ISM Plunges, stocks pare gains, dollar drops, ethereum breaks USD 3K, bitcoin follows

The April ISM Manufacturing report delivered a steep decline that caught everyone off guard.  Given some impressive Fed regional surveys, a strong beat was expected by many.  Today’s miss is not really terrible, but perhaps a reminder that the Fed surveys only cover a portion of the country and miss a good part of the West Coast.  Expectations with US data may have become too optimistic, but this first look at April suggests the recovery is firmly in place, albeit at a slower pace.  US stocks did not know how to react to the ISM data.  Slowing growth along with soaring pricing pressures is somewhat a vindication for the Fed’s cautious stance but not necessarily supportive that inflation will be transitory.

The S&P 500 index is holding onto modest gains, while the Nasdaq turned negative following steep drops with Tesla, Amazon, and AMD.

FX

The dollar plummeted as surging input pressures from the ISM report justified inflation concerns.  The ISM’s prices paid jumped from 85.6 to 89.6, the highest reading since 2008.  The rest of the ISM report triggered a wave of growth concerns given noticeable declines across the other components.  The headline fell from 64.7 to 60.7, while new orders dropped from 68.0 to 64.3, and the employment component weakened from 59.6 to 55.1.

EU

The Dax is outperforming most of its European peers after impressive retail sales and manufacturing activity.  German retail sales in March impressed with a 7.7% gain, stronger than the forecast of 3.0%, and upwardly revised prior month’s reading of 2.7%.  Overall, European manufacturing PMI data suggests the recovery is progressing albeit slightly weaker-than-forecasts.

Ethereum/Bitcoin

Ethereum surged over 12% to top USD3,000 for the first time amid a broad cryptocurrency market rally.  Ethereum’s encrypted ledger might be costly and slow but that hasn’t stopped it from becoming the favorite cryptocurrency to use.  The use case argument justifies the appeal for Ethereum and the current social media buzz has many traders eyeing a run towards USD10,000 before the end of the year.

It used to be the other way around, but now bitcoin is riding the coattails of ethereum.  Everything crypto is rallying today now that financial markets are seeing US stocks already trade around the year-end target for many analysts.  Cryptocurrencies might be more volatile than stocks and bonds, but for many on Wall Street it still has a clearer trajectory.

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