What does the volatility of US stocks mean for the crypto market at a critical moment of CPI data?

After Trump confirmed his return to the White House, the U.S. stock market and the crypto market experienced a week of continuous growth, but with the surge in U.S. bond yields and the strengthening of the U.S. dollar, the rise of U.S. stocks has slowed down. Investors' attention has gradually shifted from the "Trump deal" to the upcoming U.S. Consumer Price Index (21:30 p.m. Wednesday, Beijing time) report, which may determine the future monetary policy of the Federal Reserve. This CPI data also has an important impact on the crypto market and will determine the short-term market trend.

Analysis of volatility factors of US stocks

Trump's victory has given investors hope for his tax cuts and deregulation policies, which has driven up U.S. stocks. However, Morgan Stanley believes that this optimism has three major risks: rising U.S. Treasury yields, a stronger dollar and overvalued stocks. As U.S. Treasury yields continue to rise, investors are worried that the Federal Reserve may maintain a high interest rate policy, thereby weakening the momentum of stock market gains. The market is not very confident about the future rate cut process, and the high valuation of U.S. stocks makes investors worry about price bubbles, which may trigger a correction.

In addition, the strengthening of the US dollar is not good for the profits of multinational companies, further suppressing the trend of US stocks. If the US dollar continues to strengthen, it will put pressure on the S&P 500 index. The combination of these factors may lead to an increase in investors' risk aversion demand, thereby pushing up US bond yields further and exacerbating market uncertainty.

The key impact of CPI data

The upcoming October CPI data is one of the key factors that determine the Fed's policy. The market expects the October CPI to rise by 2.6% year-on-year , slightly higher than 2.4% in September . If the actual data is higher than expected, the Fed may delay the pace of interest rate cuts, which will be bearish for the market. Fed official Kashkari hinted that if the CPI data exceeds expectations, it will be very likely to keep interest rates unchanged at the December meeting.

The linkage between the US stock market and the crypto market

On Tuesday, all three major U.S. stock indexes closed lower, with the S&P 500 ending its four-day winning streak. The Dow Jones Industrial Average fell 382.15 points (-0.86%) to 43,910.98, the Nasdaq Composite fell 17.36 points (-0.09%) to 19,281.40, and the S&P 500 fell 17.36 points (-0.29%) to 5,983.99. In terms of individual stocks, Nvidia rose 2%, Tesla fell 6%, and Trump Media Technology Group fell 8.8%.

After attempting to reach the $90,000 mark, Bitcoin has pulled back to around $86,000, and its price performance has become more correlated with traditional financial markets.

The development prospects of the crypto market are not only affected by the Fed's policies, but may also be affected by the collateral effects of future fluctuations in the US stock market. If the Fed delays interest rate cuts due to inflationary pressure, the crypto market will also be negatively affected by the reduction in liquidity in the global financial market. However, with the implementation of the Trump administration's crypto-friendly policies, the crypto market is expected to enhance the robustness of its fundamentals. In addition, small currencies and meme coins show high volatility in a market environment with strong liquidity. If market sentiment is positive, the crypto market may set off a wave of rising prices.

summary

As the CPI data is about to be released, factors such as rising interest rates and a stronger dollar facing the US stock market may drive market fluctuations in the short term. Investors can seize the opportunity of linkage between the US stock market and the crypto market, but also need to pay close attention to the adverse impact of CPI data on market sentiment.