Daily Archives: January 7, 2022

If the Federal Reserve is too heavy-handed with its interest rate hikes this year as a means to stomp out high rates of inflation, there is one critical risk that most investors probably aren't factoring in.

Recession.

"That is the risk [of a recession in 2023]," said Mohamed El-Erian, Queens' College, Cambridge University president and Allianz advisor, on Yahoo Finance Live. "We haven't had a situation in the past in which the Fed has been really late [with rate hikes] and the Fed hasn't ended up tipping the economy into a recession that's why we want to avoid that outcome."

Market participants widely expect the Fed to lift rates three times this year, and conclude their bond-buying program by March. But the timing of those interest rate increases could be pulled forward given continued hot inflation readings.

Investors bore witness to eye-popping levels of inflation in 2021 as workers (in short supply) demanded higher wages, ports were clogged due to the pandemic, home prices ripped higher and gas prices marched upward.

In November, the headline Consumer Price Index (CPI) clocked in growth of 6.8%. That marked the fastest rate of inflation since 1982.

Bond manager DoubleLine told Yahoo Finance Live this week it sees headline inflation coming in at 4% in 2021. The upcoming CPI print could show a headline gain of 7%.

"I don't think we are going back to the old school one and a half to 2% inflation because it's permeated the psyche for a period of time. And so I think we are going to have to deal with higher levels of inflation, and the front end of the bond curve is telling you that if you look at breakeven spreads," DoubleLine co-chief investment officer Jeff Sherman said on Yahoo Finance Live.

The sticky inflation and subsequent actions from the Fed is leading to the likes of bond king Jeffrey Gundlach and El-Erian to raise the specter of a recession within the next 24 months. In turn, it could be a volatile road for investors ahead after an impressive 2021 for markets.

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"This is obviously painting a tricky picture for both the economy and for markets," El-Erian added.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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Here's the biggest risk with what the Federal Reserve does with interest rates: Mohamed El-Erian - Yahoo Finance

Crypto investors have cashed out over $135 billion dollars from the asset class so far in 2022, according to Coinmarketcap market cap data, and bitcoin (BTC-USD) is down around 7% year-to-date and hovering around $43,000 as of Thursday at 10 AM ET.

"There are no signs of a decisive reversal in sight," Mikkel Morch, executive director at digital assets hedge fund Ark36, told Yahoo Finance when asked about the largest cryptocurrency's recent price action relative to its drawdown over the past two months.

Bitcoin and other cryptocurrencies began tumbling after the publication of notes from the Federal Reserve's December meeting. Following the broader stock market down, especially technology growth stocks captured on the Nasdaq-100 (NDX).

Morch added Yahoo Finance that similarities between the current price movement and those witnessed in Mid-May and August suggest reasons for "cautious optimism in the medium term."

"In any case, only a clear break above $50K would signal a major reversal in the trend and investors should keep in mind the inherently volatile nature of the digital asset market," the fund director added.

Bitcoin is now trading below its 200-day moving average (DMA) for the first time since September, a signal of the market's uncertainty.

Yuya Hasegawa, an analyst with Tokyo-based crypto exchange Bitbank, told Yahoo Finance that the downward pressure on the Bitcoin price should be expected to continue until the market fully prices in the tighter-than-expected future monetary policy.

Hasegawa noted that a further drawdown to $40,000 in the near term remains a possibility.

"A strong jobs report on Friday could justify the Feds hawkish stance and could trigger another sell off. Next weeks US inflation data (CPI &PPI) could help the price to rebound," he told Yahoo Finance.

So-called "memecoins" also fell, with the price of Shiba Inu (SHIB-USD) coin dropping more than 8%.

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Cryptocurrencies powering smart contract protocols, which arguably trade like technology growth stocks more than BTC, took an even greater beating. Ether (ETH-USD) trades down more than 10% at $3,400. Performing marginally worse, its smaller contenders, Solana (SOL-USD) and LUNA (LUNA1-USD), each dropped similar amounts. Polkadot (DOT) has performed worse on the day while Solana (SOL) is still shaking off a drop a similar drop of 14% from a week ago.

Since the pandemic began, Bitcoin and the 10-year U.S. bond have moved almost in lockstep, a pattern that runs contrary to the idea that BTC is a risk-on asset.

As of Monday, the two assets diverged with the yields on the 10-year rising while BTC dropped.

Fundstrat's Sean Farrell asserted to Yahoo Finance that the pattern emerged because 10-year treasury yields, while signaling the risk-on market is running hot, wasn't taken as a warning indicator for the Federal Reserve's policy decision to raise interest rates since the U.S. economy first experienced COVID-19.

"Now that we have more certainty surrounding the timing and degree of a hawkish shift in policy, we see Bitcoin behave closer to a small-cap tech stock," Farrell stated in an email.

Credit: Fundstrat digital asset team

Farrell went on to say that once again, the most obvious dynamic crypto investors can expect in the near term is increased volatility. Traders who like cryptocurrency specifically for the volatility of the asset class can lever their positions at relatively cheap rates overnight. For instance, on many exchanges they can take on 25% leverage in BTC or ETH futures without contributing more than 1% of their own money. For the market as a whole, this could mean a more exaggerated drawdown sparked by liquidations if crypto prices do not improve according to Farrell.

Meanwhile, longer term BTC investors have largely flipped from net-sellers to net-buyers over the past week, signaling that bulls still remain optimistic about BTC's performance.

As for Bitcoin miners, the specialized computers that secure the cryptocurrency's payment network, the Bitcoin hash rate dropped yesterday following an internet blackout in Kazakhstan where roughly 18% of the world's BTC miners are estimated to operate.

Illustrative image of two commemorative bitcoins seen in the snow. On Monday, January 3, 2021, in Edmonton, Alberta, Canada. (Photo by Artur Widak/NurPhoto via Getty Images)

Hash rate measures how many miners contribute computing power towards Bitcoin. While many indicators haven't yet registered the hash rate's drop, it's estimated to have fallen at least 12%. Bitcoin's price typically leads the hash rate, not the other way around, but hash rate does indicate its level of security as a decentralized payments network.

Given that Bitcoin withstood a much larger hash rate drop of more than 50% over the summer following the Chinese government's ban on cryptocurrency mining, many observers remain optimistic about the network's security despite political change and a worsening energy crisis in a country estimated to contribute 18.10% of Bitcoin's hash rate.

David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.

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Bitcoin price tumbles and 'no signs of a decisive reversal in sight,' hedge fund risk manager says - Yahoo Finance

It's been a bad start of the year for Bitcoin (BTC-USD), and 2022 could bring in a bit more pain.

While some bulls continue to forecast $100,000, one strategist doesn't see that happening this year - or next.

"Long term, I love cryptocurrency, I love Bitcoin. But the charts and I'm a technician are just not showing that," Gareth Soloway, president and CFO of InTheMoneyStocks.com told Yahoo Finance Live.

"Bitcoin for me, has a nasty head-and-shoulders pattern on it. Believe or not, in early 2022, or early 2023, you could see a move down sub-$20,000 in Bitcoin," he added.

"We've seen Bitcoin hovering between $52,000 and $46,000 for the last month. And it keeps hitting on that $46,000 level. So on a technical basis, if you break below that $46,000...you are going to see downside to about $42,000, the low from early November."

The digital coin broke a key support level on Wednesday following the latest FOMC minutes which highlighted a more hawkish discussion among Fed officials than what markets had anticipated.

Soloway highlights another pattern. While the Dow and S&P 500 (^GSPC) saw a Santa Claus rally coming into the new year, Bitcoin has continued to falter in the last month. It's now more than 35% off its all time high levels from November.

"There's some little disconnect with cryptocurrency as a riskier asset, and I do worry that, it, including Ethereum (ETH-USD) will start to see further downside," said Soloway.

The technician predicts Gold (GC=F) will outperform the S&P 500 and Bitcoin for this year. However long term, he still believes Bitcoin will be the place to be.

"You look 5 years out, Bitcoin is easily at $100,000, maybe even $250,000. But for me, I'm looking at the leverage in the system including the stock market," said Soloway.

The Federal Reserve's plan to reduce its balance sheet and likely raise interest rates this year "is going to take a lot of money and liquidity out of the system."

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"Bitcoin and cryptocurrency are going to see their dot-com moment over the next year or two," he added.

Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre

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Bitcoin will see its 'dot-com moment' over next year or two: Charts technician - Yahoo Finance

With every new year comes a clean slate. For Cathie Woods Ark Invest, that doesnt seem to be the case.

The firms beaten-down Ark Innovation Fund (ARKK) has hit a new low in 2022 already. After shedding 7% in Wednesdays sell-off, the fund is down 9% this week so far and 45% from its peak in February 2021, with the decline marking its worst drawdown since inception in 2014.

A rout in growth-oriented stocks that has battered ARKK was made worse on Wednesday as investors mulled the likelihood of sooner-than-expected rate hikes after minutes from the Federal Open Market Committee's (FOMC) December meeting reflected concerns from policymakers about worsening inflation, signaling more imminent intervention by the central bank.

Losses in Arks beleaguered exchange-traded fund come amid the renewed pressures in technology stocks that sent the Nasdaq tumbling 3.1% and the S&P 500 down 1.9% in Wednesdays trading session. The benchmark 10-year Treasury yield topped 1.7% to yield its highest since April, deepening the downturn in high-growth stocks.

Bespoke Investment Group pointed out that ARKKs 2022 declines place it only 6.66 percentage points above the S&P 500 since the ETFs pre-COVID high and 17.9 percentage points below the Nasdaq 100 (QQQ) as of Wednesday. At its February 2021 peak, the fund was significantly outperforming both benchmarks beating SPY by 143% since its pre-COVID peak and the more tech-heavy QQQ by 117%.

Wood, whose prescient stock picks made her a star on Wall Street after ARKK returned 150% in 2020, promised investors just one month ago that her strategy could deliver a 40% compound annual rate of return during the next five years a projection she later updated to a lower but still ambitious 30%-40% after some rebuke.

All 20 of ARKK's top holdings were in the red at Wednesday's close. Losses were led by Roku (ROKU), down 11.72%; UiPath Inc. (PATH) down 10.33%; and Intellia Therapeutics (NTLA), down 8.97%. Of the 20 holdings, all except Tesla (TSLA) are down 20% or more from recent highs.

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All 20 of Ark Innovation's top holdings except Tesla are down 20% or more from recent highs.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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Cathie Woods flagship Ark ETF off to a rough start in 2022 down 45% from its peak - Yahoo Finance

The titanic, albeit controversial legacy of late Apple (AAPL) co-founder Steve Jobs drew renewed interest this week when the tech giant became the first company to reach a market capitalization of $3 trillion.

The feat owes in no small part to the development of the iPod and iPhone both overseen by Jobs which shaped the behavior of billions of people across the globe in how they listen to music and connect with loved ones.

In a new interview, former Apple engineer Tony Fadell who's credited with inventing the iPod and helping design the iPhone tells Yahoo Finance that Jobs taught him how to anticipate and serve a customer's wishes.

Plus, Jobs brought his passion for music and artists into his work, prioritizing creators and their compensation as he pursued business ventures, Fadell said. In that vein, Jobs would want to "fix" the lack of pay for musical artists on streaming services if he were alive today, Fadell added.

"It was all about in the music store not iPod it was always about: What do the customers really want?" Fadell says.

"What is going to give them that social or that emotional experience that they crave that they want?" he adds. "A rational part of that [is] making it simple."

Jobs, who was fired in 1985 from his role as the head of a team developing Apple's Macintosh computer, rejoined Apple as CEO in 1997 after its acquisition of his software company NeXT.

Meanwhile, Fadell worked at Apple spin-off company General Magic for four years designing hand-held communication devices until he moved to Dutch electronic company Philips, where he served as chief technology office of its Mobile Computing Group.

Fadell joined Apple as a consultant in 2001, proposing the idea for the iPod and leading its development as a staff engineer. In the ensuing years, he helped create the iPhone under the oversight of Jobs.

Fadell now serves as a board member at Dice, an app-based ticket sale platform. The London-based company, founded in 2014, built a platform that combines in-app ticket sales with social features that track users' tastes and those of their friends.

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Steve Jobs gestures during his keynote address at the Macworld Conference and Expo in San Francisco on January 7, 2003. REUTERS/Lou Dematteis

Speaking to Yahoo Finance, Fadell noted that Jobs would take issue with the lack of compensation provided to musical artists by streaming services. Platforms like Spotify (SPOT) and Apple Music have faced a growing backlash from artists over what they consider insufficient pay for the music on their products.

"When you see something like this, you're like, 'Wow, I think that if Steve was here, today, he would go, we need to get artists more money,'" Fadell says.

"I know how much he loved musicians, bands, and wanted to support them," he adds. "I remember way back when he was looking at buying certain media companies that kind of stuff because he really wanted to revolutionize that."

"So as far as I'm concerned, if he woke up today and saw the streaming services the way they are today, and where the artists are not getting fairly paid, he would fix that," Fadell says. "Absolutely"

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What iPod inventor Tony Fadell says he learned from Steve Jobs - Yahoo Finance

Adobe (ADBE) will be a major winner from the build out of the metaverse, says one widely followed Wall Street analyst.

"Adobe is the best software play for the metaverse its creative tools will enable the next generation of the internet," said Jefferies tech analyst Brent Thill in a new research note Thursday.

Thill reiterated a Buy rating and $680 price target on Adobe. Shares of Adobe were relatively unchanged in pre-market trading Thursday. It closed down 7% at $514.43 on Wednesday.

The metaverse arguably burst into the public lexicon for the first time in 2021 as Facebook founder Mark Zuckerberg has hyped the digital world's potential (and changed its holding company name to Meta in a show of support). Microsoft (Yahoo Finance's 2021 Company of the Year) has also talked increasingly about the metaverse and how it will play in it moving forward.

In its simplest form, the metaverse is an online world that includes augmented reality, virtual reality, and 3D avatars. As this world takes form, how things are done stand to change dramatically.

CHINA - 2021/12/09: In this photo illustration the American multinational computer multimedia and creativity software company Adobe logo seen displayed on a smartphone with an economic stock exchange index graph in the background. (Photo Illustration by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)

The Street expects a host of companies to cash in on the metaverse such as gaming bigwig Roblox and music maker Warner Music.

"A single metaverse could be more than a decade away, but as it evolves it has the potential to disrupt almost everything in human life that has not yet already been disrupted," said Simon Powell, Thill's colleague at Jefferies, in a recent note.

As for Adobe, investors will have to balance the potential for the metaverse with slowing growth at the software player.

Adobe posted a disappointing quarter and outlook several weeks ago. The stock is down 25% from its Nov. 25 high, technically putting it in a bear market.

"After disappointing Q4 earnings and FY22 guidance, digesting COVID impact may last through the first half of 2022," acknowledged Thill.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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This tech giant will shape the future of the metaverse, buy its stock: analyst - Yahoo Finance

The Sacramento Kings are having a rough go with clock operators this week.

The NBA announced on Thursday that it's fining the Kings $50,000 and assistant general manager Wes Wilcox an additional $15,000 after he approached the scorer's table during Sunday's 115-113 win over the Miami Heat.

Per the NBA, "Wilcox left his seat to confront operations personnel at the scorers table about their handling of a clock procedure during a jump ball." This appears to be the play that Wilcox took issue with:

Interim head coach Alvin Gentry was heated with the delayed start to the the shot clock after the Heat won the tip. So, apparently was Wilcox, and he let the scorer's table know about it at the next timeout.

It's not clear exactly what Wilcox said, but the league hammered home in its news release that: The clock procedure at issue was, in fact, administered correctly by the shot clock operator." The league apparently contends that Miami's Omer Yurtseven didn't actually possess the ball when he initially fumbled the tip.

Regardless, Wilcox is out $15,000. His salary's not public information, but that likely stings a bit more than your average five-figure player fine. The fine continues a comedy of clock errors that have plagued the Kings this week, most notably during Tuesday's 122-114 loss to the Los Angeles Lakers.

Alvin Gentry didn't sign up for this. (Dan Hamilton/Reuters)

With 24.8 seconds remaining and the Lakers leading 119-114, Lakers guard Malik Monk missed a free throw. Kings guard De'Aaron Fox let the rebound fall in front of him in an effort to preserve game time as every other player ran to the other side of the court.

The clock operator mistakenly started the clock, which isn't supposed to start until the ball is possessed. Fox correctly pointed that fact out, and game play stopped. Officials talked it out and correctly reset the game clock. They also called a jump ball because nobody took possession of the loose ball. The Lakers won the jump ball and the game.

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Gentry, again, was irate. The ball obviously would have belonged to Sacramento if not for the clock-operator error. But the rules didn't allow for officials to apply such common sense. Gentry let the NBA know in no uncertain terms how he felt after the game.

"It's a horses*** rule in the NBA," Gentry told reporters. "The referees did what they were supposed to do. Its the rule that needs to be changed. We didnt start the clock. It wasnt our error. We got punished for a dumbass rule."

Which brings us to Wednesday. The Kings trailed late again, this time at home to the Atlanta Hawks. Fox, like he did against the Lakers, looked to preserve game time by delaying touching the ball, this time on an inbounds pass.

Guess what happened (see the second video below):

Yes, that's Gentry irate once again proclaiming his displeasure at a clock error for TV microphones to pick up. Here's hoping for his general well being that the Kings escape Friday's game against the Denver Nuggets without any clock issues.

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NBA fine of Kings executive piles on brutal week of clock issues for Sacramento - Yahoo Sports

Antonio Brown released a statement on Wednesday blaming his "coach" for his midgame exit from the field on Sunday that preceded his still-pending release from the Tampa Bay Buccaneers.

The statement released through his lawyer Sean Burstyn was the first time Brown has directly addressed the incident in public. He doesn't reference Bruce Arians by name, but makes multiple references to an interaction with his "coach," whom he says pressured him to play with an injured ankle during Sunday's win over the New York Jets.

He wrote that when he told "coach" that he couldn't play, the coach didn't call for medical attention but told him "you're done." He also said that he was injected with a painkiller on gameday. He didn't specify what painkiller was used.

He wrote that he has since had an MRI that shows broken bone fragments, a torn ligament and loss of cartilage. It will require surgery, according to Brown.

"Because of my commitment to the game, I relented to pressure directly from my coach to play injured," Brown's statement reads. "Despite the pain, I suited up, the staff injected me with what I now know was a powerful and sometimes dangerous painkiller that the NFLPA has warned against using, and I gave it all for the team.

"I played until it was clear that I could not use my ankle to safely perform my playing responsibilities. On top of that, the pain was extreme. I took a seat on the sideline and my coach came up to me, very upset, and shouted Whats wrong with you? Whats wrong with you?'

"I told him its my ankle. But he knew that. It was well-documented and we had discussed it. He then ordered me to get on the field. I said, Coach, I cant. He didnt call for medical attention. Instead he shouted at me, YOURE DONE! While he ran his finger across his throat. Coach was telling me that if I didnt play hurt, then I was done with the Bucs.

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"I didnt quit. I was cut. I didnt walk away from my brothers. I was thrown out.

Antonio Brown says he needs surgery on his injured ankle. (Elsa/Getty Images)

Brown then described the extent of his ankle injury.

What they did not know until now is that on Monday morning I had an urgent MRI on my ankle," Brown continued. "It shows broken bone fragments stuck in my ankle, the ligament torn from the bone and cartilage loss, which are beyond painful. You can see the bone bulging from the outside. But that must and can be repaired.

Brown also accused the Bucs of an "ongoing cover-up" and pressuring him to see one of their doctors after Arians announced that he was done with the team. The entire statement can be read here:

Burstyn released his own statement claiming that he's seen the MRI which showed "a piece of loose bone ... pressing into his ankle joint and a ligament snapped clean off the bone." He also called any discussion of Brown's exit from the field on Sunday being related to "mental health issues" a "false rumor."

On Thursday morning, Brown tweeted several screenshots of what appeared to be texts shared between him and Arians just a few days before Brown's on-field exit, in which they discussed Brown's ankle.

The Bucs didn't immediately respond to the statements which were released late Wednesday evening.

Arians told reporters on Monday that Brown didn't tell him that he was injured on gameday and declined to go into detail about his conversation with Brown.

Despite his actions on Sunday, the NFL has said that Brown won't be disciplined for his bizarre on-field departure. A spokesperson for the NFLPA said on Thursday that they intend to investigate Brown's claims of medical mismanagement, though Brown has not reached out to them with any details.

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Antonio Brown says Bucs pressured him to play with severe ankle injury, accuses them of 'ongoing cover-up' - Yahoo Sports