Risk appetite returns to stocks as crypto suffers $500M wipeout; Fed split keeps dollar on watch
Stocks pushed higher while crypto markets reeled, with Bitcoin sliding below $90,000 amid roughly $500 million in forced liquidations. Traders pivoted to rate expectations and energy supply signals as the Federal Reserve’s internal debate on cuts resurfaced and U.S. oil rigs rose to 413, setting up a busy stretch for FX and commodities.
Cross-asset snapshot: risk-on equities, risk-off crypto
Equities extended gains even as digital assets stumbled, highlighting a split in risk sentiment across asset classes. The dollar’s path remains tethered to the Fed’s next steps, with investors weighing the prospect of a modest 25 bps policy move against signs of resilient consumer support in 2026 from larger tax refunds. Volatility picked up in crypto and select commodities, while broader FX stayed rangebound ahead of guidance from Chair Jerome Powell.
Key Points
- Crypto flush: About $500M in liquidations hit majors; Bitcoin fell below $90,000, primed for a weekly loss as positioning unwinds.
- Stocks rally: Equities climbed despite crypto stress, signaling differentiated risk appetite across markets.
- Fed split: Policymakers remain divided on cuts; Morgan Stanley flags a potential 25 bps move, though any growth or market boost may be limited.
- Oil supply watch: U.S. rigs rose by 6 to 413, stirring crude volatility as traders track inventories for confirmation.
- Softs diverge: Cotton slipped 15–30 points with managed money net short about 74k contracts; coffee firmed on Brazil dryness; wheat softened on supply headlines and Russia peace-talk chatter.
- Livestock: Lean hogs advanced roughly $1.05 on the week even as speculative longs were pared.
- Household tailwind: 2026 U.S. tax refunds are projected to climb by $1,000+ on average, a potential boost to spending and debt paydowns.
- Dividend stalwarts: KO, WMT, SPGI flagged with 5-year EPS growth above 10% and Strong Buy ratings, underpinning defensives.
Fed debate keeps USD and yields in a holding pattern
Markets continue to price a measured policy path. A single 25 bps cut—if delivered—may do little to re-ignite risk beyond a knee-jerk reaction, especially with inflation progress uneven and growth still supported by household balance sheets. That mix argues for a two-way dollar: softer versus pro-cyclical FX if risk appetite holds, but supported against low-yielders if Powell sticks to a cautious script. Near-term FX volatility could rise around Fed communications and incoming labor and inflation data.
Crypto drawdown and cross-asset flows
Forced liquidations amplified downside in Bitcoin, Ethereum and XRP, pressing BTC below $90,000 and erasing recent momentum. The cross-asset read-through: where crypto positioning is stretched, equities are finding buyers—another sign of dispersion in risk-taking. For FX, a crypto-led deleveraging typically nudges the dollar and yen firmer on risk-off days, though the move remained contained as stocks stayed bid.
Oil rigs tick higher, energy FX eyes inventories
A six-rig increase lifted the U.S. oil count to 413, hinting at a tentative supply response. With crude already sensitive to headline risk, any inventory build could cap rallies, while draws would reinforce tightening narratives. CAD and NOK typically track crude beta; traders will watch whether higher rigs translate into sustained output given cost curves and producer discipline.
Commodities: softs and grains diverge
– Cotton extended losses by 15–30 points as managed money stayed net short near 74,000 contracts, leaving the complex vulnerable to position squeezes but still pressured by supply.
– Coffee climbed on persistent dryness in Brazil, with weather keeping risk premia elevated; BRL sensitivity remains a watchpoint.
– Wheat softened on supply confidence and intermittent headlines around Russia-Ukraine peace efforts, which if credible, would reinforce bearish term-structure pressures.
Livestock drew support as lean hogs rallied roughly $1.05 on the week even as speculative longs were trimmed—suggesting buying from commercials or value accounts stepping in on dips.
Household support and equities: 2026 refunds in focus
Expectations for average U.S. tax refunds to rise by more than $1,000 in 2026 add a medium-term cushion to consumption and balance-sheet repair. While not an immediate macro swing factor, it blunts downside risk to services demand and offers a tailwind to retail-exposed names. Dividend heavyweights such as KO, WMT, and SPGI—each boasting 5-year EPS growth above 10% and Strong Buy calls—remain in favor as quality carry with defensive cash flows.
What to watch next
– Powell’s guidance on the policy path and any tolerance for inflation variability through 2025–2026.
– U.S. crude inventory prints for confirmation of supply trends following the rig count uptick.
– Positioning metrics in crypto and soft commodities as volatility stays elevated.
FAQ
Why did crypto sell off while stocks rallied?
Roughly $500 million in liquidations hit major tokens, forcing de-risking in crypto just as equities found buyers on hopes for measured Fed easing and resilient demand. The dispersion reflects different positioning and liquidity conditions across the two markets.
How would a 25 bps Fed cut affect the U.S. dollar?
A single small cut may have limited impact on the growth outlook and could keep the dollar rangebound. If Powell sounds cautious, the USD can stay supported versus low-yielders; if he signals greater confidence in disinflation, pro-cyclical FX might outperform.
What does the higher U.S. rig count mean for oil prices?
An increase to 413 rigs suggests potential supply response, but prices will key off inventories and realized output. If stocks build, crude rallies may stall; if stocks draw, volatility can skew higher. CAD and NOK often track these dynamics.
Why are coffee prices rising while cotton falls?
Weather-driven risks—dryness in Brazil—are supporting coffee, while cotton faces heavier speculative shorts and supply headwinds. Divergent fundamentals and positioning are driving the split.
Will larger 2026 U.S. tax refunds move markets now?
Not immediately. The projected $1,000+ boost is a medium-term tailwind for consumption and household deleveraging. It marginally supports growth-sensitive assets but is unlikely to shift near-term Fed pricing.
What’s the read-through from lean hogs’ weekly gain?
Hogs rallied roughly $1.05 even as managed money trimmed longs, hinting at non-spec buying or value demand. It signals selective strength in livestock despite broader commodity crosswinds.
How do KO, WMT, and SPGI fit into the current market?
These dividend and quality names, flagged with 5-year EPS growth above 10% and Strong Buy ratings, offer defensive carry and earnings visibility—appealing if Fed cuts are shallow and growth decelerates only gradually, according to BPayNews analysis.
