Oil Prices Crash, Bitcoin Skyrockets, and US Stocks Tumble: What Happened on Wednesday?

US Stocks Tumble. The US stocks market faced a sharp downturn on Wednesday, as energy stocks and some megacap shares dragged down the major indices. The Dow Jones Industrial Average lost 69 points, while the S&P 500 and the Nasdaq dropped by almost 0.4% and 0.6%, respectively. The market was also rattled by fresh data indicating a cooling US labor market, with the ADP report revealing fewer-than-expected job additions in November and lower-than-anticipated labor costs in Q3.

Energy Sector Struggles

Oil prices plunged by nearly 4% on Wednesday, weighing heavily on the energy sector. Exxon Mobil and Marathon Petroleum experienced declines of 1.3% and 3.8%, respectively. The challenges in the energy market were exacerbated by tensions among OPEC members, particularly Saudi Arabia’s strategy to slash more output in response to record U.S. production.

Tech and Megacap Challenges

Nvidia faced a 2.3% decline as the company collaborated with the US government to comply with export restrictions for its new chips intended for the Chinese market. Megacap stocks, including Apple, Microsoft, and Amazon, declined between 0.5% and 1.6%, contributing to the overall market downturn. However, Tesla managed to add 0.3%.

Labor Market Concerns

The ADP report revealed that private businesses in the US hired 103,000 workers in November. Below expectations and a slight decrease from October. The services sector added jobs, particularly in trade, transportation & utilities, education & health, and financial activities, while the goods sector saw a decline, primarily in manufacturing and construction. Wage growth also continued to slow, with job-stayers experiencing a 5.6% pay increase, the smallest since September 2021.

Trade Gap Widens

The US trade gap widened slightly to $64.3 billion in October, reflecting an increase in the goods deficit and a rise in the services surplus. Total exports decreased by 1%, with notable declines in various sectors, while imports edged up by a meager 0.2%.

Oil Prices and Global Factors

WTI crude futures fell by almost 4% to below $70 a barrel on Wednesday, influenced by concerns about demand and increased supply. Economic weakness in China, Russia’s shadow fleet, and geopolitical factors. Such as the Israel-Hamas war, contributed to the decline in oil prices.

Bank of Canada Maintains Rates

In December 2023, the Bank of Canada decided to hold its target for the overnight rate at 5%, consistent with market expectations. The central bank highlighted signs that monetary policy is moderating spending and relieving price pressures. But expressed ongoing concerns about inflation risks.

Gold and Bitcoin Surge

As market participants increased bets on rate cuts in early 2024, gold reached record highs. Bitcoin also experienced a significant surge, topping $41,000, driven by rate-cut expectations and hopes for upcoming ETF launches.

Bitcoin’s Seasonal Trend: Bitcoin’s price exhibited a seasonal trend, with significant spikes in the fourth quarter of the year. The cryptocurrency’s historical performance in the final months of the year has seen notable increases. Contributing to its current year-to-date rise of over 150%.

Bitcoin is better investment than gold:

Conclusion

The US stock market faced challenges on Wednesday, influenced by a combination of factors. Including energy sector struggles, labor market concerns, and global economic dynamics. Investors will closely monitor developments in the coming weeks, especially regarding monetary policy decisions and geopolitical events impacting oil prices and overall market sentiment.