On Tuesday (March 5th), gold and Bitcoin reached historic highs on the same day, but what awaited them were completely different fates
Although gold prices fell slightly after reaching a historic high of $2141, they still closed up about 0.6% throughout the day, and bulls immediately regained support after a short-term drop of about $10. In contrast, after breaking through a historic high of $69000, Bitcoin plummeted like a waterfall, dropping more than $10000 from its peak and ending the day with only a brief drop!
The vastly different trends of these two types of assets after reaching overnight highs, although influenced by different fundamental backgrounds, holdings, and speculative psychology, actually reflect to some extent the overall market situation of the overnight financial market: as risk aversion suddenly heats up against the backdrop of major stock index declines in the United States, the more risky Bitcoin immediately becomes unsustainable after reaching overnight highs. Gold, on the other hand, remains a trusted investment target for many investors at present.
Undoubtedly, Tuesday's global financial markets were not calm:
Even though Federal Reserve Chairman Powell will only be visiting Capitol Hill to deliver his semi annual testimony on Wednesday night Beijing time, the overnight US market has already felt a "chill" in advance due to a series of other news factors
Market data shows that as of Tuesday's close, the three major US stock indexes have fallen by more than 1%, and the Nasdaq's intraday decline has even exceeded 2% at one point. The overall weakness in the stock prices of giant growth stocks such as Apple and the chip industry has had the greatest drag on the Nasdaq. Some strategists believe that Tuesday's sell-off in technology stocks was the result of profit taking, as the sector has continued to rise this year after a 56% surge in 2023.
Kevin Gordon, senior investment strategist at Jiaxin Wealth Management, said, "Perhaps some people are 'taking chips off the table' - profiting in high performing areas. Coupled with the fact that people may be feeling nervous before Powell's speech and we will have access to a large amount of job market data, it may be reasonable."
Edward Jones, Head of Investment Strategy, Craig Fehr, pointed out that two pieces of news fueled risk aversion overnight.
One is the latest data released by consumer electronics research firm Counterpoint, which shows that iPhone sales in China decreased by 24% in the first six weeks of this year, ranking only fourth among various brands. The market share has decreased from 19% in 2023 to 15.7%, due to the increasingly fierce competition from domestic smartphone manufacturers such as Huawei. Apple's stock price ultimately fell 2.8% worldwide on Tuesday.
Another news is that according to media reports, AMD's AI chips specially customized for the Chinese market have not been approved by the US Department of Commerce. If the company wants to sell this chip to China, it will need to apply for an export license. The stock prices of the US chip industry were also hit overnight as a result, with the Philadelphia Semiconductor Index closing down 2%.
Fehr also attributed some of Tuesday's weakness to the recent excessive gains in the US stock market. The S&P 500 index has hit a new closing high 15 times in just over two months so far this year. Fehr pointed out, "Stopping along the way is reasonable, even healthy. The overnight trend is to some extent a pause to take a breath after the previous sharp rise."
Scott Ladner, Chief Investment Officer of Horizon Investments, pointed out when talking about struggling technology stocks, "The higher they used to rise, the more they are now falling. That's the essence of what's happening today. The stocks being sold are those that have been rising all year."
However, due to the fact that many US stock investors have not experienced such a fierce decline as last night for a long time, the market's panic sentiment clearly continued to heat up on Tuesday. The VIX index, known as the US stock panic index, surged overnight and returned to above 15.
In the US bond market, the rise in safe haven sentiment on Tuesday also drove up US bond prices, with yields on various maturities falling. The benchmark 10-year US Treasury yield hit a low of 4.112% during trading, the lowest level since February 8th.
As of the end of the New York session, the 2-year US Treasury yield fell 5 basis points to 4.562%, the 5-year US Treasury yield fell 6.2 basis points to 4.146%, the 10-year US Treasury yield fell 6.2 basis points to 4.153%, and the 30-year US Treasury yield fell 6.2 basis points to 4.293%.
Looking ahead, investors in the US stock and bond market will undoubtedly pay close attention to the testimony of Federal Reserve Chairman Powell in Congress today and tomorrow, as well as the February non-agricultural employment data on Friday, in order to find clues about the direction of future interest rates.
Several Federal Reserve officials have expressed in recent weeks that they will remain patient when deciding when to cut interest rates, given the potential resilience of the US economy. Therefore, many industry insiders predict that Federal Reserve Chairman Powell may also emphasize in his testimony speech this week that there is no rush to cut interest rates, especially after the latest inflation data shows that price pressures continue to exist.
Macroeconomists such as Anna Wong said, "It is expected that Powell will maintain a hawkish stance in his biannual congressional testimony, sending a signal to the market that the Federal Reserve is not in a hurry to cut interest rates. If this leads to a tightening of the financial environment, it will continue to put pressure on the economy and increase the possibility of additional lagging effects of monetary policy."