Stocks hover near record highs, mixed dollar, lira in freefall, bitcoin exhaustion

Earnings continue to impress as 84% of S&P 500 companies have topped expectations.  US stocks are hovering near record highs, but seem poised to consolidate until investors know what will be the final version of Biden’s economic package and until next week’s earnings updates from the rest of the mega-cap tech stocks.  The US economy is still on solid footing, but now inflation remains the biggest threat.  The commodity move higher may continue as rising production costs and some COVID outbreaks could continue to derail output.

US Data

A mixed bag of economic data did not move the needle for investor expectations on when the Fed will raise rates.  Jobless claims made a new post-pandemic low, the housing market saw better-than-expected demand for previous homes, while the Philly Fed business outlook softened and the leading index dipped more than forecasts.

Inflation pressures continue to dominate the focus on Wall Street and that could continue to keep pushing Treasury yields higher.  The five-year Treasury yield rose 3.5 basis points to 1.20%, the highest level since February 2020.

FX

The dollar was little changed after a weekly jobless claims made a fresh post-pandemic low, primarily because Fed watchers are waiting to see if the next few months of data show how much inflation is transitory.  The dollar was weaker against the Japanese yen and little changed to the euro.

The lira tumbled to fresh record lows after the CBRT once again caved to Erdogan’s pressure and delivered a larger-than-expected rate cut.  The Turkish central bank’s bold strategy to disregard inflationary pressures and common sense central banking has the lira in freefall and that could continue as they noted they still have limited room for a downward adjustment to the policy rate.

Bitcoin running on fumes

Bitcoin exhaustion is settling in as many retail traders shift gears and focus on altcoins.  The ProShares Bitcoin ETF debut was a success after gaining over USD 1.1 billion in assets in just two days.  It is unclear how much demand exists for the Valkyrie Bitcoin Strategy fund that will launch on Friday.  Valkyrie has had some trouble deciding on a ticker, going back and forth with BTF or BTFD, which for some means “buy the dip” with an expletive.  If you’re looking for an ETF that attracts older money, the BTF symbol might be the preferred choice.

If Bitcoin continues to slide, initial support could come from the USD 62,000 level, with major support coming from the USD 58,000 region.

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