Cryptos face crunch, and 2 other things to watch in the market next week
Cypto’s steep decline ignites fear among investors. Also: Notable earnings and Musk’s Twitter buyout on hold.
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If it’s feeling like the movie Groundhog Day, where you’re reliving the same bad day over and over again, you’re not alone. Investor sentiment is overwhelmingly negative, according to the AAII Sentiment Survey. And the prolonged drop in stock prices we’re seeing is what defines a bear market.
The tech-focused Nasdaq is well into bear territory, down around 32% from its previous high. Apple (AAPL), the last FAANG stock holdout, succumbed to the bear market his week. It dragged down the S&P 500 to close Thursday around 20% from its previous high mark. Meanwhile, the Dow industrials are down 15%.
The markets seem to be trying for a Friday rally, though. All three indexes opened slightly higher, with all sectors in the green as of 9:41 a.m. Friday morning.
As we look to the week ahead, should we expect more of the same? Here are three things to watch that could affect your portfolio.
Will the crypto fire-sale continue or be extinguished?
Investors seeking shelter during the ongoing crypto fallout that has erased over $500 billion in crypto value since last weekend may be panicking. The turmoil is fueling fears of contagion across financial markets.
Earlier this week, TerraUSD (UST), the so-called stablecoin that’s meant to maintain a one-to-one peg with the US dollar, collapsed below the $1 mark and then fell into freefall. It was trading at around 15 cents Friday morning, according to CoinMarketCap data.
Its sister coin Terra (LUNA), which is meant to help stabilize the UST to hold that $1 peg, has fallen from over $80 last Friday to $0.0001137 at the time of this writing. Yes, a fraction of a penny.
Meanwhile, blue-chip crypto Bitcoin (BTC) set a new 52-week low this week. The price of Bitcoin dropped below the $30,000 mark for the first time since July 2021, hitting a low of $26,350.49 on Wednesday, CoinMarketCap data shows. Ethereum plunged back to near its 52-week low of $1,707.60.
In short, the stablecoin meltdown could spill over into the stock market if investor panic takes hold. Investors still jittery from the crypto volatility could decide to pull their money from riskier tech stocks, and from stocks with crypto investments or crypto-related business. This could spur a further market selloff.
Earnings roundup
Though we’re at the tail end of earnings season, next week we’ll see a handful of noteworthy companies investors should be watching.
Retailers make up the bulk of next week’s earnings. We’ll see big box stores Walmart (WMT), Target (TGT), Home Depot (HD) and Lowe’s (LOW) reporting, as well as discount department stores Ross Stores (ROST) and TJX Companies (TJX) — parent company of TJ Maxx, Marshalls, and HomeGoods. Investors will be watching retail earnings for an idea of consumer spending amid soaring inflation, which has been tightening disposable income.
Video game company Take-Two Interactive (TTWO), electric vehicle (EV)-maker Mullen Automotive (MULN) and agricultural equipment manufacturer Deere & Company (DE) also report.
Below is a list of some of the most notable companies scheduled to report next week, which could move some closely-watched stocks.
Monday, May 16
Tuesday, May 17
Wednesday, May 18
Thursday, May 19
- Applied Materials (AMAT)
- Palo Alto Networks (PANW)
- Ross Stores (ROST)
- BJ’s Wholesale Club (BJ)
- Kohl’s (KSS)
Friday, May 20
Will Twitter bots derail Musk’s buyout plans?
Elon Musk said his $44 billion Twitter (TWTR) takeover is “temporarily on hold” after the social media company reported that bot accounts represent less than 5% of the platform’s total users.
In a tweet early Friday, Musk said the deal was on hold until he can verify that spam and fake accounts on the platform are fewer than 5% of total accounts. He linked to a May 2 Reuters report on Twitter’s filing detailing its findings.
A couple hours later, Musk tweeted again, saying he is still committed to following through with the purchase.
— Elon Musk (@elonmusk) May 13, 2022
Twitter estimates that fewer than 5% of the monetizable daily active usage or users (mDAUs) on the site are spam or fake, according to a Securities and Exchange Commission 10-K filing from May 2. This is based on an internal review of a sample of accounts, and the company acknowledges the number of fake accounts could be higher.
Musk said in the April press release announcing the deal that he wanted “make Twitter better than ever by … authenticating all humans.”
Twitter’s share price fell as much as 11% Friday, falling as low as $40.01 shortly after market open.
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