U.S. consumer spending loses momentum, Bitcoin falls back to 68K

Tuesday’s U.S. stock market showed a mixed pattern, with the Dow Jones Industrial Average reaching a new closing high, but the S&P 500 and Nasdaq both declined due to weak retail data and threats from artificial intelligence (AI) competition. December retail sales growth stalled, reflecting a slowdown in core consumer spending, raising concerns about the resilience of economic growth. Meanwhile, the rise of financial technology tools triggered a sell-off in traditional financial stocks. The crypto market remained under pressure, with the fear and greed index still in the extreme fear zone at 10. Bitcoin retreated to 68K, Ethereum fell above $2,000, and investor sentiment remained cautious amid anticipation for Wednesday’s employment report and Friday’s inflation data.

U.S. Consumer Spending Unexpectedly Weakens, Retail Giants Under Pressure

The latest report from the U.S. Department of Commerce showed December retail sales were flat month-over-month, well below the expected 0.4% growth and a sharp decline from November’s 0.6%. This data is seen as a sign of weakening consumer spending, directly impacting major retail leaders. Costco and Walmart shares fell more than 2% and 1%, respectively. Since consumer spending is a key driver of U.S. GDP, the stagnation suggests that low- and middle-income groups are beginning to cut back on spending amid inflation and debt pressures. The market is closely watching whether this will develop into a broader slowdown in economic growth.

AI Application Threat Deepens, Financial Sector Faces Sell-Off

On Tuesday, financial stocks performed poorly, mainly due to the launch of AI-driven tax planning tools by tech platform Altruist, sparking concerns that traditional financial advisors and institutions could face increased competition. As a result, LPL Financial dropped 8.3%, and Charles Schwab fell 7.4%. Although Goldman Sachs CEO David Solomon believes the threat posed by AI may be overstated, capital has already begun shifting from vulnerable financial services to more defensive sectors like commodities and utilities, which are less affected by AI.

Bond Market Responds to Rate Cut Expectations, Fed Officials Maintain Caution

Affected by weak retail data, the 10-year U.S. Treasury yield fell 6 basis points to 4.14%, reflecting increased market pricing for rate cuts by the Federal Reserve this year. Currently, markets expect about three rate cuts this year. However, Fed officials remain cautious. Cleveland Fed President Loretta Mester hinted that interest rates might stay high longer, while Dallas Fed President Lorie Logan emphasized the need to see “material” weakness in the labor market before supporting further rate cuts, indicating a gap between policymakers’ views and market expectations.

Crypto Market Continues Under Pressure, Bitcoin Falls to 68K

The crypto market remains under pressure, with total market capitalization dropping to $2.34 trillion, down 2.35% over 24 hours. The fear and greed index remains in the extreme fear zone at 10.

Bitcoin retreated to 68K, and Ethereum fell above $2,000. Despite rebounding from last week’s lows, risk appetite for the two largest cryptocurrencies remains low. The Bitcoin derivatives market still shows bearish signals, with perpetual futures funding rates consistently below zero, indicating traders are under downward pressure.

Bloomberg analyst comments:

“The current downturn in cryptocurrencies highlights their role as an over-speculative indicator. Their depressed state does not mean the market will revert to the frenzy and risk-taking environment seen months ago, but rather that the market is undergoing a longer-term adjustment process.”

Key Data Ahead This Week: Employment and Inflation Indicators

Market focus has shifted to Wednesday’s January non-farm payroll report and Friday’s Consumer Price Index (CPI). Economists expect January to add about 65,000 jobs, with the unemployment rate remaining at 4.4%. If the data shows weaker-than-expected job growth, it could reinforce the case for rate cuts but also raise recession fears, intensifying risk-off sentiment. The S&P 500 remains above its 50- and 100-day moving averages, with technicals still solid, but fundamental data will determine whether this rebound can continue.

This article, “U.S. Consumer Momentum Fades, Bitcoin Falls to 68K,” first appeared on Chain News ABMedia.