Nvidia\u2019s blockbuster earnings late Wednesday set up the stock market for a ferocious rebound as the chipmaker appeared to ease fears that an AI bubble was about to pop.<\/p>\n
Thursday began with a massive rally with the Dow<\/a> Jones Industrial Average up 700 points, regaining some ground after an earlier AI-related selloff. Upbeat results from retail giant Walmart<\/a> helped too.<\/p>\n But the market suddenly turned lower, and the Dow lost 300 points, leaving Wall Street wondering what the heck happened. <\/p>\n Some commentators pointed to persistent worries about an AI bust, while others cited the mixed September jobs report that showed strong payroll gains but an uptick in the unemployment rate to the highest level in four years.<\/p>\n Meanwhile, Federal Reserve policymakers have been sounding increasingly hawkish, putting a rate cut next month in doubt. <\/p>\n Market veteran Ed Yardeni, cited these factors in a note late Thursday along with the selloff in the world\u2019s leading cryptocurrency.<\/p>\n \u201cWe attribute some of today\u2019s stock market selloff to the ongoing plunge in bitcoin\u2019s price,\u201d he wrote. \u201cThere has been a strong correlation between it and the price of TQQQ, an ETF that seeks to achieve daily investment results that correspond to three times (3x) the daily performance of the Nasdaq-100 Index.\u201d<\/p>\n Yardeni blamed bitcoin\u2019s slide on the GENIUS Act, which was enacted on July 18, saying that the regulatory framework it established for stablecoins eliminated bitcoin\u2019s transactional role in the monetary system. <\/p>\n \u201cIt\u2019s possible that the rout in bitcoin is forcing some investors to sell stocks that they own,\u201d he added.<\/p>\n Bitcoin has tumbled more than 30% from earlier highs, suffering its worst slump since 2022. Traders who used leverage to make crypto bets would need to liquidate positions in the event of margin calls.<\/p>\n Steve Sosnick, chief strategist at Interactive Brokers, also said bitcoin could swing the entire stock market, pointing out that it\u2019s become a proxy for speculation.<\/p>\n \u201cAs a long-time systematic trader, it tells me that algorithms are acting upon the relationship between stocks and bitcoin,\u201d he wrote in a note on Thursday<\/a>. \u201cTraders have always sought to find relationships between asset classes, and there are teams of skilled quants who pore through data, both long- and short-term, seeking inputs that guide their decisions.\u00a0We called them \u2018leads.’\u201d<\/p>\n And in recent days, Sosnick added, bitcoin has become one of the most reliable leads.\u00a0<\/p>\n Tom Lee, Fundstrat Global Advisors\u2019 head of research, linked crypto with the AI trade in particular, noting that investors with big holdings in AI-related stocks also tend to own bitcoin.\u00a0<\/p>\n