Stock futures fell from all-time highs over the weekend to send stocks and index ETFs lower on Monday, as Bitcoin and technology sector losses dragged down the major benchmarks.
The Dow Jones Industrial Average slipped roughly 0.5% from a record high, while the S&P 500 declined 0.6% after closing at a new high on Friday. Meanwhile, the Nasdaq Composite, weighed down by losing tech stocks, fell 1.2%.
Major stock ETFs are falling after the weekend as well. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are all lower just after noon EST.
Also hurting investor sentiment was Bitcoin. The cryptocurrency was brutalized over the weekend after notching an all-time high of just shy of $65,000 last week, according to data from Coin Metrics. At one point, Bitcoin had tumbled as much as 19% from that record high over the weekend. The cryptocurrency was last trading near $54,815 as of noon Monday.
The move in the famed crypto was damaging for companies like Tesla, a key holder of bitcoin, which fell over 4%. Coinbase, which just made its public appearance last week, lost over 3% as well.
“Whenever a headline grabbing asset sees a big decline at a time when the broad market stands at an expensive level, it usually has a negative impact on the stock market even if it’s only short-lived,” said Matt Maley, chief market strategist at Miller Tabak.
Bank stocks were lower as investors logged gains following big earnings from the sector last week. Goldman Sachs slipped 1.3% while Wells Fargo declined 0.3%, helping to push ETFs like the Invesco KBW Bank ETF (KBWB) lower on Monday.
Volatility Creeping Higher Once More
Volatility, as seen through the CBOE Volatility Index or VIX, had also continued to compress recently, floating near a 14-month low as stocks remained close to all-time highs. But on Monday the index is climbing back above 20.
“The S&P 500 has reached new highs while volatility has sharply declined. Low volatility has outweighed low correlations among stocks, driving return dispersion back below the long-term average,” David Kostin, Goldman Sachs chief U.S. equity strategist, said in a note Monday.
“As the U.S. moves beyond key macro events such as the 2020 election, the $1.9 trillion fiscal stimulus package, and peak economic activity, we expect three defining themes for markets will be tax reform, infrastructure, and pricing power,” Kostin said.
The major stock benchmarks had a solid performance last week thanks to robust earnings and strong economic data. The S&P and Dow added 1.38% and 1.18% last week respectively for a month of consecutive gains, while the Nasdaq hit its third positive week in a row.
The moves higher even prompted key bank UBS on Friday to adjust its forecast for the year. The firm now predicts the S&P 500 will finish the year at 4,400, about 5% from its Friday close.
“While investing at all-time highs may be daunting for some, we believe there is more upside ahead,” the firm wrote in a note to clients. “Following two rounds of stimulus deployed in the quarter and the ongoing vaccination effort, there is growing evidence that U.S. economic activity is picking up. The latest jobs data, business sentiment readings, and retail sales all point to a strong recovery.”
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