Markets Enter Correction On Inflation/Interest/Energy Fears
"The TSX composite opened the trading day on Monday with a steep selloff of roughly three per cent, putting the index in correction territory, down 10 per cent decline from its all-time high earlier this year.
The selling was also intense in New York, with Wall Street’s three key indices – the Dow Jones Industrial Average, S&P 500 and the Nasdaq 100 – all posting steep declines. The S&P 500 is now in a bear market, down 21 per cent from it’s record high." - read more on BNN here
Breaking Thoughts: Continued fears of more inflation = more interest rate hikes are valid given how tight supply chains are and that the war in Europe continues on.
We found a good analysis by economist Mark Zandi showing that as much as 5.5% of the 8.5% inflation is due to the War/Energy prices, and covid related supply chain disruption. These means that the inflation the Fed is desperate to fight with interest rate hikes could normalize to around 3% (if the war is resolved soon). Thus, requiring much less interest rate hikes than is currently expected by markets.
Crypto Crashes as 'Celsius' Suspends Withdrawals, Contagion Fears Rise
"Bitcoin (BTC) suffered one of its worst price declines of the year, tumbling alongside ether (ETH) and other cryptocurrencies as a fresh wave of panic struck traders just one month after the Terra blockchain's meltdown.
The latest sell-off came as fears emerged of a new potential systemic threat to digital-asset markets, after the crypto lending service Celsius announced in a blog post that it was pausing withdrawals amid "extreme market conditions." The price of Celsius' CEL token fell over 50% after the news came out." - read more on Coindesk here
Breaking Thoughts: The Crypto market has always been complex and risky. In the last month Terra-Luna (a "synthetic 'stable' coin") and now Celsius (a lending exchange) have collapsed.
While their user bases and market caps were small relative to the size of crypto itself (which peaked at over $2 Trillion), their impact is massive. Collapses like these destabilize markets, spread fear, and cause many unrelated coins to sell off.
In this case the biggest fears are around issues at the largest crypto exchange Binance and the largest stable coin Tether (USDT). If the collapsing pricing cause those to destabilize as well, then this crash could get much worse.
All participants should be warry of such developments. These types of issues are well covered on our Guide to Investing in Crypto. Best thing to do is always to acquire more knowledge.
Major Earnings This Week
Monday June 13:
Oracle (ORCL): Expected Q4 earnings of $1.37 per share
Thursday June 1:
Adobe (ADBE): Expected Q2 earnings of $3.31 per share
Kroger (KR): Expected Q1 earnings of $1.30 per share
Major IPOs Expected This Week
None
See you next week!
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The Market News Reel for this week! Get the most important market news & updates for the week ahead! Major headlines, excerpts from news sources are shown above. "Breaking Thoughts" section is purely our opinion.