Nasdaq and Bitcoin Plunge Amidst Fed Warnings and Strong Economic Data

Nasdaq and Bitcoin Plunge Amidst Fed Warnings and Strong Economic DataUS stock and cryptocurrency markets suffered a double blow yesterday, with the Nasdaq Composite Index experiencing a significant drop and Bitcoin plummeting. This market turmoil sparked investor concerns about the economic outlook and highlighted the uncertainty surrounding the Federal Reserve's monetary policy

Nasdaq and Bitcoin Plunge Amidst Fed Warnings and Strong Economic Data

US stock and cryptocurrency markets suffered a double blow yesterday, with the Nasdaq Composite Index experiencing a significant drop and Bitcoin plummeting. This market turmoil sparked investor concerns about the economic outlook and highlighted the uncertainty surrounding the Federal Reserve's monetary policy.

The Dow Jones Industrial Average fell 0.42%, the S&P 500 dropped 1.11%, while the Nasdaq plunged 1.89%, its largest single-day drop recently. Tech giant Nvidia's performance was particularly noteworthy. Despite two consecutive days of gains, its stock price ultimately closed down over 6%, its biggest single-day decline since September 3, 2024, after its product launch failed to meet investor expectations for short-term gains. Tesla's stock price fell more than 4%, and Meta (Facebook) dropped approximately 2%.

The performance of Chinese stocks listed in the US was more mixed. The Nasdaq Golden Dragon China Index closed down 0.2%. However, some individual stocks performed strongly, with XPeng Motors rising nearly 10%, Miniso Group up over 5%, Bilibili up over 2%, and Pinduoduo and iQIYI both exceeding 1% gains. Conversely, NIO's stock price fell over 4%.

The cryptocurrency market also took a heavy hit. Bitcoin, which had recently reclaimed the $100,000 mark, plunged over 5% in the past 24 hours, falling below $97,000. Bitcoin's decline triggered a broad sell-off in other cryptocurrencies. According to Coinglass data, nearly 170,000 traders were liquidated in the past 24 hours.

This market downturn comes against the backdrop of a rare warning from the Federal Reserve and the release of several key economic data points. On January 6th, Federal Reserve Governor Lisa Cook issued an unusual direct warning to the stock market, stating that valuations in many asset classes, including stocks and corporate bonds, were elevated, and these markets could face significant declines due to adverse economic news or shifts in investor sentiment. Cook's warning undoubtedly heightened market uncertainty and fueled investor anxieties.

Simultaneously, the US released several important economic indicators. The December ISM Non-Manufacturing PMI came in at 54.1, exceeding the expected value of 53.3 and the previous month's reading of 52.1. This better-than-expected data indicated continued resilience in the US economy, somewhat dampening expectations of a Fed rate cut. The November JOLTs job openings were at 8.098 million, higher than the expected 7.7 million and the revised previous value of 7.839 million, further highlighting the strength of the labor market. Redbook retail sales for the week ending January 4th showed a year-over-year increase of 6.8%, slightly below the previous reading of 7.1%.

These economic data had a complex effect on market sentiment. While the ISM Non-Manufacturing PMI data was better than expected, concerns about the Fed's future monetary policy trajectory remained. According to the CME FedWatch tool, the market's expectation of the Fed holding interest rates steady this month rose to approximately 95%, up from 91.4% on Monday and 62.9% a month ago. This suggests that despite strong economic data, the market remains cautious and unwilling to bet on the Fed easing monetary policy in the short term.

Federal Reserve official Lorie Logan also reiterated the Fed's unwavering commitment to its inflation target. She stated that the Fed is highly committed to achieving its 2% inflation target and would need to employ a more aggressive interest rate policy if price pressures intensify. Logan's statement further cemented market expectations of the Fed maintaining its high-interest-rate policy.

In summary, the simultaneous plunge in the Nasdaq and Bitcoin is the result of several interacting factors. The Fed's warnings, better-than-expected economic data, and concerns about the future direction of the Fed's monetary policy all contributed to the sharp market volatility. Investors are closely monitoring the Fed's next move and future economic data to gauge whether the market has bottomed out and to predict future trends. This market turmoil also serves as a reminder that market risks persist, and cautious investment is crucial. The future market trajectory remains highly uncertain, and investors need to carefully monitor relevant information and make investment decisions cautiously. Currently, market sentiment remains tense, and investors need to remain vigilant, paying close attention to market dynamics and related economic data. Only by fully understanding market risks and their own risk tolerance can investors make rational and prudent investment decisions.