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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:

• Breaking down stocks’ wild week that is seeing prices end…right where they began. 

• A look at MicroStrategy’s stock split, and how much it matters.

• What the economic data from this week means for markets.

Full-circle moment for stocks

After all the excitement this week, stocks are poised to end pretty much exactly where they began. 

The S&P 500 on Friday morning opened just 32 points below its closing level last week, when the jobs report-fueled selloff began. The index is now trading 3 points below Aug. 2’s close as of 2 pm ET. 

The Nasdaq Composite similarly opened on Friday around 0.8% lower than its Aug. 2 close — but by 2 pm ET was trading almost the same as where it closed last week. 

So what happened? First, let’s rewind to what caused the selloff: 

Last week’s distressing July jobs report coincided with a series of disappointing earnings reports from Big Tech companies. Plus, there was a massive drop in Japanese markets as the popular yen carry trade started to unwind. 

Couple all that with the Sahm figure flashing red (don’t worry, it may not be as bad as it sounds) and it was, by most accounts, a perfect storm. No wonder stocks have started out August in the red. 

Now, things are looking up. At least for now.  

For starters, we got some encouraging data this week. More on that below, but the gist is that investors’ concerns about the labor market appear to have eased since Thursday’s initial jobless claims came in lower than expected. 

The VIX has been on the decline since hitting 55 on Monday, a level not seen since the pandemic-driven crash in March 2020. As of Friday, the VIX is down more than 60% over the past five days, hovering around 21. 

There’s a “but” coming, right? 

As we discussed Tuesday, volatility does not just dissipate in a matter of days; it tends to cluster. If the VIX hits 35 or higher once during a given year, it almost always does again. The index is also a leading indicator, so expect delays between heightened volatility and stock market reaction. 

And markets may have breathed a sigh of relief on Thursday after seeing the jobless figures, but the report wasn’t all good. Continuing claims rose to nearly 1.9 million, marking a new high for 2024 and bringing the figure to a level not seen since November 2021. 

Increased continuing claims show that laid off workers are having a hard time finding new jobs, said Sevens Report Research founder Tom Essaye. This shouldn’t come as a surprise, as we’ve been seeing a hiring slowdown and new openings across industries for months. 

“Bottom line: The headline on this report was positive and it did spark a rally, but don’t let the market’s reaction fool you,” Essaye said. “This report still implies the labor market is losing momentum, and as such, downside economic risks remain very real.”

All in all, the data is mixed. The market seems happy enough though, and odds of an interest rate cut come September are still 48%, per CME Group. 

I say take the win and unplug until Monday.

— Casey Wagner

The bitcoin hash price level (per petahash per second, or PH/s) hit earlier this week, which represented an all-time low.    

This metric takes BTC’s price, network difficulty, block subsidy and transaction fees into account. It measures the potential earnings a BTC miner can expect from a specific quantity of hash rate.

Bitcoin hash price has since rebounded to about $43 PH/s, Hashrate Index data shows. Still, this level makes it a challenging environment for bitcoin miners, particularly those with higher power costs.

“Even proprietary mining operations of publicly traded companies are unlikely to generate net profits with the current record-low hash price, before accounting for depreciation and tax,” states a Thursday report by BlocksBridge Consulting.

Crypto’s prominence within capital markets is growing day by day. 

The On The Margin Roundup crew will hit the stage at Permissionless III synthesizing crypto market conditions within the broader macroeconomic environment. 

One share of MicroStrategy is 10 times cheaper than it was a couple days ago. Measuring how this affects the crypto stock’s outlook is slightly more nuanced.

Shares of MicroStrategy — the largest corporate holder of bitcoin — surged above $1,000 in early March. MSTR shares kept rising to roughly $2,000 toward the end of the month. The run coincided with bitcoin’s all-time high price, hit on March 14. 

At the market open today, investors could buy a MicroStrategy share for about $135.

Put another way, the 10-to-1 stock split (announced last month and put into effect Thursday) lowered MSTR’s share price from that of a new laptop to the price of a New York City salad (inflation joke!).

While stock splits increase the number of outstanding shares in a company, the move doesn’t change that company’s inherent value. In MSTR’s case, that still rests on the value of the BTC MicroStrategy holds, its software business and its “intelligent leverage” approach, noted Benchmark analyst Mark Palmer.

Still, such a split makes the stock more affordable to certain investors and enhances the shares’ liquidity, he added. 

MSTR shares rose by about 4% after the stock split, according to Yahoo Finance data. Lance Vitanza, managing director of equity research at TD Cowen, said he does not attribute yesterday’s MSTR share price rise to the split, but rather to bitcoin’s recovery.

To that point, MSTR shares were down 3% Friday, as of 1 pm ET — similar to BTC’s 2% price drop over the past 24 hours. 

“It appears to me that MSTR got more of an anticipatory benefit upon the announcement of the split (in July), at which point the premium at which the shares trade to underlying bitcoin value increased notably,” Vitanza told Blockworks.

The share price gain on Thursday was more pronounced than what other companies have seen this year on their first day after a stock split. NVIDIA, Broadcom and Chipotle, for example, saw negligible gains of 1% or less immediately after stock splits. 

Though sentiment around these splits may be overblown, MicroStrategy’s decision to execute a 10-for-1 split was “prudent,” Vitanza added.  

He said: “In the case of MSTR, which is largely traded by retail accounts, I do think the lower share price post-split could serve to broaden the stock’s appeal.”

Such investors looking for BTC exposure could also just buy a spot bitcoin ETF — though Michael Saylor and analysts have pointed out the differences between those and MSTR shares.

— Ben Strack

We made it to Friday! While it was an eventful week for markets, things were a bit quieter on the economic data front. Here’s what happened: 

• Initial jobless claims on Thursday came in slightly below expectations (seasonally adjusted 233,000, versus the anticipated 240,000), which helped to calm markets. The latest figure — reflecting claims filed in the week ended Aug. 3 — comes after jobless claims hit their highest levels in almost a year at the end of July. The report did show that continuing claims are on the rise, signaling that unemployed workers are having a hard time finding new roles. All in all, the report was mixed, but you wouldn’t know that by only looking at the market. 

• US services sector activity is also on the rebound, according to data released Monday by the Institute for Supply Management. The ISM’s non-manufacturing purchasing managers index (measuring factors like employment, orders and supply) increased from 48.8 in June to 51.4 in July. The figure was another positive indication that a recession may not be imminent after all. 

— Casey Wagner

• US spot bitcoin ETF inflows totaled $195 million on Thursday, reducing the category’s net outflow total this week (excluding Friday) to $77 million. Meanwhile, the country’s spot ETH ETFs managed to reel in positive net flows of $121 million over the four-day span. 

• Tether is looking to double its headcount by the middle of next year, Bloomberg News reported. The report, which cites CEO Paolo Ardoino, comes after the stablecoin issuer posted a net profit of $5.2 billion during the first half of 2024.

• You read a bit about MicroStrategy above. For more, check out Blockworks editor David Canellis’ piece on how the company’s stock has managed to beat bitcoin.