Following Thursday's CPI report, equities and crypto stocks faced a challenging session. Core inflation unexpectedly climbed to 6.6%, a 40-year high, causing bitcoin to drop to $18,100. Major U.S. stock market averages fell over 2%, with mining stocks Marathon Digital, Riot Blockchain, and Core Scientific declining significantly. Argo Blockchain underperformed, dropping 16.5% after its capital raise decision. Roth Capital downgraded Argo to neutral, citing limited growth and market share loss. MicroStrategy and Coinbase also faced losses, with MicroStrategy holding $2.4 billion worth of bitcoin.
Equities and Crypto Stocks Battered by Soaring Inflation
The financial markets have been rocked by the release of the Consumer Price Index (CPI) report for September, which revealed an unexpected surge in inflation, sending shockwaves through the investment community. The report indicated that core inflation has reached a four-decade high of 6.6%, while headline inflation stands at 8.2%, both surpassing economists' expectations.
The grim economic news has had a devastating impact on equities, particularly crypto stocks, which have been among the hardest hit. Bitcoin (BTC), the largest cryptocurrency by market capitalization, plummeted to $18,100 in the aftermath of the report, just shy of its 2022 low of $17,600. At the time of writing, BTC has partially recovered, trading at around $18,400.
The bearish sentiment has also extended to the broader stock market, with major U.S. indices registering significant declines. The S&P 500, for instance, has plunged by more than 2%, although it is currently attempting a modest recovery, narrowing its losses to just 1%.
Within the crypto mining sector, Marathon Digital (MARA) has shed 7% of its value, while Riot Blockchain (RIOT) and Core Scientific (CORZ) have experienced similar declines. The underperformance has been exacerbated by U.K.-based miner Argo Blockchain (ARBK), which has plummeted by 16.5%, extending its losses following its recent capital raise.
Analysts have been quick to downgrade their recommendations for Argo Blockchain. In a research note published on October 12, Roth Capital analyst Darren Aftahi lowered his rating from buy to neutral, citing concerns about the company's growth prospects and market share erosion amid rising energy costs and stagnant bitcoin prices.
Cryptocurrency-focused companies have also been negatively impacted by the inflation report. MicroStrategy (MSTR), which holds a significant amount of BTC, has retreated by 6.7%, while crypto exchange Coinbase (COIN) has suffered a decline of 11.5%.
The market's reaction to the inflation data highlights growing concerns about the potential impact of persistent inflation on the economy and corporate profits. Investors are grappling with the likelihood of further interest rate hikes by central banks, which could further strain financial markets. The crypto sector, in particular, remains vulnerable to macroeconomic uncertainties, with volatility expected to continue in the near term.
