Market Insights

Attention is focused on war in the Middle East as oil prices surge, but something more historic may be happening: a crypto-based transformation of the financial system.

The U.S. Senate last week passed the GENIUS Act to establish a legal framework for stablecoins. Tokens would be backed by U.S. Treasuries and large issuers would be overseen by the Office of the Comptroller of the Currency. It still needs to clear the House of Representatives and receive President Trump’s signature.

The measure could disrupt the $9 trillion U.S. payments system because the new technology allows near-instant settlement at low cost. That potentially threatens the duopoly of Visa (V) and MasterCard (MA), which have fallen sharply in the last two weeks.

The rollout of stablecoins also triggered big rallies in two companies specializing in the blockchain-based products:

• Circle (CRCL), parent of leading stablecoin USDC, jumped 80 percent last week. The issuer of USDC (the largest stablecoin) is up more than 600 percent from its $31 IPO price on June 4.
• Coinbase Global (COIN), which helps manage USDC and offers a payments wallet, jumped 27 percent. It was the biggest gainer in the S&P 500, according to TradeStation data.

Was it an “iPhone moment” for crypto, when the course of an industry changes forever?

Coinbase Global (COIN), daily chart, with select patterns and indicators.

Coinbase Calls

Activity also surged in options market. COIN’s call volume increased 811 percent last Wednesday as the Senate voted. One of the biggest transactions occurred the following session in the August 250 and August 300 calls.

• Blocks totaling at least 44,450 contracts traded in each.
• The August 250s traded for an average premium of $64.50.
• The August 300 calls fetched $33.97.
• Volume was below open interest in the 250s but not the 300s, which suggests an existing position was closed at the lower strike and rolled up to the 300s.
• The trader apparently collected $30.54 per contract ($136.6 million in total based on its size). He or she also has exposure to further upside because they still hold the 300s.

Calls fix the price where investors can purchase a security. They can gain value quickly when shares appreciate — as COIN did last week. They can also lose value when a stock declines.

CRCL’s daily option volume increased fivefold during the course of the week. V and MA saw put activity jump to 3-4 times average amounts as their shares sank. Puts are the opposite of calls, potentially gaining when a stock falls because they set a minimum selling price.

Another Bearish Week

The overall market fell last week as investors braced for escalation in the Middle East and economic data worsened. The S&P 500 slipped 0.2 percent in the holiday-shortened period between Friday, June 13, and Friday, June 20. It was the second straight negative week. The overall range remained small, with prices fluctuating less than 1.7 percent from low to high.

Geopolitical uncertainty seemed to cause paralysis as investors braced for U.S. planes to bomb Iran. Futures slid less than 1 percent last night after the attack occurred, which may reflect limited selling pressure despite the unrest.

Economic data was relatively weak. May retail sales missed estimates by a wide margin and April’s reading was revised lower. Housing starts and building permits also disappointed and homebuilder sentiment plunged to its lowest level in more than two years.

The Federal Reserve also left interest rates unchanged and made estimates of future policy slightly more hawkish. However, Chairman Jerome Powell said officials lack “a great deal of conviction” and will react to the data as it comes. Two days later, Governor Christopher Waller said the central bank may start cutting rates at its July 30 meeting.

The Fed stays in focus this week with Powell scheduled to testify in the House of Representatives tomorrow and the Senate on Wednesday.

AI Drives Tech

Clean-energy stocks led the market lower last week after senators kept a measure to phase out tax credits by 2028. That made Enphase Energy (ENPH), First Solar (FSLR) and AES (AES) the biggest decliners in the S&P 500.

Jabil (JBL) broke out to a new all-time high after earnings, revenue and guidance beat estimates. The maker of IT hardware like servers, cooling systems and circuit boards cited a sharp growth in AI demand from the year before. Piper Sandler upgraded Advanced Micro Devices (AMD), seeing more demand for GPUs and AI chips. Estee Lauder (EL) climbed as investors focused on its turnaround potential after years of weakness.

Energy was the top sector overall last week and health care fared the worst, according to TradeStation data. Gold miners and international stocks also struggled. Could their weakness suggest the U.S. dollar is poised to rebound after several months of declines?

Charting the Market

The S&P 500 has remained in a potentially important price zone near its previous all-time highs from February. That could make chart watchers hopeful for a breakout — even with anxiety about tariffs, inflation and the Middle East.

For example, prices have mostly stayed above an area where they stalled before breaking down in early March. The index peaked at this zone in May but is now trying to hold above it. Has old resistance become new support?

Bollinger Band Width has also narrowed as price fluctuations tighten. That kind of signal can occur before breakouts like in December 2023 and January 2024 — or a reversal like February 2025.

The S&P 500 has also remained above its 21-day exponential moving average as its 50-day moving average turns higher. Those patterns may reflect bullish trends in the short and intermediate terms.

S&P 500 ($SPX.X), daily chart, with select patterns and indicators.

The Week Ahead

This week features some noteworthy earnings and economic events like Powell’s testimony. Unscheduled events in the Middle East could also impact sentiment.

Existing home sales are due this morning.

Consumer confidence and Powell’s testimony are both slated for 10 a.m. ET tomorrow. Carnival (CCL) announces results in the premarket and FedEx (FDX) is in the afternoon.

New home sales and crude-oil inventories are on Wednesday morning. Micron Technology (MU) reports after the closing bell.

Thursday morning features durable-goods orders, initial jobless claims and results from Walgreen Boots Alliance (WBA) and Nike (NKE).

Friday brings the personal consumption expenditures (PCE) inflation report, which may have some impact on sentiment. Personal income and spending are also due.

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