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Wall Street Tumbles at Open as Crypto Crashes; Dow Down 410 Pts

Published 2021-05-19, 11:00 a/m
© Reuters.
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By Geoffrey Smith 

Investing.com -- U.S. stock markets opened sharply lower as a crash in crypto assets - triggered by new regulations announced overnight in China - quickly spread to other risk assets.

With Bitcoin losing 20% in a single session and Ether as much as 40%, stocks seen as proxies for crypto exposure came under heavy pressure. Coinbase Global stock fell over 10% at opening before recovering slightly, while Microstrategy (NASDAQ:MSTR) stock fell 11.5% and Square (NYSE:SQ) stock fell 3.5%. 

Tesla (NASDAQ:TSLA). whose CEO Elon Musk has loudly trumpeted the virtues of crypto assets this year until his repudiation of Bitcoin last week, fell 4.6%. At current levels, Bitcoin is now trading below where Tesla bought it for treasury purposes around the turn of the year. The company had used unrealized profits on its holding to bolster its bottom line in its first-quarter earnings

By 9:40 AM ET (1340 GMT), the Dow Jones Industrial Average was down 417 points, or 1.2%, at 33,644 points. The S&P 500 was down 1.5% and the Nasdaq Composite was down 1.7%.

The slide in crypto assets had begun in the Asian session, when the central bank of China reissued guidance to the financial sector forbidding it from facilitating crypto trading in any way. Given the sizable fines handed down recently to China's biggest Internet companies. it's likely that companies such as Tencent  (OTC:TCEHY) and Ant Group - both of whom were given heavy fines recently for unrelated misdeeds - will comply conscientiously in shutting down a major source of demand for crypto assets. Tencent stock fell 1.4%, while JD.com (NASDAQ:JD) stock fell 0.4%, despite a strong set of quarterly results that should underpin the planned IPO of its logistics unit later this month.

The popularity of crypto assets with retail traders appeared to have knock-on effects to stocks popular with the same cohort of investors. AMC Entertainment (NYSE:AMC), a favorite of this winter's 'meme stock' rally, fell 7.7% amid hints of forced selling, while GameStop (NYSE:GME) stock fell 3.4% - albeit that's a pretty small move for GameStop this year. 

Elsewhere, Cathie Wood's ARK Innovation ETF (NYSE:ARKK) fell 3.9% to test a six-month low.

Back in old economy news, Target  (NYSE:TGT) stock was one of few to escape the carnage after the retailer restored annual guidance on the back of a stronger-than-expected first quarter. Target hit a new all-time high before slipping a little to trade up 5.1%. 

Oil and gas stocks meanwhile were hurt by the sharp drop in crude prices as money flowed out of risk assets in general. Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX) and Conocophillips (NYSE:COP) stock all fell by between 3% and 4%. Mining giant Freeport-McMoran (NYSE:FCX) stock slid 7.9% as industrial metals suffered a similar fate.

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