TRADERS FLEE AWAY
Dogecoin (DOGE), the leading meme token in the crypto market, is facing increased bearish bets as the entire meme coin sector declines. Over the past week, DOGE has dropped 12%, wiping out gains since March, and funding rates turned negative, indicating a bearish sentiment. In addition, open interest in DOGE futures also fell, reflecting decreased demand. Furthermore, the broader meme coin market has seen losses of up to 40% as traders shift to safer crypto assets like Bitcoin and stablecoins. Moreover, it is worth highlighting that DOGE futures traders faced their worst day since May 2021, with $60 million in long positions liquidated. And although these declines coincide with Bitcoin’s recent price drops, driven by $2 billion in sales from large holders, ETF outflows, and a strong dollar, the downturn was more evident for meme coins – a trend that normally happens, as stated by Stocklytics.
INTEREST REMAINS TEPID
There has been a recent drop in mortgage rates, however, consumer interest has not significantly increased as stated by Mortgage Bankers Association. The average rate for a 30-year fixed-rate mortgage fell to 6.94%, the lowest since March, nonetheless, total mortgage application volume rose only 0.9% from the previous week, and refinance demand dropped by 0.4%, remaining 30% higher than a year ago. In addition, applications to purchase homes increased by 2%, but these are still 12% lower than the same time last year due to high prices and limited housing supply. Nevertheless, it is worth noting that looking ahead, MBA’s forecasts remain positive, as there is the belief that home sales will improve as more inventory becomes available.
JOBLESS CLAIMS REMAIN LOW
Last week, initial applications for U.S. unemployment benefits slightly decreased by 5,000 to 238,000, following a significant rise in the previous period, according to Labor Department data. This figure, which tends to be volatile around holidays and school breaks, was close to the 235,000 predicted by economists. Furthermore, continuing claims, representing the number of people receiving unemployment benefits, inched up to 1.82 million, and although there were minor fluctuations, it is worth remarking that unemployment claims have remained relatively low over the past year. This reflects the labor market’s resilience despite high prices and interest rates. Moreover, the four-week moving average rose to 232,750, the highest since September, while unadjusted claims fell to 227,213, with notable declines in California, Minnesota, and Illinois.
PORTAFOLIO TO BE UPDATED
Despite Nvidia (NVDA) achieving its 43rd record high on Tuesday with a nearly 175% return for 2024, passive investors relying on mutual funds and ETFs have missed much of these gains. For instance, the Technology Select Sector SPDR Fund (XLK) underperformed its benchmark due to regulatory rules that limit the weight of dominant stocks like Apple, Microsoft, and Nvidia to maintain diversification. Consequently, Nvidia only comprises 5.9% of the XLK fund, far less than its benchmark weight. To comply with regulations, XLK will be rebalanced tomorrow, reducing Apple’s weight from 22% to 4.5% and increasing Nvidia’s from 5.9% to 21.1%. This will involve substantial trades, selling $12.7 billion in Apple stock and buying $11 billion of Nvidia but should be manageable due to the stocks’ high liquidity.
INTERNATIONAL NEWS
As expected, the Bank of England (BOE) decided to keep interest rates steady at 5.25% during its June meeting, despite U.K. inflation reaching the 2% target. The decision, deemed “finely balanced,” saw seven Monetary Policy Committee members voting to hold rates, while two advocated for a 25 basis point cut. Nonetheless, it is worth noting that if inflation trends continue to improve, a rate cut is increasingly likely. In fact, market expectations for an August rate cut have increased to nearly 50-50 following the announcement. Moreover, the MPC noted eased short-term inflation expectations and wage growth but highlighted ongoing concerns about services and core inflation. This decision comes amid political tensions with an upcoming general election, though BOE Governor Andrew Bailey emphasized a data-driven focus. Furthermore, following the BOE’s latest meeting, the British pound dropped 0.3% against the U.S. dollar in response.
