Ecommerce and Crypto stocks crash as investors digest Fed rate hike

Shares of eCommerce and crypto stocks tumbled in Thursday’s trading session as yields on the 10-year note broke the 3% barrier for the first time since 2018. Thursday’s session was the market’s painful day on Wall Street where the Dow Jones Industrial Average lost more than 1,000 points on Thursday, marking its worst single-day drop since 2020.

On Wednesday, the U.S. Federal Reserve raised its benchmark interest rate by half a percentage point. Further interest rate hikes and tightening of monetary policy have sparked fears that the U.S. economy could go into a recession.

Etsy (ETSY:NASDAQ) and eBay (EBAY:NASDAQ) dropped 16.8% and 11.7%, respectively, after issuing weaker-than-expected revenue guidance. Shopify (SHOP:NYSE) fell 14.7% to $413.64 after missing estimates on its top and bottom lines. The stock has declined by 70% so far this year and is now 2% below where it closed on the day in March 2020 when Covid-19 was declared a global pandemic by the World Health Organization.

Amazon(AMZN:NASDAQ) which has been trading lower since its rare revenue miss, also finished negative on Thursday. Shares of the eCommerce giant slipped by 7.56%. Wayfair’s (W:NYSE) stock dropped 26%, touching a fresh 52-week low after the online furniture retailer reported wider-than-expected losses in the first quarter and logged fewer active customers.

Shares of The RealReal (REAL:NASDAQ) and Farfetch (FTCH:NYSE) both fell around 11% Thursday, while those of Peloton (PTON: NASDAQ) and Revolve (RVLV:NYSE) each dropped about 9%, and Warby Parker (WRBY:NYSE) and ThredUp (TDUP:NASDAQ) fell 8%. Poshmark (POSH:NASDAQ) an online site for shopping secondhand, saw its shares end Thursday down about 4%.

E-commerce stocks have been pummeled this earnings season on concerns that online shopping is slowing as the Covid-19 pandemic fades. After being cocooned indoors for over a year, shoppers are eager to head back to brick-and-mortar stores. Data from Mastercard (MA:NYSE) SpendingPulse said total retail sales in the United States, excluding sales of autos, grew 7.2% from the prior year. Within that, e-commerce transactions dropped 1.8%, while in-store sales rose 10%.

This is happening against the backdrop of rising inflation which is stoking fears that consumers are pulling back their spending on some items to still afford the essentials. This spells bad news for many e-commerce-focused retailers, and their stocks tumbled amid a broader market sell-off Thursday as investors feared their growth could be screeching to a halt and profits could be harder to come by.

Crypto stocks also took a severe pounding as cryptocurrencies plunged lower on rising interest rates. Around $129 billion of value was wiped off the cryptocurrency market in 24 hours according to data from CoinMarketCap as Bitcoin dropped more than 8% to $36,251.50. Other cryptocurrencies including ether and XRP were also down sharply.

The price action on cryptocurrencies had ripple effects on crypto stocks which usually track their movement. Shares of MicroStrategy were down by 14.17%, while others like Marathon Digital Holdings (MARA:NASDAQ), Riot Blockchain (RIOT:NASDAQ), Coinbase(COIN:NASDAQ), and Grayscale (GBTC:NASDAQ) dropped 10.47%, 11.93%, 12.22%, and 9.87% respectively.

Cryptocurrencies usually track the Nasdaq because of their high growth features which they share with tech stocks. The hawkishness from the Fed is putting bearish pressure on high-risk assets as investors scamper for a haven till the volatility in the market cools off. Cryptocurrencies and their underlying stocks have been sitting ducks for investors looking for ways to take risk off the table. This is amidst growing concerns about the seemingly poor fundamentals of crypto companies, and declining trading volume on cryptocurrencies.

MicroStrategy (MSTR:NASDAQ) came out with a quarterly loss of $10.42 per share versus the analysts’ estimate of $1.50. Crypto adjacent stocks such as Robinhood (HOOD:NASDAQ) which makes most of its revenue from crypto trading are also trading sharply lower because of the decline in trading volumes.

The scenario playing out in the market suggests that investors are shedding high growth pandemic winners as monetary policy gets tighter. As such, there is little patience for high-growth companies that are yet to generate profit or whose revenues are contracting as the economy reopens.