Stocks soften ahead of CPI, claims hits 52 year low, King Dollar, bitcoin breaks below USD 50K

US stocks edged lower on growing expectations for a turbo-charged taper, potentially more supply chain issues, and as Omicron derails reopening momentum, as companies delay return to the office and cancel holiday gatherings. An impressive jobless claims report could not overcome rising risks to the short-term outlook that stem from virus jitters and fears of an aggressive Fed. The next big move for equities will likely come after the US inflation report which could tilt the scales on how fast the Fed tapers and when we can expect that first rate hike.

The 10-year Treasury yield fell 3.8 basis points to 1.484% as investors grew cautious on Chinese debt.

US Data

Jobless claims data showed the labor market recovery remains very strong. Seasonal factors were likely at play but still this is an outstanding number. Initial jobless claims dropped precipitously to 184,000, much better than the 220,000-consensus estimate, also the lowest reading since 1969. Continuing claims are hovering around 1.95 million but are still significantly better than the 19.6 million seen a year ago.

When you combine this jobless claims report with the ‘great resignation’(quits rate still near record highs), the Fed has to acknowledge that the labor market is very tight and that policy decisions are all inflation.

US dollar could get a boost from CPI

The dollar is looking to keep its crown and tomorrow‘s inflation report could help it resume its upward trajectory. Today’s dollar strength is more about euro weakness from speculation that ECB council members will temporarily increase the APP bond-buying scheme and commit to QE purchases till the end of next year.

Bitcoin

Bitcoin fell below the USD 50,000 earlier in Asia as global stocks mostly traded in the red. Selling pressure continued in New York as the dollar remained on solid footing. Bitcoin really didnt do much after CEOs from six major crypto firms made their case for Congress to not get too aggressive with regulation.

Some of the selling pressure is also related to the growing electric shortages in Kazakhstan, which is taking away mining power from the worlds second-largest bitcoin mining country. In the past, when China had outages, we saw significant drops with bitcoin.

The long-term bull case remains for bitcoin, but everything in the short-term seems bearish. Bitcoin will need to overcome growing expectations for a stronger dollar, an extended altcoin season, and short-term bearishness for risk assets as Omicron derails reopening momentum.

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