Xinhua Finance and Economics, New York, January 31 (Reporter Liu Yanan) As the Federal Reserve hinted that it would not be in a hurry to cut interest rates and the decline in large-cap technology stocks, the three major stock indexes of the New York stock market opened lower on the 31st, and then consolidated in a narrow range, and the three major stock indexes fell significantly at the close.
By the end of the day, the Dow Jones Industrial Average was down 317.01 points, or 0.82%, from the previous session at 38,150.3, the S&P 500 fell 79.32 points, or 1.61%, to close at 4,845.65, and the Nasdaq Composite was down 345.89 points, or 2.23%, at 15,164.01.
In terms of sectors, the 11 major sectors of the S&P 500 index fell across the board. The communication services and technology sectors led the declines with declines of 3.93% and 2.11%, respectively, while the healthcare sector saw the smallest decline of 0.11%.
The Federal Open Market Committee announced on the afternoon of the 31st that it would keep the target range for the federal funds rate unchanged at 5.25% to 5.5%. Until there is greater confidence that inflation will continue to fall back to the 2% target, it would be inappropriate to expect a reduction in the target range for the federal funds rate.
The FOMC announcement said that recent indicators show that US economic activity is expanding at a solid pace. While job growth has eased from earlier last year, it remains strong and the unemployment rate remains low. Inflation, while slowing over the past year, remains elevated.
The Fed is cautious about cutting interest rates
Compared with Fed Chairman Powell's emphasis on the progress of interest rate cuts and the possibility of interest rate cuts at the previous interest rate meeting, Powell's attitude towards interest rate cuts at the press conference held on the 31st was much more cautious, which can be regarded as a rebound to the market's previous aggressive interest rate cut expectations.
Bill Adams, chief economist at Comerica Bank, said on the same day that the Fed became very anxious later in 2021 and in 2022 by misjudging that inflation was transitory, and that inflation continued to rise and persisted longer than expected to surprise the Fed. The Fed wants to avoid making the same mistake again.
Adams said the Fed would wait until 2% inflation was around the corner before starting to cut rates.
Fed Chairman Jerome Powell said at a press conference in the afternoon that he did not think the FOMC would be confident enough to start cutting interest rates in March at its March meeting. It is believed that the Fed's monetary policy is likely to be at the peak of this round of interest rate hike cycle, and if the overall economic development is in line with expectations, it is likely to be appropriate to start a pullback on the restrictive monetary policy at some point this year. "If appropriate, we are prepared to keep the federal funds rate unchanged for longer. ”
Powell has shown caution about cutting interest rates. He said that starting to cut interest rates would be a very influential decision, so he wanted to make the right decision. A lot of progress has been made in bringing inflation down, and the Fed just wants to make sure that inflation is brought down in a sustainable way.
Powell also said that whether to implement a series of rate cuts after the first rate cut will be data-dependent.
According to data released by the Chicago Mercantile Exchange Fed Watch Tool at 6 pm on the 31st, the market sees a 36% probability that the Fed will cut interest rates in March, down from 41.2% the previous day.
Michael DePass, global head of interest rate trading at Citadel Securities, said that the Fed will not cut interest rates in March this year under the baseline forecast scenario. For a rate cut at the March Fed meeting to be truly likely, there needs to be significantly disappointing data.
Data released by ADP before the market showed that the U.S. job market continued to cool, with the U.S. private sector adding 107,000 jobs in January, below market expectations of 145,000 and a downward revision of 158,000 in the previous month.
The Chicago Area PMI for January released early in the day came in at 46, below market expectations of 48.1 and the previous month's 46.9.
Falling heavyweights weighed on sentiment
Sentiment has already been weighed down by the decline in a number of large-cap tech stocks ahead of the Fed's monetary policy decision in the afternoon, sending the Nasdaq and S&P 500 lower.
Although Google's parent company Alphabet announced its financial report after market hours on the 30th, the company's performance in the fourth quarter of 2023 was better than expected, but Google's advertising revenue growth was disappointing, and Alphabet's stock price fell significantly by 7.5% on the day. Microsoft's fourth-quarter 2023 results were better than expected after market hours on the 30th, but its expectations for the first quarter of 2024 were flat, and Microsoft's stock price fell 2.69% on the day. Despite the better-than-expected results for the third quarter of 2023 announced after market hours on the 30th, the stock price of Chaowei Semiconductor (AMD) fell 2.54% on the day.
New York Community Bank (NYCB), which acquired the assets of Signature Bank in the banking crisis early last year, released a performance report before the market on the 31st, showing that the bank made a provision for credit losses of $552 million in the fourth quarter of 2023, and the adjusted net profit for the quarter was -$1.93 per share, and the dividend per share was significantly reduced to 5 cents per share. New York Community Bank shares plunged 37.67% on the 31st to close at $6.47 per share.
Vladimir Zernov, a market analyst at FXEmpire, said on the same day that Alphabet, Cisco, Chaowei Semiconductor and Nvidia Corp. stocks were the worst performers among the Nasdaq Composite Index constituents on the day. The Nasdaq came under pressure as traders focused on the sell-off in Alphabet Corp. stock. Previously, traders were bullish on AI-related stocks, and market expectations were at a high level. The latest earnings reports from Alphabet and Microsoft Corp., while beating forecasts, did not meet traders' expectations.
Rob Ginsberg, a senior analyst at Wolfe Research in the United States, said that the five-day moving average of bullish-bearish positions in the market shows that the market has entered "complacency territory". With this indicator giving the wrong signal in the recent past, it is a fairly good indicator for predicting a short-term correction or an upcoming consolidation.
"We tend to do some profit-taking and tighten stop-loss or take-profit requirements," Ginsburg said. ”
Chris Senyek, chief investment strategist at Wolf Research, said that part of the reason why the stock prices fell after the results announced after the 30th market hours was because investors were selling on the occasion of the announcement after the stock rose sharply.
Senyek said some economically sensitive stocks that have not outperformed the market recently have also sold off, Senyek said. While the day's performance was not a trend, the price action suggests that the U.S. economy could slow faster than the consensus expects.
Editor: Luo Hao
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