Stock market investors are slowly heading for the sidelines after a strong earnings season is telling this market that “I’ve given her all she’s got.” This has been a very good earnings season as 90% of the S&P 500 companies delivered robust results, but the problem for stocks is that most of the good news has already been priced in.
Rising manufacturing and raw materials costs are forcing Procter & Gamble (NYSE:PG) to deliver price hikes in September. This price hike theme will become broad across many sectors and eventually could tilt the Fed away from that transitory stance with inflation. The fundamentals are still strong for the US stocks but being in excessive overbought territory has this market ripe for a pullback now.
Foreign Exchange
The euro turned negative after a Forsa poll showed German Chancellor Merkel’s conservative party trailed by seven points to the Greens. Merkel’s party has settled on Armin Laschet but early polling suggests conservatives have an uphill battle. Laschet had a tough battle for the nomination over Soeder and that has left him looking vulnerable. Political uncertainty is never a good thing for the euro and right now the risk continues to grow that conservatives may not be in power once Merkel leaves.
Canadian Dollar
The Canadian dollar is weakening ahead of BOC policy meeting that is expected to deliver the first major taper tantrum during the COVID-19. Expectations are for the BOC to reduce its weekly asset purchase from CAD4 billion to CAD3 billion. Struggles with COVID-19 in Ontario and an expected dovish taper is the reasoning why the loonie is softening.
Cryptocurrencies
In the crypto world, many enthusiasts circle some key dates on their calendar such as halving dates, launching of ETFs/direct listings (Coinbase (NASDAQ:COIN), key network upgrades, and Apr. 20, known as “420”.
Many retail crypto traders were also hoping for today to be a successful “Doge Day” by sending Dogecoin to the moon. Some were eyeing the 0.50 dollar level as an area to take some profit, with others having outlandish hopes of a skyrocketing move to the 1.00 dollar mark. The current retail fervor probably won’t completely give up on Dogecoin, but a sell the event reaction could be in the cards.
Continued risk-off flows on Wall Street could lead to more bearish sentiment across all cryptocurrencies in the short-term. Institutional money might lock-in some bitcoin profit if we see stronger risk aversion later this week.
Bitcoin could be stuck in the mud for a couple of weeks, but should still see healthy institutional flows on any major dip.