People buy bitcoins at a Coinstar ATM during an event in Miami last month.
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After a stormy week for markets, stock market futures are pointing down again Monday.
Concerns that aggressive interest-rate increases, geopolitical tensions from Russia’s invasion of Ukraine, and another Covid-induced economic slump in China have already pulled the
Nasdaq
into a bear market. Inflation data due out Wednesday may further stoke fears that the Federal Reserve will take no prisoners in its quest to keep consumer prices in check.
For its part, Bitcoin, the largest cryptocurrency, is worth about half its peak value at around $34,000. It has lost a quarter of its value this year, compared with a 22% drop in the Nasdaq and a 13% decline in the
It isn’t an easy time to pick winners, but surely it is good news for crypto that it continues to trade more or less like risky stocks. Sure, Bitcoin is proving that it isn’t a haven asset like gold when inflation is quickening. But it also isn’t a meme stock that is wildly disconnected from everything else.
It is important to keep an eye on that if things get worse from here. Companies, at least, offer future revenues as a basis for their values. Bonds have yields. It is still not widely accepted what benefit cryptocurrencies offer, as
Berkshire Hathaway
CEO Warren Buffett recently pointed out. The investment case is largely based on the idea that value will go up in future.
At the moment, that proposition is looking harder to justify.
—Brian Swint
*** Join Barron’s senior managing editor Lauren R. Rublin today at noon as she chats with deputy editor Ben Levisohn and Charles Lemonides, founder of ValueWorks, about the outlook for financial markets, industry sectors, and individual stocks. Sign up here.
***
Bitcoin Near Half Its Peak as Investors Sidestep Risk
The price of Bitcoin fell below $34,000 over the weekend but recovered some ground to $35,197 on Sunday evening. It is now nearly half its all-time high. The cryptocurrency’s fall over the weekend echoed the broader stock market’s decline last week as investors stepped away from riskier assets.
- Bitcoin, the largest cryptocurrency, hit a peak price of $67,802.30 a coin in November 2021. The price of Ether, the second-largest digital asset, dropped 0.2% to $2,533 on Sunday.
- “Risk assets” such as tech stocks and cryptos have been hurt because bond yields keep rising. The yield on the benchmark 10-year U.S. Treasury was 3.14% Sunday evening. Higher Treasury yields reduce the extra return relative to bonds that traders expect from taking riskier bets.
-
Last week, software company
MicroStrategy
’s
chief financial officer, Phong Le, said it would face a margin call if Bitcoin’s price drops to $21,000, Insider reported. MicroStrategy owned $5.9 billion of Bitcoin at the end of March, after taking out a $205 million Bitcoin-collateralized loan with Silvergate Bank to buy more Bitcoin.
What’s Next: MicroStrategy shares are down 62% since Bitcoin’s November peak, and down 46% this year. Le said the company could contribute more Bitcoin to the collateral package, so “we don’t ever get into a situation of a margin call.”
—Janet H. Cho
***
G-7 Nations Vow to Phase Out Russian Energy
Ukrainian President Volodymyr Zelensky on Sunday joined a virtual meeting of the Group of Seven, including the U.K., Canada, Germany, France, Italy, Japan, and the U.S., which pledged to phase out dependence on and imports of Russian energy and help nations to find alternative energy sources.
- In separate visits to Ukraine, first lady Jill Biden met on Mother’s Day with first lady Olena Zelenska and praised “all of the brave and resilient mothers of Ukraine.” Canadian Prime Minister Justin Trudeau reopened his country’s embassy in Kyiv, and tweeted that Canada is suspending tariffs on Ukrainian imports.
- A Russian airstrike in eastern Ukraine killed 60 villagers who were hiding in a school, and Ukrainian forces in Mariupol vowed to fight until the end. Ukrainian Ambassador Oksana Markarova told CBS that Russians killed more Mariupol civilians in two months than the Nazis killed in two years.
- The U.S. announced fresh sanctions against Russia, including cutting off Western advertising from Russia’s three state-owned television stations, prohibiting U.S. accounting and consulting firms from advising Russians, and banning equipment that could help Russia’s military.
- Russian President Vladimir Putin aims to send a “doomsday” warning to the West during Russia’s Victory Day celebration today, including a flyover by supersonic fighters, Tu-160 strategic bombers, and the II-80 “doomsday” command that would carry Russia’s top brass in a nuclear war, Reuters reported.
What’s Next: The U.S. also sanctioned 27 executives from Gazprombank, which oversees Russia’s sales of natural gas, and eight from
Sberbank
,
and imposed 2,600 visa restrictions on Russian and Belarussian officials who supported or enabled the war in Ukraine.
—Janet H. Cho
***
Disney’s ‘Doctor Strange’ Notches Biggest 2022 Debut Weekend
Walt Disney Co.
’s
Doctor Strange in the Multiverse of Madness took in $185 million on its theatrical debut weekend in the U.S. and Canada, more than double the 2016 opening of the first movie in the series and the biggest opening weekend for a movie so far this year.
-
The opening comes in ahead of The Batman’s $134 million weekend in March. Internationally, the latest Doctor Strange installment made an estimated $265 million since opening Wednesday, bringing total receipts to $450 million.
IMAX
and 3-D screens were 36% of Doctor Strange’s total box office. - The Marvel production, in which Doctor Strange battles the forces of evil in parallel universes, is just the start to summer blockbuster season, including the coming releases of the next Downton Abbey film, plus Top Gun: Maverick, Jurassic World Dominion, and Bullet Train.
- Disney shares reached a 52-week low on Friday, down nearly 29% this year, as the Hollywood studio, theme-park operator and media streaming company grapples with an uneven reopening. It is also at odds with the state of Florida over the loss of its special tax status after criticizing a new sex education law.
What’s Next: Disney is scheduled to report second-quarter earnings on Wednesday. Analysts tracked by FactSet expect it to report earnings per share of $1.19 on revenue of $20 billion, which would be down 7% from the first quarter.
—Liz Moyer
***
Wall Street Awaits a Sign That Inflation Has Peaked
Wall Street is looking for signs that inflation has peaked, though many economists and the Federal Reserve itself believe inflation will remain higher for longer than they thought it would six months ago. Unknowns include effects of the lingering Covid-19 pandemic and the Russia-Ukraine war’s influence on commodity prices.
- The dollar is near a two-decade high against other currencies despite inflation at its highest in 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is up 8% this year, while the euro, British pound, and Japanese yen are lower.
- Economic weakness worldwide is driving the dollar’s climb, with lockdowns in China slowing industrial production there and Russia’s war spiking energy prices for European households. The eurozone’s economy faces the threat of a recession, The Wall Street Journal reported.
-
A strong dollar means Americans can buy things from other countries at a lower price, but it can also make U.S. products more expensive for foreigners.
Microsoft
said the strong dollar cut its revenue last quarter, the Journal reported. - U.S. consumers have more money in their bank accounts and continue to spend despite rising prices. Fed Chair Jerome Powell said the economy can weather a series of interest-rate increases.
What’s Next: The Bureau of Labor Statistics releases the consumer price index for April on Wednesday. Analysts expect a gain of 8.1% over last year, or 5.9% excluding volatile food and energy prices. The March readings rose 8.5% and 6.5% respectively.
—Liz Moyer
***
Infineon Raises Outlook on Strong Semiconductor Demand
Infineon Technologies
,
Europe’s largest chip maker, posted strong second-quarter results lifting its…
Read More: Bitcoin Is Proving It Isn’t Gold 2.0 as It’s Moving in Same Direction as Stocks
