Fed Chair Powell's Remarks Send Markets into a Tailspin: Stocks Down, Gold Up, Crypto VolatileEarly Friday morning, US market sentiment experienced significant volatility in response to Federal Reserve Chairman Jerome Powell's speech on Thursday. Stock and cryptocurrency markets generally declined, while spot gold bucked the trend, rising 0
Fed Chair Powell's Remarks Send Markets into a Tailspin: Stocks Down, Gold Up, Crypto Volatile
Early Friday morning, US market sentiment experienced significant volatility in response to Federal Reserve Chairman Jerome Powell's speech on Thursday. Stock and cryptocurrency markets generally declined, while spot gold bucked the trend, rising 0.15%. Powell's remarks, emphasizing the Fed's current reluctance to lower interest rates, dashed market expectations of a rate cut and intensified risk-averse sentiment.
David Morrison, senior market analyst at TradeNation, noted the concerning market performance on Thursday, with the Russell 2000 index of mid-cap stocks leading the decline, falling 1.4% intraday. The tech sector wasn't spared either, with the "Magnificent Seven" components experiencing widespread declines. Morrison believed Powell successfully "shocked the market" in his speech and Q&A, stating clearly that current economic data doesn't indicate an urgent need for the Fed to cut rates. This led to a stock market pullback and a rebound in bond yields.
Morrison further pointed out the dramatic reversal in market expectations for Fed rate cuts, as shown by the CME FedWatch Tool. Before Powell's comments, the market priced in an 82% probability of a 25-basis-point rate cut at the next Federal Open Market Committee (FOMC) meeting next month. However, after Powells speech, this probability plummeted to 62%, with the probability of a December rate cut further dropping to 58%. Morrison highlighted the significant uncertainty remaining before the December meeting.
Morrison analyzed that the Fed's shift in stance could stem from recently released economic data, particularly this week's CPI and PPI figures, and possibly from the influence of the Trump administration on the US economy. While both Trump and Powell seemingly favored rate cutsTrump to stimulate the economy, and Powell to alleviate pressure from $1.5 trillion in resetting mortgages next yearPowell's hawkish leanings might again spark conflict between the two, echoing their clashes during Trump's first term.
Looking ahead, Morrison stated the key question for traders is whether this week's pullback is sufficient to attract buyers to scoop up bargains, or if further downside is in store. If US stock indices can find support around current levels (e.g., the S&P 500 at 5900) and bounce before the weekend, it could set the stage for further gains. However, if the sell-off accelerates to today's closing point, investors will have more reason to reduce their risk exposure before the year-end. The S&P 500's 1.08% decline to 5885 on Friday, in Morrison's view, signaled continued weakness.
In the cryptocurrency market, Bitcoin (BTC) bulls initially pushed prices higher earlier Friday, rallying from support at $87,300 to a high of $90,723. However, bears subsequently took control, pushing BTC back down near the $88,000 support level. Alex Kupcsikevich, chief market analyst at FxPro, stated that the cryptocurrency market is down for a third consecutive day, falling 1.7% in the last 24 hours, with its total market cap dropping to $2.92 trillion. This represents a retest of the lower bound of a range that saw intense position changes. This dynamic is also consistent with the risk-averse sentiment prevalent in broader markets this week. Kupcsikevich warned that further adjustment to $2.73 trillion by the weekend is not ruled out, representing a 61.8% retracement of the last upward impulse and consolidation area from November 10-11.
Kupcsikevich noted that Bitcoin is currently consolidating around $88,000, opening and closing within the $88,000-$89,000 range for four consecutive days. On the daily chart, the Relative Strength Index (RSI) is nearing a drop below the 80 level, which could trigger a deeper correction, potentially retracing to $83,000. He also pointed out that Ethereum has fallen back to $3000, down 12% from its peak in a four-day pullback. The 200-day moving average around $2950 could offer support for Ethereum, aligning with a support zone for Ethereum from April to July this year.
While the cryptocurrency market currently shows signs of consolidation and potential further declines, its noteworthy that November 2023 is shaping up to be one of Bitcoin's best-performing months ever. Barring a massive sell-off, Bitcoin is on track for its best monthly performance ever. Analysts point out that we are only halfway through the month.
CryptoQuant analyst Gaah noted that Bitcoin reserves on exchanges have fallen to their lowest level since November 2018 in 2024, further bolstering market optimism. Gaah believes this milestone signals a significant shift in investor behavior, with a growing preference to move assets off exchanges into private wallets for long-term holding. This reduces the immediately sellable supply of Bitcoin, creating buying pressure in a supply-constrained environment. Therefore, the market might see an upward trend in Bitcoin's value, especially if demand remains stable or increases. This also suggests increased investor confidence in Bitcoin as a store of value in an uncertain and high-inflation global economic backdrop. Gaah concluded that while this suggests a potentially more volatile Bitcoin market, increased resilience, reduced selling pressure, and growing dominance of long-term holders could create the conditions for new price peaks.
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