US stocks rallied after Russia-Ukraine talks brought hope that a potential de-escalation was nearing. Initially, risk appetite roared higher after Russia negotiator Medinsky said Russia will ‘drastically, cardinally’ cut military activity near Kyiv and Chernihiv.
Progress in talks was not widely expected, so Wall Street delivered a strong reaction. However, stocks gave back some of the gains after Medinsky clarified that a de-escalation around Kyiv and Chernihiv does not mean a ceasefire.
Stocks will have a bumpy road even if a major de-escalation occurs as inflation pressures will linger into next year. It looked like Wall Street thinks the economy was still on solid footing even after the 2s10s curve inverted for the first time since 2019.
The countdown for a recession started, but growth should still be strong at the very least for the next few quarters. The inversion didn’t last long, but that was somewhat to be expected given how optimistic large parts of Wall Street remained.
Bitcoin runs out of steam
Bitcoin bulls ran out of steam after hitting overbought territory. Even Tuesday's risk-on session on Wall Street after progress was made with Russia-Ukraine talks, Bitcoin couldn’t muster up a rally. It looked like Bitcoin was going to consolidate here and could be vulnerable to profit-taking towards the USD 45,000 level.
The long-term bull case for Bitcoin was still in place, but exhaustion in the recent runup was settling in.