Retail investors on Monday launched a record-breaking dip-buying frenzy, reversing the U.S. stock market decline triggered by Moody's downgrade of the U.S. credit rating over the weekend. According to JPMorgan Chase data, retail investors aggressively purchased favored stocks like Tesla and Palantir, and also invested cash in Bitcoin ETFs, becoming the biggest winners after Trump's liberation day.
The S&P 500 index initially dropped nearly 1.1% in early trading on Monday due to Moody's downgrade of the U.S. credit rating, but turned positive by afternoon, with trading prices remaining essentially flat as of 2:50 PM New York time. Retail investors accounted for 36% of trading volume, reaching a historical high surpassing late April.
According to Bloomberg citing JPMorgan Chase data, individual investors net bought $4.1 billion of U.S. stocks by 12:30 PM New York time, creating a record high for that time period and breaking the $4 billion mark for the first time at noon.
This buying trend continues the momentum of retail investors aggressively purchasing U.S. stocks for several weeks, buying stocks at a record pace during the bear market in the S&P 500 index in April. Now, as the index has risen 20% and entered a bull market, they are enjoying the upward trend. Meanwhile, so-called "smart money" remains in a wait-and-see attitude.
On Monday, Wall Street analysts largely dismissed Moody's downgrade and advised clients to continue buying stocks. Morgan Stanley strategist Michael Wilson suggested investors should buy during the U.S. stock market decline caused by the rating downgrade, as the U.S.-China trade truce reduces the likelihood of an economic recession.
According to JPMorgan Chase data, retail investors bought $2.5 billion in individual stocks and $1.5 billion in ETFs on Monday. They aggressively purchased favored stocks like Tesla and Palantir, with inflows of $675 million and $439 million respectively. They also invested cash in Bitcoin ETFs while continuing to be net sellers of Nvidia.
After Moody's downgraded the U.S. sovereign credit rating from AAA to Aa1, U.S. Treasury yields spiked on Monday (5/19), and stocks initially plummeted. As the market gradually digested the rating impact, Treasury yields fell from their peaks, and the three major indices ultimately stabilized, with the S&P 500 index slightly rising. Bitcoin fluctuated but returned to 105K this morning, and MicroStrategy announced another Bitcoin purchase, with its stock rising 3.41% despite facing a class-action lawsuit.Toggle
Market Quickly Digests Moody's Downgrade Risk
On the 16th, after the New York market closed, Moody's, one of the three major U.S. rating agencies, announced a downgrade of the U.S. debt credit rating from the top-tier Aaa to Aa1, mainly due to the continuously expanding fiscal deficit and the Republican-controlled House of Representatives' failure to pass a large-scale tax cut and spending reduction plan.
However, the other two rating agencies, Standard & Poor's (S&P), had already downgraded the rating in 2011, and Fitch did so in 2023. The market quickly digested the risk of this downgrade.
Most analysts believe that Moody's downgrade is essentially not a big deal, and the market has seen "buy on dips" trading.
BTC Fluctuates and Returns to 105K, MicroStrategy Buys BTC Again
BTC once rose to 107K in the Asian early morning session yesterday, then fell back to 102K, and was reported at $105,647 before the deadline. The ups and downs have once again washed out open positions. According to Coinglass data, in the past 24 hours, $102 million worth of BTC positions were liquidated, and $112 million worth of Ethereum positions were liquidated.
Michael Saylor, founder of MicroStrategy and a long-term BTC believer, not only posted on X calling everyone to buy BTC quickly but also led by example, sweeping up 7,390 BTCs last week! Although the company is facing a class-action lawsuit alleging misleading investors, MSTR's stock price rose 3.41% yesterday and has risen 37% year-to-date, outperforming BTC.
Cryptocurrency investment carries high risks, and its price may fluctuate dramatically. You may lose all your principal. Please carefully assess the risks.
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