Crypto rout and commodities diverge as stocks climb; Fed cut debate keeps dollar in focus
A sharp crypto shakeout and mixed commodity moves contrasted with a buoyant equity tone to end the week, as traders weighed a split Federal Reserve and the prospect of 2026 fiscal tailwinds that could bolster U.S. consumption. Dollar price action stayed range-bound with rate expectations in flux.
Key points
- More than $500 million in crypto positions were liquidated as Bitcoin slid below $90,000, even as global stocks pushed higher.
- Wall Street desks, including Morgan Stanley, continue to flag a potential 25 bps Fed rate cut, but policymakers appear divided on timing and scope.
- U.S. oil rig count rose by 6 to 413, a supply-side signal that injected fresh volatility into crude trading.
- Softs mixed: cotton futures slipped while coffee rallied on Brazil dryness; wheat eased on ample supply headlines.
- Analysts highlighted dividend stalwarts such as Coca-Cola, Walmart and S&P Global for resilient EPS growth and supportive ratings.
- Potentially larger U.S. tax refunds in 2026—over $1,000 on average—could lift consumer spending and help households reduce debt.
FX and rates: Powell’s guidance looms large
A visible split at the Fed over the pace and depth of easing is keeping the dollar tethered to ranges, with front-end Treasury yields tracking incoming guidance. Chair Jerome Powell’s cues remain pivotal: a cautious tone would underpin the greenback via higher-for-longer expectations, while a clearer path to a 25 bps cut could soften the dollar and revive higher-beta FX.
For now, FX volatility remains contained as investors fade directional bets until labor data and inflation prints either validate or challenge the easing narrative. Risk sentiment from equities is supportive at the margin, but not forceful enough to break the dollar out of its policy-driven orbit.
Equities: defensives and quality still in demand
Stocks extended gains as investors leaned into defensives and quality balance sheets. Names like Coca-Cola (KO), Walmart (WMT) and S&P Global (SPGI)—cited for five-year EPS growth above 10% and “Strong Buy” calls from parts of the Street—remained in focus as portfolio ballast in a late-cycle setup. If rate-cut optionality firms, cyclicals could catch up, but earnings resilience still commands a premium.
Crypto: forced selling jars sentiment
Digital assets buckled after a burst of forced liquidations exceeding $500 million swept through the space. Bitcoin dropped below $90,000, dragging majors including ETH and XRP lower. While equities shrugged off the crypto turbulence, the episode illustrates thinning liquidity conditions and the sensitivity of leverage to abrupt price swings—factors that can bleed into broader risk appetite if volatility persists.
Commodities: oil volatility, softs split
A six-rig jump in the U.S. oil rig count to 413 telegraphed incremental supply capacity, a development that can amplify intraday swings as traders recalibrate balances against OPEC+ discipline and inventory data. With positioning light and macro signals mixed, crude’s near-term path hinges on weekly stockpiles and demand indicators.
Soft commodities diverged. Cotton extended losses—managed money remains notably net short around 74,000 contracts—while coffee climbed on ongoing dryness in Brazil. Wheat eased as ample supply and headlines around geopolitical negotiations kept rallies in check. In livestock, lean hogs advanced roughly $1.05 on the week even as managed money trimmed long exposure, a sign of cautious optimism amid margin uncertainty.
Macro watch: 2026 refunds as a demand wildcard
Prospects for larger U.S. tax refunds in 2026—potentially more than $1,000 per household on average—introduce a late-cycle demand impulse that could bolster retail spending and facilitate household deleveraging. For FX, a growth-supportive fiscal undertone may complicate the disinflation path, influencing the Fed’s glidepath and, by extension, dollar direction.
What traders are watching
- Powell’s upcoming communication for clarity on the first cut and terminal expectations.
- U.S. inventory reports and the rig trend for crude’s supply-demand balance.
- Crypto funding rates and open interest as proxies for leverage rebuilding.
- Consumer data and credit metrics into 2026 as larger refunds come into view.
FAQ
Why did Bitcoin drop while stocks rallied?
Markets can decouple when idiosyncratic factors dominate. In crypto, a wave of more than $500 million in forced liquidations triggered outsized moves in thin liquidity, while equities were buoyed by steady rate-cut hopes and appetite for quality stocks.
How does a divided Fed affect the dollar?
Uncertainty over the pace of easing keeps the dollar range-bound. Hawkish signals support the greenback via higher front-end yields, while clearer guidance toward a 25 bps cut would typically weigh on the dollar and aid higher-beta FX.
What does a higher U.S. rig count mean for oil prices?
A rising rig count points to potential supply growth over time. Near term, it adds volatility as traders reassess balances against OPEC+ policy and inventory data; the price impact depends on whether demand keeps pace.
Could larger 2026 tax refunds move markets?
Yes. Bigger refunds can lift consumer spending and debt repayment, supporting growth-sensitive assets. If demand proves stronger than expected, it could also complicate disinflation and influence Fed policy, affecting FX and rates.
Which equity styles are favored in this backdrop?
Quality and defensives remain in favor—companies like Coca-Cola, Walmart and S&P Global have been cited for resilient EPS growth and supportive analyst ratings. If rate cuts firm, cyclicals may gain traction, but earnings durability still commands a premium.
Is the crypto selloff a macro risk?
On its own, crypto volatility is often compartmentalized. If deleveraging intensifies and spills over into broader risk assets or funding markets, it can dent sentiment, but equities and FX typically react more to Fed guidance and growth data.
Reporting by BPayNews.
