Big Tech powered the stock market higher Thursday, reversing gears after Wednesday's timing clash between Treasury Secretary Janet Yellen and Fed Chair Jerome Powell. A noted short seller alleged Block committed fraud, triggering a violent decline. Coinbase plummeted after the SEC recommended enforcement action.
Yellen was at a separate event talking about the banking problems. Powell talked about banks as part of a wider discussion on economic risks.
The former Fed chief upstaged Powell in the middle of his post-decision news conference, insisting the government isn't considering explicit guarantees for bank deposits above $250,000. Powell, for his part, took the middle road throughout the presser, trying to accommodate twin goals of inflation control and financial stability with a conciliatory but still-aggressive tone.
The crosscurrent between former and present Fed chiefs triggered selling pressure into the close. But investors chose to look through a different lens overnight and have retaken more than half of the late afternoon rout.
Stock Market Strong After Fed Decision
The Dow Jones Industrial Average surged 1.3% while the S&P 500 added 1.5%. The Nasdaq jumped 2.1%, underpinned by Big Tech buyers. The Russell 2000 small-cap index underperformed again, but still rose 0.9%.
NYSE and Nasdaq volume surged compared to Wednesday at the same time.
Initial jobless claims for the last week fell by 1,000, to 191,000, affirming tight labor market conditions.
Crude oil traded a bit higher, at $71.10 per barrel. The futures contract has bounced off December lows. Asian and Australian markets were mixed. European bourses ignored the U.S. bounce, trading firmly lower.
The 10-year Treasury note yield tested support at the 200-day moving average for the ninth day, hovering below 3.50%.
Odds for a 0.25% rate hike at the May Fed meeting stand at 50-50 this morning, according to CME FedWatch.
The Nasdaq has remounted the 200-day moving average. The S&P 500 reversed Wednesday after testing the 50-day line, indicating growing bear strength. Testing like this is common after breakdowns. At the same time, the Russell 2000 is lagging after a long period of superior performance, held down by worries about pressure on startup funding.
Coinbase Plunges; Bitcoin Rallies
Coinbase trimmed losses to 11% after receiving an SEC "Wells Notice," which warns public companies when a securities violation enforcement action is likely.
Oppenheimer's Owen Lau downgraded Coinbase to perform, warning "we are increasingly worried about the fairness of the enforcement actions, and the ability for the ecosystem to grow."
Despite the bearish action, Bitcoin surged 5.0%, tested nine-month highs and held steady above $28,500.
The ProShares Bitcoin Strategy ETF is the most actively traded Bitcoin-linked ETF, closely tracking the cryptocurrency since its inception, according to Proshares. The fund invests "primarily in Bitcoin futures contracts" and "does not invest directly in Bitcoin."
Stock Market Today: Short Sellers Crush Block
Block got crushed, down more than 12%, slicing below the 200-day moving average.
Hindenburg Research alleged the fintech provider facilitated "fraud against consumers", adding that "former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud or were additional accounts tied to a single individual."
Mizuho's Dan Dolev defended Block after the piece, noting "claims & risks around high, unregulated interchange fees and definition of monthly users are well known to investors. As a reminder, the near-term bull case on SQ remains reaching better than expected profits helped by cost control. The long-term bull case remains."
Former Twitter founder and CEO Jack Dorsey currently reigns as co-Founder, self-named "Block Head," Chairman and President.
Ford Motor rose 1.8%. The automaker is aligning accounting units with product segments, which will allow the company to isolate heavy startup losses for ramped-up electric vehicle production in the next five to 10 years.
Yum China Holdings surged out of a 10-week flat base, in a strong breakout that set off a relative strength blue dot on the weekly MarketSmith chart. This denotes the strongest price action since June 2021. YUMC stock rose 3%.
Homebuilder Highlights The IBD 50
IBD 50 favorite and single-family homebuilder Meritage Homes rallied 4.0%, nearing the 117.32 buy point of a handle, with the cup-with-handle pattern starting all the way back in December 2021. Homebuilders are acting well Thursday.
The stock boasts a perfect 99 Composite Rating. The 97 Earnings-Per-Share Rating also reflects rapid growth, while the "A" SMR Rating (sales + profit margins + return on equity) confirms strong profitability.
Monolithic Power Systems continued to trade above the 21-day line. This price action could mark the final leg of a cup-with-handle pattern going back to August 2022. MPWR stock popped 5.4% in the first half.
Follow Alan Farley on Twitter at @msttrader.
