Trading Day: AI, crypto routs deepen | WKZO | Everything Kalamazoo
By Jamie McGeever
ORLANDO, Florida, Feb 5 (Reuters) – The tech-fueled stock market selloff snowballed on Thursday and slammed the Nasdaq to its lowest since November, while precious metals prices and bitcoin tanked, as worries over companies’ massive AI capex spending and the U.S. job market deepened.
In my column today, I dig into the “tech wreck” and explain why the AI tide no longer lifts all boats. Buying an index fund and watching the “Mag 7” drive it higher is not a strategy any more – investors must turn to stock picking and active management strategies.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
Today’s Key Market Moves
Today’s Talking Points
* And it sure been a cold, crypto winter
The selloff in bitcoin and cryptocurrencies is turning into a rout, making this year’s “crypto winter” perhaps the coldest ever. Bitcoin fell 12% on Thursday for its worst day in nearly four years, and has lost half of its value in just four months.
Momentum and technicals are clearly bearish, but at a time of growing dollar debasement fears, shouldn’t bitcoin be rising? Obviously not, and the long-term bull cases put forward by crypto enthusiasts are now coming under greater scrutiny too.
* JOLTS shock backs Fed in a corner
Just what the Fed didn’t want. After signaling in December that rate cuts are on hold because the labor market appears to be steadying and inflation is more of a concern, figures on Thursday showed a sharp rise in layoffs and a collapse in job openings.
With inflation around 3% and showing few signs of cooling – economic activity is accelerating – strains are intensifying at both ends of the Fed’s dual mandate. Presumptive Fed Chair Kevin Warsh has his work cut out.
* U.S. yield curve steepest in four years
The gap between two- and 10-year U.S. yields is more than 70 basis points, the widest in four years. Weak economic data enhances rate cut expectations, strong data points to inflation-boosting growth – we have had both recently, and both steepen the curve.
Of course, a steep curve is consistent with a normal, healthy economy. And it’s great for banks. But it can also reflect growing worries over inflation expectations becoming unanchored or other risks that inflate the term premium. Of the two scenarios, that’s probably where we are right now.
What could move markets tomorrow?
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Jamie McGeever; Editing by Nia Williams)
