Stocks traded solidly higher for most of Tuesday, but lost steam in the afternoon as Wall Street reacted to a major shake-up in the cryptocurrency space.
Earlier today, crypto exchange Binance said it plans to buy rival FTX’s non-US assets due to liquidity concerns at the latter firm. The news sent the price on Bitcoin falling 12.6% to $18,184 (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.).
“Today is a bad day in crypto. Binance had to step in to save Sam Bankman-Fried’s FTX crypto exchange,” said Edward Moya, senior market strategist at currency data provider OANDA. “This is a big setback for many investors in cryptos who saw [Bankman-Fried] as a white knight and one of the leaders in the space that should thrive as we get beyond this crypto winter.” The news has also hit stocks with exposure to digital assets such as cryptocurrency exchanges Coinbase Global (COIN (opens in a new tab)-10.8%) and online trading platform Robinhood Markets (HOOD (opens in a new tab)-19.0%.
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The headlines created a whirlwind afternoon for the markets, with Nasdaq Composite swinging from a gain of nearly 2% in early trade to a loss of 0.9% by mid-afternoon. Price action stabilized in the final hour of the session, with the tech-heavy index ending up 0.5% at 10,616. The broader The S&P 500 index rose 0.6% to 3,828, while blue-chip Dow Jones Industrial Average surpassed (+1.0% at 33,160) which Amgen (AMGN (opens in a new tab)) added 5.6% on a well-received update for the obesity drug.
Low-Volume ETFs to Consider After the Midterms
Today’s early gains came as midterm elections were held across the country. And history suggests that the stock market may continue to rise in the coming weeks. “After the election, we would expect a small lift in the stock market over the next month (+1%) – assuming the CPI on Thursday is not ‘hot’,” says Wells Fargo analyst Chris Harvey.
Although the full results of the midterms will likely take weeks to determine, most expect Republicans to win control of the House of Representatives. Harvey says that if we see a “red wave” — where the GOP gains control of both the House and Senate — defensive stocks should continue to do well. This includes firms within the consumer goods and healthcare sectors. Harvey also says a red wave could be beneficial for low-volatility strategies, which have tended to see strong relative results after past elections in which Republicans took control of Congress.
For investors looking to add defensive positions to their portfolio, here are 10 low-volatility exchange-traded funds that offer an affordable way to provide stability amid market volatility. Check them out.
