San Francisco, CA – Bitcoin mining stocks saw a decline as the price of the cryptocurrency remained in the red on Wednesday. Riot Platforms and CleanSpark were down 3%, while Iris Energy and Marathon Digital fell 2% each. Bitcoin itself traded slightly below the flat line. This downward trend in mining stocks comes after the recent launch of bitcoin exchange-traded funds (ETFs), which has led traders to shift their focus towards the ETFs instead of the miners.
Traditionally, mining stocks have been closely correlated with bitcoin, acting as a way for investors to gain exposure to the cryptocurrency’s price. However, with the introduction of bitcoin ETFs, traders are now opting to invest directly in these ETFs instead. According to Sam Callahan, an analyst at bitcoin services firm Swan Bitcoin, this shift may be due to investors shuffling their capital between different investment products.
Callahan also believes that the launch of bitcoin ETFs will have long-term benefits, as they will lower the barrier to entry for bitcoin investments. This comes at a time when the Federal Reserve is expected to adopt a more accommodative monetary policy and when bitcoin’s issuance rate is expected to be halved, factors that could potentially boost the price of the cryptocurrency.
Meanwhile, Megan Horneman, chief investment officer at Verdence Capital, believes that the Federal Reserve is unlikely to cut interest rates in March. Horneman argues that there is no immediate need for rate cuts, given the current state of the economy with low unemployment and robust consumer spending. Lowering rates now could potentially lead to an increase in inflation, which is a concern for the Fed.
In other news, the Federal Reserve’s Beige Book report revealed that economic activity has been stagnant over the past seven weeks. Hiring and prices have been rising at a modest pace, with housing and the demand for mortgages weakening due to elevated interest rates. While companies have reported challenges related to inflation and pricing power, wage pressures remain high.
In the stock market, insurance stocks hit new highs, with Allstate, Chubb, Travelers, and Progressive all reaching intraday all-time highs. Other companies such as Hilton, Visa, and Domino’s Pizza also hit new highs. On the other hand, Archer-Daniels-Midland, Exxon Mobil, and Pinnacle West Capital saw their stocks hit their lowest levels in years.
As for individual stocks, Instacart shares rose 8% after an upgrade from Wolfe Research, while Spirit Airlines and JetBlue Airways both saw declines following a federal judge’s ruling that blocked JetBlue’s proposed acquisition of Spirit. Oil prices fell after China’s economic growth missed expectations, raising concerns about oil demand in the country.
Looking at the broader market, major indexes have slid since the start of the year after a strong finish in 2023. The Dow Jones Industrial Average and S&P 500 are currently on pace for losses, while the Nasdaq Composite has also seen a decline. Large-cap stocks are regaining market leadership, surpassing small-cap stocks which had a resurgence last year.
In the banking sector, the Federal Reserve’s upcoming changes to banking regulations are creating uncertainty. Federal Reserve Governor Michelle Bowman hopes that compromises can be made to address the proposal’s shortcomings. However, some of these regulations have faced pushback from Wall Street banks, who argue that they could negatively impact their operations.
On the earnings front, Charles Schwab reported fourth-quarter earnings that beat expectations, although revenue fell slightly short. The company’s net income for the quarter dropped significantly compared to the same period last year. Despite the positive earnings, Charles Schwab shares slipped in premarket trading.
Overall, the market is closely watching the Federal Reserve’s next moves, with expectations for interest rate cuts varying among traders. While retail sales data has shown strength, some analysts believe that it may not be enough to warrant rate cuts. The upcoming presidential election also presents challenges for the Federal Reserve, as rate cuts during an election season might be seen as politically motivated.
In international news, U.S.-listed Chinese companies saw their shares fall after disappointing GDP data was released. JD.com, PDD, Alibaba, and the iShares China Large Cap ETF all experienced declines. This underscores the growing concerns about the state of the Chinese economy and its impact on global markets.
As the trading day began, U.S. stocks opened lower, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all experiencing declines.
The stock market remains volatile as investors grapple with various economic and geopolitical factors. The Federal Reserve’s rate cuts and the performance of major indexes will continue to be closely watched in the coming weeks.