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Dow Future slips from NFP high on Bitcoin, meme stocks chaos, inflation concern, and Biden’s infra stimulus uncertainty

calendar 09/06/2021 - 16:26 UTC

Dow Future made a high around 34755.00 Friday after Goldilocks U.S. NFP job report as it will ensure stimulus by both Biden and Powell. As the U.S. job reports for the last few months are neither too good (hot) or too bad (cold), it's justifying Goldilocks nature of the economic recovery, which will help the Fed to be on hold for the foreseeable future, while also help Biden to pitch for infra stimulus. Fed may go for QE tapering only from Dec’22 (late 2022) rather than Dec’21 (late 2021) and in the meantime will gradually withdraw various emergency lending/liquidity tools under assistance from U.S. Treasury/Congress.

But Dow Future slips from NFP high and made a low around 34429.00 Tuesday on lingering Bitcoin, meme stocks chaos, inflation concern, and Biden’s infra stimulus uncertainty coupled with sudden internet outage, affecting some big social media companies. BTCUSD is under stress as U.S. SEC and IRS may take some regulatory action. An unorderly plunge of Bitcoin may cause a huge margin call and other asset classes (equity) may also be affected. BTCUSD was also affected as U.S. FBI was able to recover most of the ransom paid to Colonial oil pump hackers. As the FBI broke the crypto wallet password quite easily, there was renewed concern about the safety of the whole crypto world!

On the other side, Bitcoin also got some boost early Wednesday after El Salvador has become the first country in the world to adopt Bitcoin as legal tender, The legislation, passed by the Salvadoran Congress with a 62-22 majority, will make the cryptocurrency recognized by law as a means to settle a public or private debt, or meet a financial obligation: "The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out”.

After the El-Salvador Bitcoin adoption report, Dow Future as-well-as Gold slips as a knee-jerk reaction. Apart from the Bitcoin saga, Dow Future was also affected by lingering concern about elevated inflation, which may not be transitory at all.

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Dow Future was also under stress on lingering uncertainty over Biden’s ambitious infra stimulus for around $1.7T (from $2,25T) amid increasing difference with both Republicans, who offered around $1T (till now) without any tax increase, while a group of moderates led by Manchin is opting for $1.2T (with 25% corporate tax from present 21% and Biden’s 28% plan).

Senators from both parties on Tuesday described the status of infrastructure negotiations as ‘running into a brick wall’, hitting ‘a significant roadblock’ and being just plain maddening. That was moments before Biden declared weeks of discussions with a team of Senate Republicans led by Capito as at an end, an outcome she described as disappointing. The White House immediately shifted its search for either 10 Senate Republican votes for a bill or 50 Democratic votes (including Manchin) for a reconciliation strategy to pursue Biden’s vision for infrastructure and job creation investments worth at least $1.3T (middle path of all price tags).

As per reports, Biden will continue talking with a separate bipartisan group that includes Senators Romney (RNC) and Manchin with whom Biden spoke on Tuesday. Biden will confer with those lawmakers while in Europe. The bipartisan senators indicated they hope to release a compromise proposal by the end of the week; the group is preparing a bill worth roughly $880B. The Senate Majority Leader Schumer said Tuesday that a vote on infrastructure may take place one way or another by the end of June. Biden has to pass his infra bill either through bipartisan or budget reconciliation plan by Sep’21 (FY21). Then Biden has another opportunity to pass his social aid (stimulus) bill in the next fiscal year (FY22); one budget reconciliation bill in a fiscal year.

Technical view: SPX-500, DJ-30, and NQ-100 Futures:

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