Wall Street is half convinced with Coinbase, bank earnings and retail sales in focus

Coinbase’s debut in Nasdaq didn’t help boosting appetite in technology stocks. Coinbase nearly doubled its reference price of $250 per share, yet gains remained limited as Wall Street players preferred taking a downside bet and somewhat kill the joy around the cryptocurrency frenzy soon after Coinbase shares hit the market. Bitcoin eased after hitting a fresh record a touch below the $65K level and should give back some of the latest gains as the market excitement cools off following Coinbase’s first day in Nasdaq.  

Despite a whipsaw session, Coinbase still ended the day above the $250 per share reference, but the first choppy day also came as a warning that traditional investors are not necessarily convinced that the coin trading business could remain as lucrative as now in the long run, especially if banks and other financial institutions who are prepping to offer digital wallets will likely eat into the Coinbase’s and other existing crypto-exchanges’ decent margins and revenues. Yet, in the absence of other players in the immediate future, I am still convinced that Coinbase is a good option to take advantage of the crypto-mania, without taking a side. Some expect the Bitcoin’s price to further soar to $K100K, others value it at much below where it stands now. In both cases, we’ve not stopped seeing volatility in this market. And high volatility means lucrative business for those who allow these transactions to happen. 

And we have seen it with the big bank results in the first quarter. Despite a challenging rate environment and falling loan demand, JP Morgan and Goldman Sachs did just great in the first quarter thanks to solid revenues from trading. The short squeeze frenzy and the SPAC boom are pointed as the main booster of trading revenues. JP Morgan’s trading revenue jumped 25% in Q1 and Goldman Sachs announced the highest quarterly revenue in the past decade. Big banks’ heads warned investors though, that the receding volatility and the challenging interest rate environment may not allow the same performance to happen in the quarters ahead.  

Bank of America, Blackrock and Citigroup will announce earnings today. If the short squeeze frenzy resulted in strong trading revenues for JP Morgan and Goldman, the low volatility in FX trading may have weighed on Citigroup’s.  

Nonetheless, banks remain part of the reflation trade as the economies recover. Prospects of higher rates should support demand in the banking sector, even though Jerome Powell insists, at each possible occasion, that the rates will remain unchanged for a long long period, at least two more years, and we will see the first rate hike coming as the Fed will start tapering ‘well before’ it starts raising its rates. We know the music, this is how it happened with Janet Yellen, it wasn’t a bad thing for the market, so it may go well this time around as well.  

In the economic calendar, the US retail sales could confirm a jump to near 6% m-o-m in March. Strong sales will support the idea of a further rise in inflationary pressures in the US. But as long as the US yields remain contained, the risk of seeing headwinds across the US stock markets remains limited, as well.