Why Is Bitcoin Falling as Stocks Rise on Fed Rate Cut Hopes?

TL;DR

Bitcoin traded back above $85,000 but stayed below its weekend highs as investors doubted a December Fed rate cut. Fed Governor Christopher Waller told Fox Business he still backs a December cut, citing a softening job market. Stock futures rose, yet Bitcoin failed to catch the bid amid $3.5 billion in November ETF outflows.

Transcript

Welcome to Yahoo Finance's flagship show, Morning Brief. I'm Julie Hyman. Let's get to the three things you need to know today. First up, US stock futures holding on to gains this morning. That's after a drop of more than 2% last week for the S&P 500 and NASDAQ despite a rebound on Friday. Didn't salvage the week. The bounce in futures coming even ... Read More

Key Insights

• Bitcoin is trading back above $85,000 but remains off the highs it notched over the weekend, as riskoff sentiment builds while investors question whether the Fed will cut interest rates again in December.
• Fed Governor Christopher Waller told Fox Business he still supports a December rate cut because he sees a softening in the job market, and he expects major downward revisions to the September jobs report of 50 to 60,000 jobs.
• Bitcoin ETF outflows in November reached $3.5 billion, the highest since February's $3.6 billion, signaling that institutional investors are on the sidelines and not allocating to Bitcoin at current levels.
• The broader crypto market has lost $1.3 trillion in market cap since the October sell-off, about 31% of the total crypto market, marking a severe fall from recent highs.
• New York Fed President John Williams shifted market odds on Friday by saying he sees room for a near-term rate cut, a critical signal because he, Chair Powell, and Vice Chair Jefferson are typically aligned as the Fed 'troika'.
• US stock futures are holding gains with NASDAQ futures leading up about 0.8%, S&P futures up half a percent, and Dow futures up about a quarter percent, even as crypto assets keep falling.
• One strategist notes a 25 basis point December cut alone may not sustain a Bitcoin rally, and resistance is expected until markets see much more dovishness from the Fed, such as a 50 basis point cut.
• The White House is expected to announce a framework this week to extend Affordable Care Act subsidies for two years with new eligibility limits, addressing a surge in health insurance premiums as subsidies expire at year-end.

Questions & Answers

Q: Why is Bitcoin falling while stocks are rising?

Bitcoin traded back above $85,000 but off its weekend highs as riskoff sentiment built and investors questioned whether the Fed will cut rates in December. While stock futures rose on rate-cut hopes, Bitcoin did not catch the bid. One strategist noted the expected 25 basis point cut is too small to sustain a rally, and institutional investors appear to be on the sidelines, with November ETF outflows reaching $3.5 billion, the highest since February.

Q: Does Fed Governor Waller support a December rate cut?

Yes. Fed Governor Christopher Waller told Fox Business this morning that he still supports a rate cut in December because he sees a softening in the job market. He expects major downward revisions to the September jobs report, to the tune of 50 to 60,000 jobs. However, he indicated the FOMC will take a meeting by meeting approach into January and next year, and that any inflation pop-up could give the committee pause.

Q: How much has the crypto market lost since the October sell-off?

Since the big crypto sell-off in October, the overall crypto market has lost about $1.3 trillion in market cap, which represents roughly 31% of the entire crypto market. This has been a severe fall from the recent highs seen with Bitcoin. Alongside this, Bitcoin ETF outflows in November reached $3.5 billion, the highest since February's $3.6 billion, suggesting institutional investors are not allocating to Bitcoin at current levels.

Q: What did New York Fed President John Williams say about rate cuts?

On Friday, New York Fed President John Williams said he sees the option of a rate cut in the near term, that there was room for one. This changed the market odds significantly. His comments carry heavy weight because he is considered part of the Fed 'troika' alongside Chair Powell and Vice Chair Jefferson, who are always aligned. Some analysts posited that Powell may have given Williams the blessing to signal this to markets during a critical, split period.

Q: What retail earnings are investors watching this week?

Several retailers report this week, including Kohl's, Best Buy, Abercrombie and Fitch, and Dick's Sporting Goods on Wednesday. Best Buy is expected to post an increase in same-store sales growth after its fastest rate since Q2 2022 last quarter. Abercrombie and Fitch is expected to see growth driven by younger consumers at its Hollister brand. Dick's Sporting Goods will report its first full quarter since acquiring Foot Locker, giving insight into consumer health heading into Q4.

Q: What is the White House planning for health care costs?

The White House is expected to announce a framework this week to bring down health care costs, addressing an impending surge in health insurance premiums caused by Affordable Care Act subsidies that expire at the end of the year. Treasury Secretary Scott Bessent said an announcement is planned for this week. Politico reported the framework would extend the subsidies for two years and add new limits on eligibility. The subsidy fight was at the core of the recent government shutdown.

Q: How are airlines preparing for Thanksgiving travel?

Airlines are expecting a record travel week for the Thanksgiving holiday, expected to carry more than 31 million people according to Airlines for America. Carriers are hoping for a smooth holiday after thousands of flights were disrupted during the federal government shutdown. Some flyers appear to have waited for the shutdown to end before booking. United Airlines said bookings between November 15th and 16th were up 16% compared with the prior weekend when the shutdown was still in effect.

Q: What leadership change is happening at Kohl's?

Bloomberg reported on Sunday afternoon that interim CEO Michael Bender will become the permanent CEO at Kohl's, following the change last year that led to previously named CEO Ashley Buchanan stepping down. Kohl's has been a struggling retailer, with same-store sales growth negative since 2021. Wall Street expects Kohl's to post a negative sales decline of about 4% again this quarter. The company hopes jewelry and other discretionary goods, along with its in-store Sephora business, will draw consumers in.

Summary & Key Takeaways

• US stock futures held gains after the S&P 500 and NASDAQ dropped more than 2% last week, with NASDAQ futures leading up about 0.8%. The bounce came even as crypto assets kept falling, with Bitcoin back above $85,000 but off its weekend highs amid questions about a December Fed rate cut.

• Fed Governor Christopher Waller told Fox Business he still supports a December rate cut, citing a softening job market and expected downward revisions of 50 to 60,000 jobs for September. Boston Fed's Susan Collins does not see a strong need for a cut, while New York Fed's John Williams shifted odds Friday by citing room for near-term easing.

• Bitcoin failed to catch a sustained bid despite rate-cut hopes, as November ETF outflows hit $3.5 billion and the crypto market shed $1.3 trillion, about 31%, since October. Retail earnings from Kohl's, Best Buy, and others are on deck this week, and airlines expect a record Thanksgiving travel week of over 31 million people.