A Market Whirlwind is Powered by Bitcoin ETF Buzz, Earnings Jitters and Global Tensions

Despite yesterday’s wild market volatility, the S&P 500 and the Nasdaq Composite both closed nearly unchanged

• It’s a volatile day as the market reacts to the CPI, the bitcoin ETF launch, the impact of earnings reports and geopolitical tensions.
• Banks are reporting mixed results. Interest rate concerns persist at Bank of America and Wells Fargo.
• The bitcoin ETF debut is influencing crypto stocks, and the earnings season is starting with mixed performance and warnings.

Yesterday brought considerable market volatility, with the S&P 500 navigating a 60-point range but ultimately closing down merely three points (0.07%). Meanwhile, the Nasdaq Composite experienced a 260-point range, concluding the day with a marginal $0.54 increase.

The morning witnessed an initial market selloff catalyzed by a robust consumer price index (CPI) report, revealing a 0.3% month-to-month inflation surge, surpassing the expected 0.2%. On a year-over-year basis, inflation rose to 3.4%, exceeding the 3.2% forecast. However, the subsequent producer price index (PPI) painted a different picture. Month-to-month, PPI contracted by 0.1%, contrary to the anticipated 0.1% increase. Year-over-year, PPI rose by 1%, slightly below the expected 1.3%.

Bitcoin ETFs debut

A pivotal moment came yesterday was the launch of several bitcoin exchange-traded funds (ETFs), contributing to bitcoin's ascent above $49,000 before retracing later in the day. Despite an initial boost, stocks associated with crypto trading faced challenges. Coinbase (COIN), for example, was down over 6.5%, and crypto-related stocks, like Marathon Digital Holdings (MARA) was down more than 12%. The introduction of these ETFs marks a noteworthy shift, enabling retail customers to trade bitcoin in stock form, potentially impacting the crypto sector.

Earnings season commenced with banks taking the forefront. A key focus lies on net interest income forecasts, crucial as interest rates influence banks' profitability. Bank of America (BAC) beat earnings expectations but that was offset by a revenue miss, causing a 2.6% drop. Wells Fargo (WFC), despite beating on revenues, projected a 7%-9% decline in net interest income for the year, resulting in a 2.7% dip. JPMorgan Chase (JPM) had positive results, including a beat on revenues and net interest margin, prompting a 0.7% rise. Blackrock (BLK), although not a bank, disclosed earnings and announced the acquisition of Global Infrastructure Partners for $12.5 billion, with its stock dipping just under 0.5% in premarket.

Delta Airlines (DAL) and UnitedHealth (UNH) also reported earnings. Delta's in-line revenues and first-quarter guidance, coupled with lowered full-year guidance, led to an 8% stock decline. UnitedHealth, despite beating on revenues and earnings, announced higher costs, contributing to a 4% premarket dip.

Burberry (BURBY) warned of weakening demand for high-end retail, causing a significant market cap loss of 100 million pounds or $127.4 million U.S. dollars. Tesla (TSLA), unrelated to earnings, faced a 2.5% drop after announcing a two-week shutdown of its Berlin factory because of Red Sea shipping issues, potentially impacted by piracy concerns. Notably, a U.S.-led coalition launched rocket attacks on Houthi rebels in Yemen, raising oil prices by nearly 1.5%.

What to watch

Monitoring oil prices, the sustainability of bitcoin ETF volume, and fluctuations in interest rates—currently below 4% for the 10-year rate—remain crucial aspects of today's analysis. Oil, as a significant commodity, could wield the potential to disrupt the inflation landscape. Upholding a vigilant stance on these factors aligns with prudent adherence to one's investment strategy and long-term objectives.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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