Skip to Content

Cryptos and stocks like NIO and Tilray are crucially linked. Here's what you need to watch, says strategist.

By Jack Denton

Critical information for the U.S. trading day

The technology-heavy Nasdaq inched higher on Thursday, reversing some of its slide from this week as it remains near 3% lower since Monday.

But investors are continuing to pour money into Big Tech stocks as individual investor favorites keep suffering. And cryptocurrency prices may be a key reason, according to strategist Ben Onatibia's team at investment research group Vanda, in our call of the day.

Individual investors remain the major buyers of Big Tech stocks as prices move lower. Of the $870 million spent on single stocks on May 4, roughly 28% went to S&P tech companies like Facebook (FB), Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL), Netflix (NFLX), and Microsoft (MSFT), according to the team at Vanda, with major tech funds recording massive retail inflows as well.

Not only does this point to individual investors buying the dip, but it suggests that institutional investors are partly responsible for the selloff, as they cut their exposure to tech in favor of commodities and financials.

But "tech supremacy has also crowded out investments from other speculative stocks," Onatibia said, with individual investors showing much more hesitation about buying the dip in the likes of cannabis or clean energy stocks. The team at Vanda believes this environment is likely to persist, especially given the poor performance of widely held stocks like Apple and Advanced Micro Devices (AMD).

One of the key preconditions the team at Vanda said is necessary to "bring the mojo of fallen retail angels back" is a correction in cryptocurrency prices. According to Onatibia, prices of stocks like Tilray (TLRY), Skillz (SKLZ), Virgin Galactic (SPCE), Plug Power (PLUG), and NIO (NIO) have been inversely correlated with cryptocurrencies in 2021, and this is indicative of a rotation among individual investors. That is a crucial relationship.

"Investors in [environmental, social, and governance-focused stocks], electric vehicles, and a host of other highflying sectors will need to pay full attention to developments in the crypto world," Onatibia said. "A significant correction is all they may need to get some of their lost appeal back."

When the price of bitcoin sank following the initial public offering of crypto exchange Coinbase (COIN), "all retail favorite stocks enjoyed a decent recovery," Onatibia said. "But as the price of ethereum and other altcoins skyrocketed this week, retail favorite stocks have given up most of their recent gains."

More compelling evidence from Vanda that individual investors are behind the crypto rally -- at the cost of highflying favorites -- is that popular trading platform Robinhood crashed following "unprecedented trading activity" in crypto assets this week.

The markets

U.S. stocks were broadly higher , with the Dow ticking up after investors cheered a better-than-expected jobs report.

European equities are broadly lower (link). However, stocks in London remained in the green after the Bank of England decided to reduce the rate of government bond purchases while insisting it wasn't changing monetary policy. Asian stocks finished mostly in the green.

The chart

Lumber futures traded on the Chicago Mercantile Exchange have quadrupled in price since February 2020 to hit a record high of $1,610 per thousand board feet, as shown in our chart of the day, courtesy of Wolf Richter from the Wolf Street financial blog (link).

"A sign of scary-crazy inflation amid suddenly blistering demand from builders, insufficient supply to meet that sudden surge in demand, growing lead times, and irrational behavior by buyers betting on being able to pass on that irrationality via higher prices to their customers," Richter wrote.

Random reads

Talk about stratospheric asset prices: A bottle of French wine that spent more than a year in space (link) will be auctioned off with a price tag of $1 million.

The owner of a Massachusetts pizza parlor fraudulently obtained $660,000 in COVID-19 relief funds and used some of the money to set up an alpaca farm (link), federal prosecutors allege.

Need to Know starts early and is updated until the opening bell, but sign up here (link) to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barron's Daily (link), a morning briefing for investors, including exclusive commentary from Barron's and MarketWatch writers.

-Jack Denton; 415-439-6400;


(END) Dow Jones Newswires

05-08-21 1200ET

Copyright (c) 2021 Dow Jones & Company, Inc.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.