In the early morning of the 18th, Beijing time, U.S. stocks fell at midday on Wednesday, and the S&P 500 index and the Nasdaq may record a fourth consecutive trading day of decline. Markets continue to focus on U.S. earnings and the Fed's monetary policy outlook. UBS believes the Fed will be forced to cut interest rates.
The Dow fell 79.89 points, or 0.21 percent, to 37,719.08, the Nasdaq lost 93.61 points, or 0.59 percent, to 15,771.64 and the S&P 500 lost 15.95 points, or 0.32 percent, to 5,035.46.
Earnings remain in focus. The new earnings season is off to a good start. While less than 10% of S&P 500 companies have reported financials so far, three-quarters of them have exceeded Wall Street expectations.
Shares of United Airlines rose after the company announced a narrower-than-expected loss and revenue that beat expectations. J.B. Hunt Transportation Services' revenue and profit fell short of analysts' expectations.
Barclays strategists believe that U.S. earnings reports will be the main factor driving stock price gains, and recommend buying dips as economic activity data continues to show that the economic recovery could boost profits.
U.S. stocks closed mixed on Tuesday, with the Dow closing higher and snapping a six-day losing streak. However, the S&P 500 and the Nasdaq closed lower, both recording their third straight session of declines.
Fed Chair Jerome Powell's speech on Tuesday sent markets down on bets on rate cuts this year.
Powell said recent inflation data suggests that it may take longer for central banks to be confident enough to cut interest rates. He noted that the Fed has lacked more progress in fighting inflation since the rapid decline in inflation at the end of last year, and that the Fed could keep interest rates unchanged "for as long as necessary" if price pressures persist.
Federal Reserve Vice Chair Philip Jefferson said on Tuesday that he expects inflation to continue to decline as the Fed continues to implement restrictive policies. "The inflation outlook remains quite uncertain and if the upcoming data suggests that inflation is more persistent than I currently expect, it would be appropriate to maintain the current restrictive policy stance for longer," he said. ”
The above comments from Fed officials indicate a shift in the views of Fed officials on the path of interest rates after an important measure of CPI inflation exceeded expectations for the third month in a row.
At the beginning of the year, the market expected the Fed to cut rates as many as six times in 2024, for a total of 1.5 percentage points. But now traders are skeptical that the Fed will cut interest rates by 0.5 percentage points this year. Market expectations for a Fed rate cut – which has fallen sharply over the past two weeks – fell further after Powell's comments on inflation.
The market has sharply lowered its expectations for the number of US rate cuts this year, and is now forecast at less than two, which is a far cry from the six rate cuts expected at the beginning of the year. The first rate cut is still expected in September, although market confidence has declined.
UBS said on Wednesday that the Federal Reserve will be forced to cut interest rates this year and expects the US 10-year Treasury yield to eventually fall back below 4% by the end of the year. The Fed will eventually have to ease monetary policy, although Fed Chair Jerome Powell warned on Tuesday that interest rates may have to stay higher for longer, the firm said.
The U.S. 10-year Treasury yield fell 3.3 basis points to 4.624% early Wednesday, still above 4.6% and near a five-month high.
"In our view, we still expect the 10-year Treasury yield to fall to around 3.85% by the end of the year, down from around 4.66% currently, as rate cuts are delayed, rather than canceled," UBS analyst Solita Marcelli wrote in a note on Wednesday. ”
"While we have recently lowered our expectations for the timing and magnitude of Fed rate cuts, we think the US central bank will still cut rates twice this year, most likely starting with the September meeting," Marcelli said. This means that the return outlook for high-quality bonds remains positive and attractive, while near-term losses in fixed income products are likely to be temporary. ”
Ross Mayfield, an investment strategy analyst at Baird, said the Fed official's speech on Tuesday added to the pessimism in the market. He said that in the short term, stock market trading is mostly range-bound, but any geopolitical event will cause oil prices to rise further.
"The main headwind is a renewed hawkish pricing of Fed monetary policy expectations," he said. I don't think Fed Chair Powell did much today to alleviate those concerns, and he probably did it on purpose. The market is questioning whether interest rates will be cut in 2024. ”
Alexandre Marquis, senior portfolio manager at asset manager Unigestion, said tensions between Iran and Israel also constrained riskier bets. He said the market had priced in the prospect of a slower-than-previously expected rate cut.
"Some of the disappointment has already been reflected in prices, and we have seen a recent pullback in the last few days," he said. ”
Tensions in the Middle East continue to simmer. Israel is considering a response to Iran's first attack on Israel, a Jewish state. Saudi Arabia and the United Arab Emirates issued an unusually frank joint statement on Wednesday calling for maximum "self-restraint" to save the region "from the danger of war and its terrible consequences."
Stocks in focus
NVIDIA recently added two Ampere-based entry-level products to its workstation professional visualization GPUs: the RTX A400 and RTX A1000, bringing Tensor Cores and RT Cores to the low-end desktop professional graphics card lineup for the first time.
Tesla Inc. will once again let shareholders vote on CEO Elon Musk's compensation package after a Delaware court declared null and void the $56 billion bonus Tesla arranged for Musk in 2018.
Tesla also said in a proxy filing released Wednesday that it would vote to move the company's domination from Delaware to Texas. The electric vehicle maker will hold its annual shareholder meeting on June 13.
Tesla Chairman Robin Danholm criticized the Delaware Court of Chancery's ruling in January, saying it amounted to post-speculative speculation about shareholders who approved Musk's compensation. U.S. Delaware Court of Chancery Justice Kathleen McCormick described the company's directors as "lazy servants of arrogant masters" and said they had failed to consider the best interests of investors.
AMD announces the Ryzen™ AMD Ryzen Pro 8040 series and AMD Ryzen Pro 8000 series to support the most advanced x86 processors in the AI computing space. It is equipped with an NPU unit and supports WiFi 7. Among them, the Ryzen Pro 8040 series is for notebooks, and the Ryzen Pro 8000 series is for desktops, both of which use 4nm process technology.
Maxim gives Apple an initial holding rating with a price target of $178.
Apple CEO Tim Cook visited Indonesia on the 17th and said that Apple would consider building a manufacturing plant in Indonesia. According to reports, Cook met with Indonesian President Joko Widodo and a number of ministers and other dignitaries in Jakarta on the same day to discuss Apple's investment plans in Indonesia.
Speaking at a press conference after the meeting, Cook said the Indonesian president spoke about his vision of wanting to develop manufacturing in Indonesia, which is something Apple will consider.
Indonesian Communications and Information Minister Budi Ali Setiadi said Microsoft CEO Nadella will visit Indonesia at the end of the month.
According to reports, Japan intends to enact laws to regulate the control of the mobile app market by tech giants, aiming to establish a regulatory regime on par with Europe, prohibit certain behaviors, and impose fines equivalent to 20% or more of sales for violations.
The bill would prevent large platform operators such as Apple and Google from blocking third-party app stores and payment systems, as well as other gatekeeping rules, in hopes of promoting competition in the market and giving consumers lower prices to access apps.
Amazon Web Services announced the official launch of the Claude 3 Opus model from Anthropic on Amazon Bedrock, which is the smartest model in the Claude 3 family, excelling at highly complex tasks, with amazing fluency and human-like comprehension, and the ability to efficiently respond to open prompts and unknown new scenarios.
Citi published a research report that it increased its first-quarter ad volume tracking for Instagram Reels by 90 basis points to 20% quarter-on-quarter as engagement continued to improve. According to SenorTower, the number of daily active users per app spent on Instagram increased by 4% year-on-year in the first quarter.
Citi Meta Platforms, which is listed as an industry top pick, raised its price target to $590 from $525 and maintained a "buy" rating.
United Bank Corporation cuts its 2024 net interest income outlook.
ASML's Q1 net sales, new orders and Q2 sales guidance all missed expectations.
The U.S. Federal Trade Commission (FTC) is preparing to file a lawsuit to block Coach's parent company, Tapestry, from acquiring Capri Holdings.