Transferred from: Xinhua Finance
Xinhua Finance, Shanghai, May 24th (GE Jiaming)-the "hot" economic data surpassed the "hawkish" Fed speech.PlaycasinoroulettegameNvidia's "force" on American stocksPlaycasinoroulettegameAt a time when market expectations of interest rate cuts were thwarted again, US stocks plunged collectively and the strength of the dollar rocked global assets.
Although Nvidia reported a big rise in the good share price, US stocks plunged overnight, with the Dow down more than 669 points. By the close, the Dow was down 1.Playcasinoroulettegame.53%, down more than 600 points; Nasdaq down 0.Playcasinoroulettegame.39%, the S & P 500 index fell 0.74%.
A number of industry insiders told Xinhua financial analysis that US stocks were boosted by Nvidia's performance at the start of trading, but economic data showed no signs of weakness after Fed minutes suggested that Fed policy makers would have to wait longer to consider cutting interest rates. All of them "poured cold water" on market expectations of interest rate cuts, causing the three major indices to plunge collectively.
After yesterday's release of US economic data, traders were betting that the Fed would cut interest rates by just 35 basis points this year, down from 40 basis points the previous day, and postponed the cut from November to December, according to the latest pricing in the interest rate market.
Hit by expectations of a Fed rate cut, US bond yields across the board soared overnight, with the dollar index breaking the 105 mark and hitting an one-week high. Asian currencies were mostly lower in early trading, led by the South Korean won.
Wall Street's interest rate cut expectations are "dashed" again.
Us inflation stickiness has repeatedly cooled expectations of Fed rate cuts in the first quarter of this year, but falling inflation data and cooling economic data have also rekindled expectations on Wall Street in recent weeks.
But at a time when markets are looking forward to the Fed's rate cut in September, this week's minutes of the Fed's May meeting, the latest economic data and the "hawkish" speeches of Fed officials have forced traders to re-examine their optimism.
On May 23, S & P global data showed that the US composite PMI index rose to 54.4 in May, the highest level in two years, with the manufacturing PMI hitting a two-month high and breaking the 50 mark, while the service sector PMI hit a 12-month high.
In terms of highly watched inflation data, factory input prices rose at the fastest pace since November 2022 in May PMI data, and service providers' paid and received prices also increased. In the composite PMI data, the measure of input prices rose to the second highest level since September last year.
The rise in the PMI index means that overall US economic activity expanded in May, reversing the decline in some previous economic data. The previous depressed retail sales data for April and a decline in manufacturing output made the market believe that the cooling trend of the US economy and inflation in the second quarter could be sustained.
Chris Williamson, chief corporate economist at S & P global market finance, said in a statement that the main driver of US inflation now comes from manufacturing rather than services, which means that the last mile of the Fed's 2 per cent inflation target is still out of reach.
In addition to the PMI data, initial jobless claims in the US released on Thursday continued to decline, indicating the resilience of the labour market, with initial jobless claims falling by 8000 in the week ended May 18, the biggest consecutive decline since September, with the market expected to be 220000.
Before that, the latest minutes of the Fed's May meeting showed that many Fed officials questioned whether policy had reached a sufficiently restrictive level, and several officials mentioned the willingness to tighten policy further if necessary.
This year, Bostick, chairman of the Atlanta Federal Reserve, reiterated that monetary policy is not as effective in restricting economic growth as in previous cycles, so it is all the more necessary to maintain high interest rates for a long time to curb inflation. While Bostick thinks the Fed will start cutting interest rates by the end of the year, he doesn't think it is possible to cut rates before the fourth quarter.
Industry insiders said that in fact, after the release of the minutes of the Fed meeting, market expectations for the Fed to cut interest rates twice this year began to cool. Expectations of interest rate cuts fell further as economic data came out on Thursday.
Global asset shock
Although Nvidia surged 9.32% against the market to an all-time high, with a total market capitalization of $2.6 trillion, the market capitalization of u.s. stocks soared by $230 billion on Thursday, but the total market capitalization of u.s. stocks fell about $500 billion on the day.
Yields on all-maturity Treasuries also soared across the board on expectations of interest rate cuts. As of press time, the yield on 2-year Treasuries rose 7.2 basis points to 4.952%, the yield on 5-year Treasuries rose 6.8 basis points to 4.537%, and the yield on 10-year Treasuries rose 5.5 basis points to 4.483%.
In the foreign exchange market, the dollar index also broke the 105th mark on Thursday, hitting an one-week high. Asian currencies came under pressure, with the South Korean won falling 0.6 per cent to 1370.05 against the dollar and most other Asian currencies lower, with the dollar rising 0.4 per cent to 36.662 against the Thai baht. the dollar rose 0.3 per cent to 4.7170 against the Malaysian ringgit.
Marc Chandler, chief market strategist at Bannockburn Global Forex LLC, said the currency market showed that the market was still reacting to strong US economic data in the expected way. "I think there is still some upside for the dollar".
Commodities such as gold, silver and crude oil fell collectively, with COMEX gold futures down 2.60 per cent and London gold down 2.07 per cent, and Loco-London silver down 3.72 per cent and 2.05 per cent respectively. Gold and silver futures and spot prices have been adjusted continuously in the last two trading days.
The analysis pointed out that the continuous weakness of gold and silver is, on the one hand, to further revise the Fed's interest rate cut expectations, and on the other hand, to correct previously overheated market sentiment, if prices continue to be weak, or to further stimulate the profit-taking sentiment of early bulls.
In terms of international oil prices, the main contracts of NYMEX crude oil futures and ICE oil distribution futures fell by 0.76% and 0.51% respectively. Judging from the recent performance, international oil prices began to fluctuate and fall after hitting a stage high on April 12.
Ellis Phifer, managing director of fixed income capital markets at Raymond James, said that the S & P PMI indicator had never really had a significant impact on the market before, but suddenly (Thursday) it caused a stir. The only reason that can be thought of is that the manufacturing industry is recovering stronger than the market expected. "I think the market has been lacking in vitality and people have not responded much to the number of initial jobless claims. But when you combine a better-than-expected unemployment report with a PMI, the calm market will cause waves."
Waiting for the next key data guide
The next meeting of the Federal Reserve's Federal Open Market Committee (FOMC) will be held on June 11-12 local time. At that time, the Federal Reserve will release the latest Economic Forecast Summary (SEP) and dot matrix chart. The debate about when the Federal Reserve will cut interest rates this year and will cut interest rates several times may have a clearer answer by then.
For the current market, the next most critical indicators will be the core personal consumption expenditure (PCE) price index to be released next week and the May non-farm payrolls report to be released on June 7.
Francesco Pesole, foreign exchange strategist at ING Bank, said there wasn't actually much to be optimistic about. Inflation is moving in the right direction, but there is still no level at which the Fed can cut interest rates.
Pesole believes investors are waiting for the upcoming PCE data. Only when PCE data is released will the market have clearer trend guidance.
Editor: Tan Rui