The Daily Breakdown looks at the bull market in Bitcoin and Ethereum, as well as bond yields with the PCE report in focus.
Thursday’s TLDR
- BTC and ETH lead surge in crypto.
- The PCE inflation report is due up this morning.
- Wednesday’s volatile earnings response.
What’s happening?
We’re seeing some explosive price action in crypto and it’s not just Bitcoin.
While the investment world — and this newsletter too — have been focused on the rallies in Bitcoin and Ethereum, many other smaller coins are starting to come along for the ride too.
That includes Litecoin, Solana, Cardano, Dogecoin and others.
Bitcoin started the week trading near $50,000. Yesterday it soared past $60,000 and hit a high of $64,000 — marking a two-year high and year-to-date gain of more than 50%.
Amid the rally, the recently approved Bitcoin ETFs are seeing record volume. Investors who don’t have access to crypto but have access to traditional investment accounts can gain exposure to Bitcoin via these ETFs. That’s also helping drive demand for Bitcoin as well.
Ethereum’s Dencun upgrade and Bitcoin’s halving in April are also acting as catalysts for crypto.
The recent spike has given many active investors an opportunity to take some profits off the table. They’ll be able to reinvest the funds elsewhere or wait for a more favorable buying opportunity, with many investors still having exposure should crypto continue higher.
Want to receive these insights straight to your inbox?
The setup — 10-year yields
Today could be a big day for the markets with the release of the PCE report. Remember, this is the Fed’s preferred inflation gauge, and how it comes in could impact when the Fed decides it will be appropriate to cut interest rates.
Stocks bulls are hoping that the PCE report will come in low, meaning inflation isn’t as persistent and rate cuts could be back on the table sooner. The stock market can do all sorts of things, but the bond market can be more helpful in situations like this.
Like stock bulls, bond bulls also want rate cuts.
If rates go down then bond yields should go down too, and since bond prices have an inverse relationship with bond yields, bonds and bond assets — like the TLT — will rally as yields decline.
To keep an eye on this, investors can either watch bond prices — again, like the TLT — or they can watch yields, via something like the ticker symbol “TNX,” which tracks the 10-year Treasury yield.
You can’t trade TNX — which is shown above in the chart — but it does a good job illustrating how bond yields are trading.
Stock and bond bulls don’t want to see the 10-year yield clear the 4.33% to 4.35% zone. If it does and it continues higher, it can act as a headwind for stocks — and likely indicates a rate cut from the Fed is delayed again.
However, a drop in yields would allow bond prices to rally, and likely give stocks a boost as well — not that they necessarily need it, with the S&P 500 going for its 16th weekly rally in the last 18 weeks.
What Wall Street is watching
SNOW: Snowflake shares are plunging this morning despite beating on earnings and revenue expectations. However, management’s Q1 product revenue forecast of $745 million to $750 million missed analysts’ expectations. CEO Frank Slootman’s departure compounded concerns.
OKTA: Okta surged 20% after a strong quarterly report and after management provided bullish Q1 revenue guidance. The pre-market surge in Okta’s share price will likely send the stock to new 52-week highs.
BIDU: Baidu’s Q4 revenue increased by 6%, driven by advancements in AI technology and advertising. Its online marketing revenue reached 19.2 billion yuan, with adjusted profit per American Depositary Share rising to 21.86 yuan from 15.25 yuan last year.
BMBL: Bumble’s stock plummeted due to disappointing Q4 earnings, reporting an unexpected loss of 19 cents per share. Additionally, weak Q1 guidance was accompanied with the company’s decision to lay off 350 employees.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.