Markets Daily: Crypto bubble and Buffett's old economy

Federal Reserve Chair Jerome Powell says the US economy is doing just fine, so there's no rush to lower interest rates. Traders dialed back

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Markets Snapshot S&P 500 Futures 5,945.75 -0.54% Nasdaq 100 Futures 20,850.75 -0.77% US 10-Year Treasury Yield 4.434% -0.002 Shanghai Shenzhen CSI 300 Index 3,968.83 -1.75% Bitcoin 89,533.38 +1.50% Market data as of 06:37 am EST. View or Create your Watchlist Market data may be delayed depending on provider agreements.

Five things you need to know

Federal Reserve Chair Jerome Powell says the US economy is doing just fine, so there's no rush to lower interest rates. Traders dialed back their estimates of a cut next month to less than 60% from roughly 80% a day earlier. Stock-index futures drop on Powell's comments. A gauge of the dollar is set to rise about 1.4% for the week. European equities head for a fourth weekly decline and Chinese stocks slumped. Mixed economic signals elsewhere: China's retail sales grew at the strongest pace in eight months, while the UK economy cooled by more than expected. US retail sales are due at 8:30 a.m.  Donald Trump will nominate former SEC chief Jay Clayton as Manhattan US attorney, a key role for prosecuting financial crime. Robert F. Kennedy Jr. is Trump's pick for health secretary, and there's no room for JPMorgan's Jamie Dimon in the administration.  Samsung Electronics plans to buy back about $7.2 billion of its own stock over the next year. Investors have been concerned that Samsung's memory-chip business is losing out to smaller rival SK Hynix in supplying AI products.

The Saylor-Buffett ratio

The speculative fervor triggered by Trump's victory is cooling quickly: The S&P 500 has given up a third of its post-election gain and is down for the week, while the Nasdaq 100 Index is on a four-day losing streak.  It's a different story in the newfangled world of crypto. While Bitcoin has pulled back from Wednesday's all-time high, it's still up almost 30% since the presidential vote. Investors poured a record $6 billion into crypto funds in the week through Wednesday, according to Bank of America, and the entire crypto industry is booming. The president-elect has pledged to implement a game-changing regulatory agenda in favor of digital assets while creating a strategic US stockpile of Bitcoin. For another way to measure animal spirits right now, look at a metric developed by Owen Lamont, a portfolio manager at Acadian Asset Management. The former finance professor tracks the relative performance of two stocks. Warren Buffett's Berkshire Hathaway -- a household name that invests in boring old companies -- and Michael Saylor's MicroStrategy, a meme-stock famous for its aggressive Bitcoin buying. Dubbed the Saylor-Buffett Ratio, the gauge provides a lens into fear and greed in the market. While Berkshire is up 31% this year – ahead of benchmark indexes such as the S&P 500 – it pales in comparison to MicroStrategy right now. The latter has surged more than 400%, thanks to the relentless rally in cryptocurrencies. As a result of MicroStrategy's better returns, the Saylor-Buffett Ratio has spiked to levels not seen since 2000. That sends an ominous signal to Lamont. While the dotcom era was marked by the internet craze, today's market also shows speculation is similarly alive and well for newbie investments like Bitcoin and artificial intelligence. "I don't know if we're in an AI bubble, but it sure feels like we're in a crypto bubble," Lamont wrote. "Right now, we have two largely separate narrative streams: AI and crypto. If these two streams cross, it would be bad." —Sid Verma

On the move

Pharmaceutical stocks are slumping on Trump's choice to elevate Kennedy, a prominent vaccine skeptic and broader industry critic, to a top role on health policy. Health-care shares fell broadly, with companies that make vaccines taking the brunt of the losses. France's Sanofi and London-listed GSK dropped more than 4%. In the US, Moderna is down 1.7% in premarket trading after falling 5.6% yesterday. "We consider vaccines to be amongst the greatest scientific achievements to impact public health: unfortunately this view is not shared by the nominee," says Deutsche Bank analyst Emmanuel Papadakis. He cut his rating on GSK to hold from buy. —Joe Easton

Cash is still king

Stock markets are roaring and interest rates are coming down. So why do American investors still love cash?  Companies and households pushed the total assets in money funds above $7 trillion this week for the first time ever.  Even as money market rates slip to 4.5% from above 5%, the funds are still throwing off a steady stream of nearly risk-free revenue that is bolstering the finances of many households. That's offsetting to some extent the damage that rate hikes have caused in other parts of the economy. And with signs mounting that the Fed may not cut benchmark rates much more, many on Wall Street are now predicting that Americans aren't going to fall out of love with cash any time soon. —Alexandra Harris

Tracking Buffett's trades

The market action on Friday showed traders jumping on the buys and sells of well-known investors in hopes of riding on their coattails.   Chief among them legendary value investor Warren Buffett. Berkshire Hathaway bought stock in Domino's Pizza and Pool Corp. last quarter, regulatory filings show. Shares of the pizza retailer are jumping 7.6% in pre-market trading. The pool equipment distributor is up 6.3%. Berkshire Hathaway cut back on long-held investments in Apple and Bank of America.

Word from Wall Street "First of all, I wish the president well, and thank you, it's a very nice note. But I just want to tell the president also, I haven't had a boss in 25 years and I'm not about ready to start."  Jamie Dimon CEO, JPMorgan Chase Click here to watch Dimon respond in an interview with Bloomberg.

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