US stocks did not stand a chance today. Risk aversion violently returned on growing fears of a Russian invasion of Ukraine. In the US, an impressive earnings report from Walmart (NYSE:WMT) suggested that consumer spending remains strong, paving the way for potential aggressive Fed tightening.
Wall Street feels very jittery as it looks to the left and sees intensifying geopolitical risks in Ukraine. Then it looks to the right and sees the potential for aggressive Fed tightening.
US data
Earlier this morning, initial jobless claims and the Philadelphia Fed business outlook disappointed, while the housing market still looked strong. The Philly Fed showed a slowdown in activity and that the employment index continues to provide rising wage pressures. Supplier delays improved, which is a big positive for traders focused on bottleneck issues.
Housing starts weakened for the first time in four months, while building permits surged to the highest level since 2006. The housing market still has a low inventory problem, and the higher mortgage costs have not derailed buyers.
Bitcoin slides over Ukraine, Fed
Wall Street has gone full de-risking mode, and Bitcoin is paying the price. Fears over geopolitical concerns and potentially aggressive central bank tightening have cryptos across the board in freefall.
The risk rebound accompanied by the major de-escalation that stemmed from the Ukraine situation that happened earlier in the week has completely been unwound now that many in the West fear Russia is moving towards an imminent invasion.
Bitcoin is the ultimate risky asset, and a Ukraine invasion would keep crypto selling pressure going another 10-15% over the short term. The outlook for bitcoin remains mostly bullish, but if long-term growth prospects start taking a bigger hit from aggressive Fed tightening, institutional investors might scale down their bets.
Weighing on cryptos was the news that President Biden is expected to issue an executive order regulating cryptos and a central bank digital currency (CBDC) next week. Uncertainty for stablecoins is a short-term negative for cryptos, but overall long-term growth for the cryptoverse will embrace US regulation.