Cryptos and stocks like NIO and Tilray are crucially linked. Here’s what you need to watch, says strategist.
By Jack Denton
Critical information for the U.S. trading day
(Photo by Andy Buchanan/Agence France-Presse/Getty Images)
The technology-heavy Nasdaq is set to outpace other stock market indexes at the open on Thursday, ready to recover from a more than 2% slide since the beginning of this week.
While investors keep pouring money into Big Tech stocks, individual investor favorites continue to suffer. And cryptocurrency prices may be a key reason, according to strategist Ben Onatibia’s team at investment research group Vanda, in our call of the day.
Individual investors remain the major buyers of Big Tech stocks as prices move lower. Of the $870 million spent on single stocks on May 4, roughly 28% went to S&P tech companies like Facebook (FB), Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL), Netflix (NFLX), and Microsoft (MSFT), according to the team at Vanda, with major tech funds recording massive retail inflows as well.
Not only does this point to individual investors buying the dip, but it suggests that institutional investors are partly responsible for the selloff, as they cut their exposure to tech in favor of commodities and financials.
But “tech supremacy has also crowded out investments from other speculative stocks,” Onatibia said, with individual investors showing much more hesitation about buying the dip in the likes of cannabis or clean energy stocks. The team at Vanda believes this environment is likely to persist, especially given the poor performance of widely held stocks like Apple and Advanced Micro Devices (AMD).
One of the key preconditions the team at Vanda said is necessary to “bring the mojo of fallen retail angels back” is a correction in cryptocurrency prices. According to Onatibia, prices of stocks like Tilray (TLRY), Skillz (SKLZ), Virgin Galactic (SPCE), Plug Power (PLUG), and NIO (NIO) have been inversely correlated with cryptocurrencies in 2021, and this is indicative of a rotation among individual investors. That is a crucial relationship.
“Investors in [environmental, social, and governance-focused stocks], electric vehicles, and a host of other highflying sectors will need to pay full attention to developments in the crypto world,” Onatibia said. “A significant correction is all they may need to get some of their lost appeal back.”
When the price of bitcoin (BTCUSD) sank following the initial public offering of crypto exchange Coinbase (COIN), “all retail favorite stocks enjoyed a decent recovery,” Onatibia said. “But as the price of ethereum (ETHUSD) and other altcoins
skyrocketed this week, retail favorite stocks have given up most of their recent gains.”
More compelling evidence from Vanda that individual investors are behind the crypto rally — at the cost of highflying favorites — is that popular trading platform Robinhood crashed following “unprecedented trading activity” in crypto assets this week.
The buzz
Shares in vaccine makers Pfizer (PFE), BioNTech (BNTX), and Moderna (MRNA) dropped 3% to 5% in premarket trading, after U.S. Trade Representative Katherine Tai said
that the U.S. supports the waiver of intellectual-property protections on COVID-19 vaccines. Moderna is also due to report earnings on Thursday.
Here’s the latest update after the third day of the trial between Apple and Epic Games — the developer of the videogame “Fortnite.” The antitrust case could lead to changes in Apple’s business model, with Epic arguing that the tech giant is a price-gouging monopolist that abuses its dominance for competitive reasons.
On the U.S. economic front, initial jobless claims for last week are due at 8:30 a.m. Eastern, along with continuing jobless claims for the week of April 24. Productivity and unit labor costs for the first three months of 2021 are due at the same time. At 4 p.m. the Federal Reserve will release its Financial Stability Report.
China suspended an economic dialogue with Australia in the latest souring of relations between Beijing and Canberra. China has been ratcheting up pressure on Australia for supporting a probe into the origins of COVID-19, and has also blocked imports of wheat, coal, and other goods as relations hit a multidecade low.
Amazon Chief Executive Jeff Bezos sold nearly $2.5 billion worth of shares this week in the company he founded, according to filings with the Securities and Exchange Commission.
Daily new COVID-19 infections in India topped 400,000 for the second time since the devastating surge of coronavirus hit the country last month, as demand for medical oxygen jumped sevenfold.
The markets
U.S. stock market futures (DJIA FUTURES)(SP 500 FUTURES) are mostly pointing lower, though the tech-heavy Nasdaq (Nasdaq-100 FUTURES) is set to open in the green. Investors will closely watch the jobs report due to be released later.
European equities are broadly lower
(XX:SXXP)
(UK:UKX)
(FR:PX1)
(DX:DAX), as markets await the answer to whether the Bank of England will join the Bank of Canada in reducing the rate of its bond purchases. Asian stocks (JP:NIK)(HK:HSI)(CN:SHCOMP) finished mostly in the green.
The chart
Lumber futures (LUMBER) traded on the Chicago Mercantile Exchange have quadrupled in price since February 2020 to hit a record high of $1,610 per thousand board feet, as shown in our chart of the day, courtesy of Wolf Richter from the Wolf Street financial blog.
“A sign of scary-crazy inflation amid suddenly blistering demand from builders, insufficient supply to meet that sudden surge in demand, growing lead times, and irrational behavior by buyers betting on being able to pass on that irrationality via higher prices to their customers,” Richter wrote.
Random reads
Talk about stratospheric asset prices: A bottle of French wine that spent more than a year in space will be auctioned off with a price tag of $1 million.
The owner of a Massachusetts pizza parlor fraudulently obtained $660,000 in COVID-19 relief funds and used some of the money to set up an alpaca farm, federal prosecutors allege.
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