Day Traders Diary

5/19/21

The major averages pared their losses in afternoon trading as cryptocurrency prices came off their lows, but the weakness in speculative pockets of the market still weighed on sentiment. The Dow Jones Industrial Average finished down 164 points after dropping 586 points at its low of the day. The S&P 500 fell 0.29% or 12 points as all 11 sectors traded in the red. The tech-heavy Nasdaq Composite dipped just 4 points after dropping 1.7% or 200 points earlier in the session as some of the major tech stocks reversed higher including Facebook and Alphabet.

The major averages briefly added to their losses in afternoon trading after the Federal Reserve's minutes from its April meeting hinted at reconsidering its asset purchase programs in upcoming meetings.

Wall Street had another wild session with tech stocks sliding in the morning, and later the weakness spilled over into other sectors with the S&P 500 dropping 1.6% at its session low. The exception was a handful of retailers that reported solid earnings including Target and Walmart.

Sentiment overall was dented by a sudden plunge in cryptocurrencies including bitcoin. The world's largest digital token plunged 30% at its low of the session to just above $30,000, according to Coin Metrics. The cryptocurrency recovered some of the decline in afternoon trading and was last down 10%.

Bitcoin has been cut in half since hitting an all-time high above $64,000 in mid-April. On Tuesday, China warned financial institutions not to conduct crypto-related business, possibly sparking the sell-off.

Tech stocks linked to bitcoin saw the biggest declines in the sector. Tesla, a big holder of bitcoin, declined 3%. Microstrategy, another company which bought a large amount of bitcoin for its corporate treasury, tanked by 9%. Coinbase, the newly public crypto exchange, tumbled nearly 7%.

Growth stocks have come under pressure lately with the Nasdaq Composite falling nearly 5% in May as fears of inflation intensified. A sustained pickup in price pressures could unravel the Federal Reserve's accommodative policies, which could hurt technology companies that have relied for years on easy borrowing costs for superior growth.

Cathie Wood's flagship fund Ark Innovation ETF (ARKK) dropped more than 4%, bringing its 2021 losses to more than 18%.

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