Powell and the other vacancies.  Getting nominations passed through the Senate might prove difficult and he may not be able to go as dovish as he would have liked.

Fed’s Harker reiterated that inflation will come down next year.  He added that markets should not expect a rate hike before taper ends. Fed’s Bowman spoke on housing, noting that supply-demand imbalances are raising housing costs.

Tesla

Oops, Elon Musk tweeted again.  A Twitter poll by Elon Musk asked his followers to vote on whether he should sell 10% of his Tesla stock so he could pay taxes. The vote was never really close over the weekend and at the end 58% voted yes and 42% said no. Elon’s motivation stemmed from options that were going to force him to sell shares anyway as he would need to make money to pay the taxes.   and they are running out of places to put their cash. Investors are also debating if the decision to include a tax provision in Biden’s infrastructure bill is positive for the space. The government seems to be focused on learning how to live with crypto and not shut it down.

Cryptos head higher

Over the weekend, Wall Street realized the inflation test was only going to get a lot hotter over the next few months and they are running out of places to put their cash. Investors are also debating if the decision to include a tax provision in Biden’s infrastructure bill is positive for the space. The government seems to be focused on learning how to live with crypto and not shut it down.

Ethereum hit all-time highs and Bitcoin is nearing record high territory as investors scramble for inflation hedges.  If the global bond yields remain heavy this week, Ethereum could see further momentum and target the $5,000 level. Bitcoin will need another catalyst to make a run towards the $70,000 level over the short-term.

Ethereum hit all-time highs and Bitcoin is nearing record high territory as investors scramble for inflation hedges.  If the global bond yields remain heavy this week, Ethereum could see further momentum and target the USD 5,000 level. Bitcoin will need another catalyst to make a run towards the USD 70,000 level over the short-term.

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