By Geoffrey Smith
Investing.com -- It's the dog days of summer, and there's nothing on either the data or earnings calendars to really fire the imagination. The vacuum has been filled by an egregious pump-and-dump in Bed Bath & Beyond stock by Ryan Cohen, which appears to have spilled over into crypto markets, as his army of retail investor followers was forced to cover losses on their bets. Stocks are set to open lower, after disappointing earnings from Kohl's and Xiaomi. Deere and Foot Locker are due to report. European power prices ease as water levels in the Rhine recover, but a drought in China is cutting output at factories along the Yangtze basin. Here's what you need to know in financial markets on Friday, August 19.
1. Bloodbath and Beyond
Bed Bath & Beyond (NASDAQ:BBBY) stock plummeted in premarket trading after Chewy (NYSE:CHWY) founder Ryan Cohen unloaded his entire stake in the company, booking an estimated profit of around $60 million on a five-month investment.
The move came at the end of a three-week long short-squeeze on the ‘meme’ stock, which retail investors had aggressively stoked on the hope that Cohen – who became chairman of the original meme stock company GameStop (NYSE:GME) after accumulating a stake in a similar fashion - would stay on board to oversee a turnaround at the struggling retailer.
That seems a forlorn hope now. The company is still losing customers and has yet to replace its last chief executive.
2. Crypto liquidations
The abrupt reversal of BBBY stock may have contributed to one of the worst days in weeks for the cryptocurrency universe.
Data analytics company Coinalyze showed hundreds of millions of dollars’ worth of crypto liquidations in the hours following the disclosure, although that may have included unrelated selling out of Asia. Bitcoin fell 7.6% to its lowest in three weeks, while Ethereum fell 6.2%.
Ethereum has been under pressure since pioneer Vitalik Buterin said on Wednesday that the long-anticipated switch to a system that uses less energy to mine new coins won’t lead to a reduction in so-called ‘gas fees’, the payments individuals make to complete a transaction on a blockchain.
3. Stocks set to open lower; Kohl's, Xiaomi flop; Deere in the spotlight
U.S. stock markets are set to give up most of their weekly gains at the open, as faith in the recent rally weakened amid signs of continued hawkishness at the Federal Reserve.
By 06:15 ET (10:15 GMT), Dow Jones futures were down 205 points or 0.6%, while S&P 500 futures were down 0.8%, and Nasdaq 100 futures were down 0.9%.
Stocks likely to be in focus later include Applied Materials (NASDAQ:AMAT), after an impressive earnings beat late on Thursday, while Deere (NYSE:DE), Foot Locker (NYSE:FL), and Madison Square Garden (NYSE:MSGS) report earnings before the open. Overnight, Chinese smartphone maker Xiaomi (HK:1810) reported a 20% drop in revenue and an 83% drop in profit that may have a read across to the chipmaking and electronics sectors. Kohl's Corp (NYSE:KSS) also disappointed late on Thursday.
4. Rhine recovers, Yangtze dries out
European power prices moderated a little after rainfall in the middle of the week allowed German authorities to forecast a significant rise in water levels in the river Rhine next week. They had fallen so low over the previous weeks that many power stations in southern Germany were unable to receive coal and heating oil shipments via the crucial waterway.
The effects of surging energy prices were visible in another blockbuster set of German producer price data that kept up the pressure on the European Central Bank to raise rates by 50 basis points at its September meeting. Across the North Sea meanwhile, energy price woes drove U.K. consumer confidence to a new all-time low.
Drought issues aren’t confined to Europe. The river Yangtze in China has also sunk to half its usual depth due to a drought that has cut hydropower supplies, forcing a variety of industries to cut or even stop production. Thousands of factories that make processor chips, solar panels, and auto components in Sichuan and Chongqing shut down this week for at least six days, according to the Associated Press.
5. Oil heads for weekly loss on strong dollar, economy fears
Crude oil prices weakened again on Friday and are on course to book a hefty weekly loss, as fears for the global economy mount. A rising dollar, which makes oil more expensive for non-dollar-based economies, is also making things worse.
By 06:30, U.S. crude futures were down 1.8% at $88.93 a barrel, while Brent crude futures were down 1.8% at $94.89 a barrel.
Some tension that had mounted after Russia’s threats regarding the Zaporizhzhya nuclear power plant receded, as those threats failed to materialize. Also weighing on prices were reports that Russia’s exports rose again in July, finding a way to energy-hungry emerging markets after being rejected by Europe, Japan, and the U.S.