U.S. stocks reduced heavy losses and ended Wednesday’s wild session well past their lows as cryptocurrency prices largely rebounded, but the weakness of the market’s speculative pockets still weighed on sentiment.
The Dow Jones Industrial Average closed 164.62 points, or 0.5%, to 33,896.04 after falling 586 points from its daily low. The S&P 500 fell 0.3% to 4,115.68 as nine of eleven sectors posted losses. The tech-heavy Nasdaq Composite rebounded from a previous loss of 1.7% to close unchanged at 13,299.74 as some of the major tech stocks, including Facebook, Netflix, Microsoft and Alphabet, rose.
The key averages briefly added to their afternoon trading losses after minutes of the Federal Reserve’s April meeting indicated that it should reconsider its asset-buying programs in upcoming meetings.
Wall Street had another wild session that morning, with tech stocks slipping as investors were rocked by a sudden slump in cryptocurrencies, including Bitcoin. The weakness later spread to other sectors, with the S&P 500 falling 1.6% from its session lows. The exception was a handful of retailers who reported solid profits, including Target.
According to Coin Metrics, the world’s largest digital token fell 30% from its lowest point to just over $ 30,000. On Tuesday, China warned financial institutions not to engage in crypto deals, potentially triggering the sell-off.
The cryptocurrency largely rebounded from the fall in afternoon trading, most recently falling 7%. The major averages later made up for some of their losses as Bitcoin prices rebounded.
Bitcoin-related tech stocks saw the biggest declines in the industry. Tesla, a large Bitcoin holder, was down 2.5%. MicroStrategy, another company that bought a large amount of Bitcoin for its corporate coffers, gained 6.6%. Coinbase, the newly public crypto exchange, fell nearly 6%.
“There is no question that Bitcoin was the poster child for rampant market speculation and risk appetite,” said Peter Boockvar, chief investment officer at the Bleakley Advisory Group. “It should definitely be monitored to take the pulse of risk taking and now risk aversion.”
Growth stocks have come under pressure lately as the Nasdaq Composite fell nearly 5% in May as inflation fears deepened. A sustained rise in price pressures could undo the Federal Reserve’s adjustment policies, which could hurt tech companies that have relied on simple borrowing costs for years for superior growth.
Cathie Wood’s flagship fund Ark Innovation ETF (ARKK) fell 1.7%, bringing its losses to over 17% in 2021.
“This had to happen sometime in 21, and some reset in crypto prices is likely healthier than negative for broader stock markets over time,” Jordan Klein, an analyst at Barclays, said in a note.
Fed pointed to a taper
The Fed’s minutes said that a strong recovery in economic activity would warrant discussions about tightening monetary policy in the coming months.
“A number of participants suggested that it might be appropriate in upcoming meetings to discuss a plan to adjust the pace of asset purchases if the economy continues to make rapid progress towards the committee’s goals,” the Fed said -Protocol.
Chairman Jerome Powell said after the meeting that the recovery was “uneven and nowhere near complete” and the economy still does not show the standard for “substantial further progress” set by the committee before changing policy.
“The market is strong right now based on this tremendous liquidity. Everyone is scared of when that liquidity will start to fade. These comments suggest that at some point the Fed will talk about it – at some point, take some of that liquidity. We believe the market.” is very sensitive to it, “said David Katz of Matrix Asset Advisors at CNBC’s” Power Lunch “.
Improving the mood a little on Wednesday was a better result than Target expected. The major retailer’s stocks rose 6% after sales rose 23% in the most recent quarter.
The major stock indices emerged from successive losses hurt by weakness in the technology sector. Soft housing data on Tuesday partially sparked the widespread sale in the previous session.
– CNBC’s Kevin Stankiewicz contributed to the coverage.
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