Inflation is Back, Bitcoin Slumps, and Stocks Stay Volatile

Markets At A Glance:

On the heels of an underwhelming job report two weeks ago, the big story in last week’s news was inflation concerns brought on by the release of the April Consumer Price Index (CPI). A staggering 1 in 4 articles published last week mentioned inflation, and the average pessimism and speculation expressed in conversation grew considerably in comparison to previous weeks (shown above). The CPI increased 0.8% from March to April — its biggest monthly jump since 1982 — and has now gone up 4.2% over the past year; the data also shows that retail sales in April remained relatively flat as the boost from stimulus checks fades and supply shortages push prices higher.1 Along with the jump in inflation, stocks finished the week highly volatile and trending downwards. The S&P 500 and Dow Jones market indexes both pulled back more than 1% (SPY falling 4% from its all-time high in early May), and on Wednesday the NASDAQ composite was down 8.5% from its April 29th peak, though stocks rebounded Thursday and Friday to end the week.2 Babbl linguistics indicate that analysts remain optimistic about a continued bull market, as reporters cite guidance from the Fed and postulate that the current imbalances between supply and demand are merely temporary growing pains as we transition into a post-COVID-19 market.3

The majority of market weakness was concentrated in high-tech and and high-growth stocks. Value stocks continued their year-to-date outperformance versus growth stocks last week, finishing the week down 0.7% as a group, while growth stocks finished the week down 2.0%. Cryptocurrencies slumped significantly following Tesla’s announcement to discontinue their acceptance of Bitcoin as a form of payment (Elon says the environmental impact of Bitcoin mining does not reflect the company’s values…). After reaching $63,000 in mid-April, $BTC finished the week below $50,000, and the rest of the crypto market followed step; Ethereum ($ETH) finished the week back below $3,500. The combination of inflationary discretion and rapidly evolving online payment processing landscape could spell continued volatility for cryptos in the weeks ahead — we will dive into this below. First, let’s take a look at the sentiment of tickers in last week’s headlines:

The average sentiment distribution of the top 25 most-talked-about tickers in last week’s news (5/10/21-5/16/21) with respect to each of the sentiment metrics we currently track, and the number of week’s each ticker has been in the top-10 over the past three months.

Last Week’s Headlines:

Each week we analyze impactful sentiment metrics expressed in the news to gain insight into each stock and cryptocurrency’s outlook. The stock market conversation last week was markedly less optimistic and more pessimistic compared to previous weeks. Overall, the average article also expressed more speculative language and less reactive language than week’s past. This said, the conversation is still leaning optimistic, as we can see from the plot above. In terms of article volume, the tickers with the most headlines last week were familiar: Tesla, Amazon, Apple, Facebook, and Google. Notably, for the first time since we started tracking ticker sentiment in January, Tesla appeared more pessimistic than optimistic in conversation, due in large part to their decision to stop accepting Bitcoin as a form of payment. Outside of the typical top-25 tickers like large-cap big tech stocks and memestonks such as Gamestop ($GME) and AMC Entertainment ($AMC), there were also some noteworthy newbies to the plot (colored more brightly in yellow and orange). These tickers were largely clustered in the highly speculative and optimistic portion of the graph (aside from Cathie Wood’s ARK Innovation ETF ($ARKK)), and include fuboTV ($FUBO) Coinbase ($COIN), AirBnB ($ABNB), Pinterest ($PINS), and Palantir Technologies ($PLTR).

Palantir ($PLTR)

This Week’s Reaction: 0.37, Speculation: 0.74, Optimism: 0.11, Pessimism: 0.08

For those who unfamiliar with the company, Palantir is a big data analytics service provider founded by guru investor Peter Thiel in 2003. The stock IPO’d this past October at just over $9 per share, and pinballed all the way up to $35 in late January (driven in large part by the r/wallstreetbets subreddit on speculative momentum) before settling down to $20 per share over the past three months. Palantir has made its share of headlines in 2021 — appearing in our top-10 most mentioned list twice in the past six weeks — and remains one of the most polarizing tickers in conversation as far as our sentiment analysis can tell. Part of this stems from the backstory; any big data company founded by Peter Thiel would sound like a safe bet to most investors. Yet even after news of Cathie Wood’s adding more than 1 million shares of $PLTR to her ARK Innovation ETF earlier this month and an optimistic earnings report highlighting a second straight quarter of positive earnings per share, the stock appears doomed to trend downwards in the near future as tech-stocks and growth stocks take the brunt of the beating in the markets.

The stock finished last week with some of its most volatile trading activity to date after announcing that the company will consider adding Bitcoin to its balance sheet and is open to accepting BTC as a form of payment. This news comes in the same week that Tesla announced it will cut ties with Bitcoin, and follows Paypal’s recent announcement to also accept BTC as a form of payment. With Bitcoin’s recent downtrend and environmental ethical concerns, analysts remain perplexed as to what the BTC move will mean for Palantir’s stock price in the coming weeks. To help you decide for yourself whether or not the stock is worth keeping on your radar, here are some of the most significant articles from our analysis of Palantir headlines last week:

  • Bearish: “Don’t Chase the Next Palantir Bounce Back” | InvestorPlace
  • Bullish: “Palantir: A Big Sell-Off Provides an Attractive Entry Point” | SeekingAlpha

Deflated Party Balloons, For Now…

With inflation data stirring the pot, stocks finished the week highly volatile, and the news reflected this. Below we take a quick look at which tickers scored the highest (and lowest) in the news last week for each of the sentiment metrics we currently track.

Ticker Optimism😀 and Pessimism😒

In terms of mood, here are the most optimistic and most pessimistic tickers discussed in last week’s news. Highly optimistic tickers in the news last week include Nike ($NKE) after announcements of a new lines of clothes in collaboration with Drake, Roblox ($RBLX) after announcing 140% revenue growth in their first earnings report since going public (analysts raise their price target to $83), and Shiba Inu Coin ($SHIB) — yes, seriously — after the cryptocurrency stole a large portion of the Dogecoin spotlight after being added to the Binance platform and rocketing up in price by more than 120% on last Tuesday alone.

In terms of pessimism, Warren Buffet-backed Chinese manufacturer BYD ($BYDDF) led the way and appeared negatively in headlines after its share price trended lower last week (the stock has quintupled in price over the past year). Other pessimistic tickers last week included the ARK Innovation ETF after underwhelming stock performance, and the Bank of Montreal ($BMO) as analysts anticipate lower-than-expected EPS in their upcoming earnings report. The complete visualization of optimistc and pessimistic tickers is shown below:

The complete visualization of the top-10 most optimistic and pessimistic tickers in last week’s news articles (5/10/21-5/16/21) broken down by their relative mood (normalized optimism vs. pessimism expressed) and absolute mood (% of optimism or pessimism expressed outright with respect to each ticker).

Ticker Speculation🤔 and Reaction😮

In terms of timesense expressed in the news last week, the most speculative ticker in last week’s news was Chinese EV maker XPeng ($XPEV) as analysts expect a reversal in the coming weeks after after the company reported a sevenfold increase in revenue last quarter. Other speculative tickers last week were Disney ($DIS) after their recent earnings report, and DoorDash Inc ($DASH) after soaring 12.68% last week.

In terms of reaction (language referencing past events), the most reactive ticker last week was Domino’s Pizza ($DPZ) after solid a solid Q1 earnings beat and “oven fresh” stock performance in the aftermath. Other highly reactive tickers last week included American mining company Freeport-McMoRan Inc ($FCX) after doubling in the past 6 months and gaining last week amid the market’s dip, and Hewlett-Packard ($HPQ) as analysts at Zacks report that the stock is now significantly overvalued. The complete visualization of speculative and reactive stocks is shown below:

The complete visualization of the top-10 most reactive and speculative tickers in last week’s news articles broken down into relative time-sense (normalized speculation vs. reaction expressed) and absolute mood (% of speculation or reaction expressed outright with respect to each ticker).

Looking Ahead

Going forward, the Babbl sentiment indicators anticipate continued volatility and uncertainty across both stocks and cryptocurrencies. The trend of value stocks outperforming growth stocks will likely continue into the future, at least until the current stock market trajectory finds some sort of bottom. With the recent whirlwind of Bitcoin-related headlines (both for and against accepting it as a payment), it is hard to say whether we will see a significant recovery in the next few weeks, or if it will continue to slide towards $40,000. In terms of cryptocurrencies, Ethereum price has experienced considerable de-coupling with the price of Bitcoin in recent months, and we expect this trend to continue. This week we look towards housing and home sales data to continue to paint the picture for economic recovery. As always, thanks for reading, and if you found this insightful whatsoever, let us know by giving this article a like. If you want to see sentiment analysis for a particular ticker, tell us which stocks, cryptos and sectors you’d like to see more of in the comments below! 🙏

We tried something new this week… instead of a meme, here’s a word cloud of what was mentioned most in last week’s news

About

Our goal at Babbl is to bring better sentiment analysis to retail investors to help automate some of the legwork around investment research. We analyze finance media to detect "mood" signals such as optimism, speculation, confidence, and credibility about individual stocks, markets, and publishers over time. Every week and month, we summarize these findings into a newsletter for our subscribers. Our goal is to make it easier for retail investors to make confident, well-rounded decisions by quantifying finance news.

This roundup was written by Ramsey Shaffer and Sam Cartford, with help from the Babbl Discord and the MoneyMen group. We randomly scraped 1000+ articles from across a variety of financial news platforms this past week, and to determine this sentiment, the language used in each article was automatically analyzed across the four metrics mentioned above; scores were determined based on the percent of sentences in each article containing words considered to be reactive, speculative, optimistic, or pessimistic for each of the tickers mentioned, respectively. Please note: all information reported here is for informational and educational purposes. We are amateur investors, not financial advisors. To help us make this better down the road, please consider leaving a comment below or sharing this post with a friend.

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