May 10 Markets Report: Mr. Powell in the Markets of Madness

The influx of newly-minted unicorns is slowing down, interest rates everywhere are spiking up, and the major cryptos are dropping like it’s hot.

Macro Overview

There Are No Winners in War

• Over 60 people are feared dead after a school in the Luhansk region of Ukraine was hit by a Russian bomb.
• On Victory Day, a holiday commemorating the victory over Nazi Germany, President Vladimir Putin tried to justify his invasion of Ukraine by claiming that The West was preparing to invade Russian territories (including Crimea).
• As the war enters its 11th week, President Joe Biden has announced a new military aid package for Ukraine — the ninth one provided thus far.

Job Growth is On the Up & Up

• The U.S. economy is experiencing decent job growth amid fears of an economic recession.
• On Friday, the Bureau of Labor Statistics reported that nonfarm payrolls grew by 428,000 in April while the unemployment rate held still at 3.6 percent.
• Job growth was led by leisure and hospitality, manufacturing, transportation and warehousing.

Rate Hikes Across the Pond

• Due to the Russia-Ukraine war and supply chain issues, UK inflation hit a 30-year high of 7% in March.
• In an effort to tackle soaring inflation, The Bank of England raised interest rates by 25-basis points to 1%.
• The Bank of England expects U.K. inflation to reach up to 10% this year.

Bonds

Feds Stay Hiking

• On Wednesday, the Federal Reserve raised interest rates by 50-basis points, their largest rate hike in over 20 years.
• This was only the second rate increase of 2022, with five more expected for the year.

Bonds Sell Off, Yields Go Up

• U.S. Treasury yields continue to rise as investors sell their bonds, with the U.S. 10-year breaking past a 4-year high of 3% this week.
• The U.S. 30-year is currently sitting at 3.21%.

Big Reports in the Week Ahead

• Investors are awaiting April’s US Consumer Price Index, which is scheduled for release on May 11.
• Economists expect annual inflation to come in at 8.1%, down from 8.5% in March.

Stocks

There’s Blood in the (Wall) Streets

• The Dow, S&P 500 and Nasdaq each shed 1.96%, 3.01% and 5.7% respectively.
• Investors continue to flee from tech stocks amid rising inflation, Fed rate hikes and China’s COVID lockdowns.
• The Nasdaq Composite has been on a five-week losing streak thus far, slashing 6.06% this week alone.
• Energy was the best performing sector this week, up 7.10%. Meanwhile, Healthtech stocks took a brutal 10.51% nosedive.

Raking in the Big Oil Bucks

• Oil giant Shell reported record high Q1 earnings of $9.1 billion off the back of soaring commodity prices.
• For context, the company earned $6.4 billion last quarter.

Saylor Will Not Abandon Ship

• Plenty of stocks have been falling due to missing Q1 EPS estimates, with MicroStrategy having one of the worst dumps at -35.37%.
• Aside from reporting a Q1 loss, MicroStrategy has registered a $170 million impairment charge on Bitcoin (BTC).
• Michael Saylor’s Diamond hands are still strong, as MicroStrategy refuses to sell any of their BTC.

Don’t Forget to Collect Your Points

• Points International, a provider of loyalty commerce solutions, managed to side-step the tech stock bloodbath by rising 44.16% this week.
• The stock rallied on news that Points would be acquired by Plusgrade, a provider of ancillary revenue and merchandising solutions in the travel industry.

Elon’s Billionaire Boys Club

• According to a new SEC filing, Elon Musk tapped a few of his billionaire buddies to chip in on his $44 billion Twitter purchase.
• The big name investors backing Musk with $7.1 billion include Sequoia Capital, Andreessen Horowitz, Larry Ellis, Binance, Fidelity and more.

Real Estate

Sellers Lower Prices, But Homes Are Still Flying Off the Market

• The 30-year fixed mortgage rate is currently hovering around 5.64%, the highest level since December 2008.
• According to Redfin, a record 15% of home sellers have dropped their asking prices in April — up from 9% a year earlier. While that is good news for homebuyers, the market is still at an all-time high in terms of competitiveness.

Cryptocurrency

Crypto Breaks Technical Support — All Bets Are Off

• Last Wednesday, Bitcoin briefly rallied 7% following the Fed’s rate hikes. But what followed was a sharp -16.45% selloff that broke BTC’s support at $35K and is now targeting $30K. Ethereum isn’t much better off, dropping -15.63%.
• The total crypto market cap is currently sitting at $1.48 trillion, down from $1.74 trillion last week. We’re officially in bear market territory, with the Crypto Fear and Greed Index sliding down to the Extreme Fear region of 11.
• On-chain analytics firm Glassnode has reported BTC Exchange Inflow Volume just reached a 3-month high of 1,755.021 BTC. When exchange inflows are high, that means users are cashing out of crypto.

Protect the Peg At All Costs

• Believe it or not, some popular cryptos are actually posting gains during this bear market. These include Tron (TRX) at 15.84%, Waves (WAVES) at 11.27% and 1inch Network (1INCH) at 11.11%
• On the losing side, we have Terra (LUNA) at -37.54%, ApeCoin (APE) at -35.14% and STEPN (GMT) at -32.23%.
• Terra’s been having a rough week, with one or more whales selling off billions of dollars in UST and consequently crashing the price of LUNA and de-pegging UST. You can learn more about the mechanics of LUNA and UST here.
• Fortunately, The Luna Foundation Guard (LFG) has decided to lend $1.5 billion to a market maker so they can restore the peg.

Three Firsts for Crypto

• A Portugal apartment sells for 3 Bitcoin. No fiat necessary.
• Algorand becomes the official blockchain sponsor of the FIFA World Cup.
• The US Treasury sanctions cryptocurrency mixer Blender for links to North Korean hackers.

NFTs & Metaverse

The NFT Market Is Cooling Down, But Adoption Is Still Growing

• Over the past 7 days, NFT market activity has declined -26.71% to $1.38 billion.
• In terms of market cap, blue chip collections Bored Ape Yacht Club (BAYC), CryptoPunks and Mutant Ape Yacht Club (MAYC) are each down 20.14%,18.05% and 25.37% respectively.
• CryptoPunk #273, previously bought for $1 million, sells for just 55 ETH ($126K) half a year later.
• Coinbase’s recently launched NFT marketplace, Coinbase NFT, only manages to attract a couple hundred users and generate 1,981 sales.
• Despite losing over 20% in market cap, BYAC still reigns supreme. On Thursday, Bored Ape Yacht Club #17 sold for 410 ETH ($1.12 million)
• Starbucks announces plans to release an NFT collection that gives access to exclusive experiences and perks.

Commodities

Gold Stumbles Along the Path to $2,000

• The price of gold started to rally at the start of last week, pushing past $1,900 per troy ounce. But following the FOMC meeting, gold dumped over 3% to $1,853.
• This could be explained by factors like the increasing strength of the US dollar as measured by the DXY and Treasury yields rising, thereby reducing the attractiveness of holding precious metals.

Not All EU Nations Support a Russian Oil Ban

• Oil hasn’t fared much better than gold either, erasing all of its intra-week gains. As of writing this, West Texas Intermediate and Brent Oil are sitting at $102.35 and $105.28 respectively.
• Meanwhile, The European Union has presented a six-month phase-out period from Russian oil. But not everyone’s on board, with nations like Hungary and Slovakia demanding a longer phase-out period since their economies are so dependent on Russian energy.

Startups

Welcome to the Unicorn Club

• According to Crunchbase, 34 new companies reached $1 billion in valuation for the month of April.
• This total is the same as in March, and unsurprisingly, lower than the amount of new unicorns minted around this time last year.

Funding Hits A 12-Month Low

• Crunchbase also reports that April saw the lowest amount invested in startups in the past 12 months.
• May also seems to be off to a slow start, with the biggest funding rounds this week including:
  • EV battery company, Group14: $400 million
  • Apple mobile device management provider, Mosyle: $196 million
  • Materials marketplace, Material Bank: $175 million

What’s Crack-a-Lacking? Fracking

• The largest IPO in the week ahead belongs to ProFrac Holding Corp, a provider of hydraulic fracturing fleets for oil and gas exploration and production (E&P) companies in North America.
• The company is looking to issue 16 million shares at a price range of $21-$24 on May 12, 2022.

Trading Cards

Racing to the Top of the Sports Cards Chart

• Basketball and Formula One lead the top selling sports cards this week, with a Michael Jordan rookie card taking the top spot once more.
  • $213,628.35: 1986-87 Fleer Basketball Rookie RC Michael Jordan #57 PSA 10 Gem Mint
  • $14,999.99: 2021 Topps Chrome Formula 1 Lewis Hamilton Superfractor 1/1 #96 Mercedes W12
  • $11,999.99: JORDAN POOLE 2019-20 CONTENDERS RC VARIATION CRACKED ICE ROOKIE TICKET AUTO /25
  • $8,000: 2000 Playoff Momentum Tom Brady Rookie #246/750 (6 Card Tom Brady Rookie Lot)

6-Figure Basketball Rookies Up for Grabs

• These two high-ticket basketball cards are currently at auction over at PWCC:
  • $320,000 (Current Bid): 2013 Panini Prizm Gold Prizms Giannis Antetokounmpo ROOKIE /10 #290 BGS 9.5.
  • $220,000 (Current Bid): 1986 FLEER BASKETBALL MICHAEL JORDAN ROOKIE #57 MBA PSA 10 GEM MINT (PWCC-E)