During yesterday's session, investors began nervously selling stocks, as if they had not previously considered inflation and the fact that it will be difficult to pass on cost increases to consumers, and therefore margins will likely have to be squeezed, adversely affecting company valuations.
Yesterday, when it emerged that US consumer inflation had risen to 4.2 percent, the highest level in 13 years, the indices crashed. The Dow Jones had its worst day since January, falling 682 points, or 2 percent, the S&P fell 89 points, or 2.1 percent, its biggest one-day drop since February, and the Nasdaq fell 2.7 percent.
More inflation data today could be nervous again
Today, sentiment isn't any better, with U.S. futures seemingly losing for the fourth session in a row, following a general sentiment of risk-aversion around the world. Investors remain concerned that rising inflationary pressures will force the Federal Reserve to tighten monetary policy sooner than expected, although Fed officials have consistently downplayed inflation risks and pledged to continue supporting the economy.
The market may be overestimating the Fed's actions because the Fed has introduced the AIT, or average inflation target, so it appears that interest rate hikes could only occur if U.S. inflation remains above the 3 percent level each month through the end of the year. Otherwise, the market could pull back its expectations, which could improve risk appetite again.
However, today could still be a nervous one, as US producer inflation (PPI) data will be released at 14:30. The market consensus is for inflation to rise - to 5.9 percent, which is also the highest in 13 years.
The falling value of bitcoin, or what Tesla is planning
Nervousness began not only on the stock market but also on the cryptocurrencies. At one point, bitcoin was traded below 46 thousand USD and found itself at the lowest level since the end of February. Tesla's announcement that it is no longer accepting BTC as a means of payment for its cars is considered the cause of the declines. However, Tesla will continue to keep bitcoins on its balance sheet.
The company's move may be related to the fact that it uses too much non-renewable energy to mine bitcoin and maintain its network. According to Reuters, Tesla is seeking a government license that will allow it to participate in the billion-dollar renewable energy market. Hence, it is likely that Tesla sees more business there than accepting BTC for cars, and officially maintains political correctness.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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