SPOT - Wall Street Lunch: Bitcoin Keeps Rallying

2023-12-04 13:40:00 ET

Summary

• Crypto stocks rally as Bitcoin climbs, with expectations for Fed rate cuts and SEC approval of ETF applications.
• Major averages, including Nasdaq and S&P, are down as money may be rotating into crypto and out of major stocks.
• Spotify and Twilio announce layoffs to reduce costs, while Uber jumps after confirmation of S&P 500 inclusion.

Listen below or on the go on Apple Podcasts and Spotify

The march to $50,000 continues. (0:15) Uber will join the S&P 500. (1:58) Spotify announces another round of layoffs . (2:17)

This is an abridged podcast

Our top story so far

Crypto stocks are rallying as Bitcoin (BTC-USD) continues to climb. Bitcoin hit a peak of $41,800 before paring gains as market sentiment turned negative.

Coinbase (COIN), HIVE (HIVE), MicroStrategy (MSTR), RIOT Platforms (RIOT), CleanSpark ( CLSK ) and others were gaining.

Bitcoin has rallied on expectations for Fed rate cuts and growing optimism surrounding the imminent approval of ETF applications. Analysts anticipate SEC approval as soon as January.

Bitcoin is up around 150% this year.

There was speculation that money could be rotating into crypto and out of the Magnificent 7 stocks, which are weighing on the major averages today.

The Nasdaq ( COMP.IND ) is the weakest, down -1.5%, with the S&P ( SP500 ) off -1% and the Dow ( DJI ) down -0.5%.

The Bloomberg Magnificent 7 Total Return Index is down more the -2%. And it’s down more than -4% since a recent peak on Nov. 29.

BofA noted that in November, regional banks, up 16%, actually outperformed the Magnificent 7, up +14%, as a buyers strike in leverage ended.

A rise in rates today may have put some pressure on growth stocks.

The 10-year Treasury yield ( US10Y ) is back near 4.3%.

In economic data, October factory orders fell more than expected.

Among active stocks

Cameco (CCJ), Uranium Energy ( UEC ) and Energy Fuels ( UUUU ) rose after the U.S. and 21 other countries pledged at the COP28 climate summit to triple nuclear energy capacity by 2050l. The countries said an agreement is critical to meeting climate commitments in the coming decades.

Meta Platforms ( META ) CEO Mark Zuckerberg disclosed in an SEC filing that he intends to sell a little more than 28,000 shares of the company, worth about $9 million.

And Uber ( UBER ) jumped after receiving confirmation that it will be added to the S&P 500 on December 18.

Analysts at research firm Argus say " Uber has significant size and scale advantages over Lyft” and they “believe that it has moved past a multiyear period of operating losses.”

They also expect Uber to begin share buybacks.

In other news of note

Spotify ( SPOT ) is laying off about 17% of its workforce to reduce costs, marking the third round of layoffs for the company this year.

In January, the music streaming service provider said that it was cutting nearly 6% of its workforce, while in June the company announced that it was laying off about 200 employees (nearly 2% of its headcount) in its global podcast division.

The latest round of cuts will affect about 1,500 people.

In a letter to employees, Spotify CEO Daniel Ek said “despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big."

And Twilio ( TWLO ) announced the elimination of about 5% of its workforce and said it would incur $25-$35 million in charges under a restructuring plan aimed at streamlining operations.

The communications software company said the majority of the restructuring charges should be incurred in the fourth quarter of 2023, and its latest workforce reduction plan would be completed by the end of the first quarter of 2024.

And in the Wall Street Research Corner

BofA is digging into the current market zeitgeist.

"Zeitgeist I: 'everyone thinks we rally into Valentine’s Day, everyone emotionally bullish, but still intellectually bearish and likely to stay that way until leadership changes.'

Zeitgeist II: 'our parachute in 2024 is the politics; elections means stimulus, and that means the landing will be soft not hard.'"

With that as the backdrop for the end of the year, Hartnett listed his top 10 trades for 2024.

Among the traders are

Long blended 30-year UST ( US30Y ) ( TBT ) ( TLT )/IG ( LQD )/HY ( HYG )/EM ( EMB ) bond portfolio for high yield + "equity returns without equity risks"

Long IG tech bonds to own tech balance sheets but not tech EPS

Long Japanese yen ( USD:JPY ) ( FXY ) as the BoJ rate hikes trigger big capital repatriation to Japan

And long equity "diamonds in the rough" where you buy the best stocks in the most unloved levered regions and sectors like banks ( KBE ), utilities ( XLU ), REITs ( XLRE ), UK ( EWU ), China ( MCHI ) ( FXI )

For further details see: