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Markets Bouncing Back from Rough Friday

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Monday, June 21, 2021

Cautious selling last Friday morning blossomed into a 500+-point sell-off on the Dow in our last trading session, closing the worst week for the blue-chip index since last October. The Dow now looks to break its four-day losing streak, trading up 215 points in today’s pre-market. The Nasdaq, which has not fared quite as badly of late, is up 28 points while the S&P 500 is +17.

Investors took more than half of last week trying to digest the new scenario painted by the Fed last Friday: a new inflation target of 3.4% through 2021, two rate hikes expected in 2023, and even “talking about talking about” tapering bond buybacks. Initially, these policies were to guard against the economy seizing up during the depths of the pandemic, whereas now the Fed sees an opportunity to bring us back to ideal growth and full employment.

A Chinese shutdown operation of cryptocurrency mining in the province of Sichuan and elsewhere has caused Bitcoin prices to drop more than 9% versus the U.S. dollar this morning. A reported 90% of Chinese Bitcoin mining capacity is expected have been shut down from Friday’s announcement and Sunday’s physical closure. Electric companies have reportedly been ordered to stop delivering power to these operations. We will keep an eye on China’s “war on crypto” from here.

Today is Amazon (AMZN - Free Report) Prime Day (actually two days — tomorrow, as well), the seventh-annual event where millions of products sold through Amazon will see major discounts for its Prime members. Not to be outdone, Target’s (TGT - Free Report) Deal Days and Walmart’s (WMT - Free Report) retail sales discounts are going on at the same time, with more companies like Best Buy (BBY - Free Report) to join in on the fun. It will be interesting to compare results to previous Prime Days once it’s all over.

This week has some fairly consequential economic reports coming due, though none this morning. New and Existing Home Sales, Durable Goods and Income/Spending for May, along with PMI Manufacturing and Services for June, in addition to a revision to Q1 GDP are all on deck for the week. Fed Chair Jay Powell makes another appearance, as well — this time on Capitol Hill to explain his new forecast to House lawmakers.

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