Overnight Finance

On The Money — Stocks and cryptocurrencies plummet


Stocks and cryptocurrencies are getting hammered ahead of the Federal Reserve’s expected rate hike announcement. We’ll also look at the White House’s consideration of a gas tax holiday and explore why President Biden’s bet on an economic recovery may have backfired. 

But first, see which celebrity chef is opening a restaurant in Trump’s former Washington, D.C., hotel. 

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Someone forward you this newsletter? Subscribe here.

Stocks enter bear market

Stocks on Monday continued a massive sell-off that started last week on news that inflation had reached a 40-year high and has yet to hit a ceiling despite a monetary tightening program begun by the Federal Reserve. 

The S&P 500 dropped 3.87 percent Monday to hit 3,749 from 3,900. This constitutes a move into a bear market for one of the premier indices of U.S. stocks, having fallen more than 20 percent since its recent high of 4,796 in January. 

  • In the two trading days since Friday, the index has dropped more than 6.5 percent from 4,017. 
  • The Dow Jones Industrial Average of major U.S. companies fell 2.79 percent Monday to hit 30,518 from 31,459. The index has seen a drop of around 17 percent since its January high. The Russell 2000 index of smaller U.S. stocks fell more than 4.9 percent Monday, having already entered bear territory on a plunge of nearly 25 percent since the beginning of the year. 
  • The bond market also saw a sell-off Monday that drove up yields and that analysts likened to a Federal Reserve rate hike in its own right. The two-year U.S. Treasury bond rose 27 basis points to hit almost 3.34 percent, with the 10-year note making a similar jump of 22 basis points to offer a 3.37 percent yield. 

The context: With the two-year yield rising above the yield of the 10-year note, the bond market saw an “inversion” that is widely seen as a harbinger of recession. The 30-year Treasury note popped 0.17 percent to a yield of about 3.36 percent, just slightly steadier than its shorter-term counterparts that are more sensitive to movements in interest rates. 

Those rates are expected to increase again this week after a meeting of the Fed’s Federal Open Markets Committee on Tuesday and Wednesday. The committee has signaled it will continue to raise rates by 50 basis points at its next several meetings, although there is speculation that a 75-point hike could be under consideration. 

The Hill’s Tobias Burns has more on this here


Warning signs flash for crypto industry 

The latest cryptocurrency selloff reveals signs of trouble for the crypto industry, which was already facing layoffs and hiring freezes amid a global economic downturn. 

Bitcoin plunged nearly 23 percent from Friday to Monday, hitting its lowest mark since late last year. Ethereum, the second most popular cryptocurrency, dropped 32 percent over the same period. The total crypto market cap dropped below $1 trillion for the first time since January as investors unloaded their digital coins. 

“Certainly, if you’re a crypto intermediary, you’re staring down dark, dark days here. This is not like the stock market where there’s a long-term track record of prices going up,” said Lee Reiners, executive director of Duke University’s Global Financial Markets Center. 

“This might be it, frankly,” he added. “This could be the beginning of the end for cryptocurrency.” 

  • The bitcoin rout accelerated after crypto lender Celsius Network announced that it would block customers from withdrawing or transferring digital assets to “stabilize liquidity” amid “extreme market conditions,” a move that drew outrage from users. 
  • Monday’s collapse coincided with a stock market selloff, indicating that investor fears over surging inflation and rising interest rates are hitting crypto just as hard, if not harder, than high-risk stocks. 
  • That could spell trouble for crypto companies that enjoyed exponential growth in the last few years but are already beginning to downsize due to falling crypto prices. Crypto.com and Gemini recently announced layoffs, while Coinbase paused all hiring. 

Karl has more here


White House takes new look at federal gas tax holiday 

The White House is showing signs that it is more seriously considering a federal gas tax holiday, sources tell The Hill.  

President Biden’s economic team has discussed the gas tax holiday recently and is expected to meet later this week for further talks. 

  • The White House is under political pressure to do something to provide relief to Americans dealing with high inflation and rising gas prices. The economic storm has created serious headwinds for Democrats ahead of the midterms, where the party is worried about a shellacking. 
  • Suspending the federal gas tax would require an act of Congress, but a public push by Biden in favor of the policy could help spur action on Capitol Hill. 

Check out more here from The Hill’s Amie Parnes and Morgan Chalfant. 


Why Biden’s bet on a rapid economic rebound may have backfired 
President Biden’s bet on a rapid rebound from the coronavirus recession may have backfired.  

  • The president and his top economic officials rallied Democrats around a $1.9 trillion stimulus bill in March 2021, urging Congress not to repeat the mistakes of the Great Recession and cut off support for the economy too soon.  
  • The bill was also Biden’s way of delivering on the promise made during the pivotal Georgia Senate runoffs, which gave his party a slim Senate majority: elect Democrats and get another round of stimulus checks. 

Just more than a year after Biden signed the bill, U.S. unemployment rate is nearly at pre-pandemic levels, the economy has added more than 10 million jobs and gross domestic product is well above where it was when COVID-19 shattered the economy. By those measures alone, the recovery under his watch was far stronger than the slow trudge out of the Great Recession. 

But despite the rapid rebound, Biden’s approval rating is at all-time lows as Americans feel the brunt of high inflation — a risk few within and beyond the administration took seriously when he signed the American Rescue Plan (ARP).  

Sylvan explains here.

Good to Know

The coronavirus pandemic forced millions of working parents to juggle job responsibilities with caring for their children, and a new report sheds light on how those child care struggles negatively affected caregiver employment.   

A study out of the University of North Carolina School of Medicine (UNC) looked at child care-related employment disruptions before and after COVID-19. The results showed there was a 30 to 40 percent increase in employment disruptions due to child care difficulties among all parents, no matter their child’s health needs. 

Here’s what else we have our eye on: 

  • Former Federal Reserve Chairman Ben Bernanke said in an interview on Sunday that he thought the Fed could address inflation with a “soft-ish landing,” to avoid a recession.  
  • Amazon will begin delivering orders in a California city by drone later this year, the company announced Monday. 
  • Reps. Bobby Scott (D-Va.) and Frank Pallone Jr. (D-N.J.) have asked the Federal Trade Commission (FTC) to address online price gouging of baby formula during the nationwide shortage.  

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow. 


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