S&P 500 Hits New All-Time High Ahead of Inflation Data

U.S. stock futures opened Thursday night with a slight increase, pushing the S&P 500 to a new all-time high of 6,141.02, just shy of the previous intraday record of 6,147.43 set in February. The Dow Jones Industrial Average also saw a 0.9% increase, while the Nasdaq Composite rose nearly 1%, both moving closer to their own potential all-time highs. This cautious optimism comes ahead of key inflation data expected to be released on Friday morning, which could either sustain the rally or cause it to falter.

Investors are eagerly awaiting the release of May’s personal consumption expenditures price index, the Federal Reserve’s preferred measure of inflation. Economists predict a monthly increase of 0.1% and a year-over-year jump of 2.3%. The core PCE, which excludes food and energy, is also expected to rise 0.1% for the month and 2.6% for the year. Additionally, updates on consumer spending, personal income, and consumer sentiment are set to be released, which could further influence market sentiment.

Despite ongoing geopolitical pressures and uncertainty surrounding the Federal Reserve’s rate strategy, the stock market has shown resilience, recovering from its lows earlier this year. All three major indexes have posted solid weekly gains, with the S&P 500 and Dow Jones up over 2%, and the Nasdaq jumping more than 3%. Rick Rieder, who heads global fixed income at BlackRock, attributed this to the influx of money into the market, stating that without negative news, the natural gravitational pull is across all assets.

While equities are flirting with record highs, Bitcoin has been stuck in a tight range since May 9, bouncing between $102,000 and $112,000. Despite significant interest from institutions, Bitcoin has not managed a strong rally. Bitcoin ETFs recorded their 12th straight day of inflows, pulling in $3.5 billion this month, yet Bitcoin itself has only risen by 2%. Markus Thielen, who leads 10x Research, explained that the demand has been offset by selling from larger wallets, resulting in an orderly change of ownership.

The biggest players in the crypto market are currently whales and megawhales, who have been net sellers since the start of the year. Retail wallets are also dumping, but dolphins, those holding between 100 and 1,000 BTC, are stepping in to absorb the pressure. However, this balance is fragile. Companies like BlackRock and Strategy have built large positions using hundreds of wallets, but even with these holdings spread out, they are considered large buyers behind most of the recent ETF flows.

Despite all the buying, price movement has stayed muted due to the significant bitcoin reserves still in the hands of Chinese miners. Between 2013 and 2021, China controlled up to 75% of the global hashrate, and out of the 19.9 million bitcoins mined so far, between 11 and 15 million came from China-based miners. Of that, about 5 million are still under their control. Normally, during a big price rally, these wallets start dumping on exchanges, but this time, they haven’t. It seems that these wallets are holding tight and only releasing as many bitcoins as can be scooped up by ETFs and by Strategy.

Strategy, now focused on corporate crypto adoption, has slowed down its BTC buying this year due to a narrowing stock premium and rising competition from other treasury buyers. If megawhale selling accelerates further, a deeper correction is likely. On the other hand, if those big sellers back off and whale accumulation starts to rise, the next leg up might finally begin.