The world’s most popular cryptocurrency and the precious metal soared to new heights on Tuesday, while U.S. stocks suffered their worst losses in months amid weak economic data and growing uncertainty.
Bitcoin reached a record high of $62,380, up more than 10% from the previous day, as investors flocked to the digital asset that is seen as a hedge against inflation and a safe haven in times of turmoil. The rally was fueled by growing adoption of bitcoin by mainstream companies and institutions, such as Tesla, PayPal, and Morgan Stanley.
Gold also hit an all-time high of $2,129.54 an ounce, up 0.7% from Monday, as market participants anticipated that the Federal Reserve would cut interest rates in June to boost the flagging economy. Gold is traditionally viewed as a store of value and a protection against currency debasement.
Meanwhile, Wall Street stocks closed sharply lower on Tuesday, with the Dow Jones Industrial Average dropping 404.64 points, or 1.04%, to 38,585.19, the S&P 500 losing 52.3 points, or 1.02%, to 5,078.65, and the Nasdaq Composite falling 267.92 points, or 1.65%, to 15,939.59.
The sell-off was triggered by disappointing economic data that showed a slowdown in the U.S. services sector and a steeper-than-expected decline in new factory orders. The data raised concerns about the strength and sustainability of the recovery from the pandemic-induced recession.
Investors also awaited the outcome of the European Central Bank’s policy meeting on Thursday, as well as the U.S. jobs report on Friday, for clues on the direction of monetary policy and the health of the labor market.
Some analysts said that the market correction was overdue, given the strong gains in the past few months, and that it could offer an opportunity to buy the dip.
“Markets don’t go up in a straight line, and we’ve had a very strong run since March,” said Chuck Carlson, CEO of Horizon Investment Services. “I think this is a healthy pullback that will set the stage for the next leg up.”
Others warned that the volatility could persist, as the markets face multiple headwinds, such as the rising tensions between the U.S. and China, the resurgence of the coronavirus in some regions, and the uncertainty over the fiscal stimulus package in the U.S.
“We’re in a choppy environment, where there are a lot of crosscurrents and conflicting signals,” said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management. “We’re not out of the woods yet, and we could see more downside pressure in the near term.”
Despite the gloomy mood, some experts remained optimistic about the long-term prospects of the global economy, as the vaccine rollout progresses and the consumer spending picks up.
“We believe that the recovery is still intact, and that we’ll see a strong rebound in the second half of the year,” said Kristina Hooper, chief global market strategist at Invesco. “We think that the fundamentals are still supportive of risk assets, especially those that benefit from the reopening theme, such as cyclical sectors, emerging markets, and commodities.”
Source: Reuters
