The Dow Jones fell by more than 680 points, the market value of technology giants evaporated by 1.2 trillion yuan, and Biden responded urgently to "appease"
National Business Daily
2024-04-26 00:17Published on the official account of Sichuan Daily Economic News
On the evening of April 25, the United States disclosed two blockbuster data, which shocked the market.
The U.S. real gross domestic product (GDP) grew at an annualized rate of 1.6% in the first quarter, compared with an expectation of 2.5% and a final value of 3.4% in the fourth quarter of last year, according to the first estimate released by the U.S. Department of Commerce.
On the inflation front, the preliminary seasonally adjusted month-on-month annualized rate of real personal consumption expenditures in the United States for the first quarter was 2.5%, compared with an estimate of 3.0% and a previous value of 3.3%, while the PCE price index, which excludes food and energy prices, increased by 3.7% from 2.0% in the previous reading.
In the face of an unexpected "upset" in U.S. economic growth and stubborn core inflation, the market is worried that the risk of stagflation in the U.S. seems to be increasing. Affected by this, on the 25th, the three major U.S. stock indexes opened sharply lower.
650 points
Meta plunged nearly 15%
On April 25, the three major U.S. stock indexes collectively opened lower, as of press time, the Dow fell more than 680 points, the Nasdaq fell 1.68%, and the S&P 500 fell 1.35%.
In terms of individual stocks, technology stocks were weak, with Microsoft, Google, and Amazon falling more than 3%, Apple up 1.27%, and Nvidia up 2.08%.
Meta fell by more than 13%, and its market value evaporated by about 170 billion US dollars (about 1,231.6 billion yuan). According to the financial report, the company's first-quarter results exceeded expectations, but second-quarter revenue guidance fell short of expectations, and it is expected that capital expenditures will increase significantly for the full year. This has sent investors into a panic, fearing that Meta will return to the cash-burning path of its "metaverse" business that it vigorously expanded two years ago.
Tesla rose 2.04%. Musk said that he is accelerating the production of the next generation of models, earlier than previously expected in the second half of 2025. This means that the market's long-awaited low-priced models may be launched earlier.
Most of the popular Chinese concept stocks fell, with Bilibili down 4.47%, iQiyi down 2.80%, NIO down 2.77%, Li Auto down 2.75%, Xpeng Motors down 1.77%, and JD.com down 0.28%.
Spot gold short-term gains extended to $26, as of press time at $2342.81 an ounce.
U.S. GDP data dragged down U.S. stocks
According to Xinhua News Agency, the first estimate data released by the U.S. Department of Commerce on the 25th showed that the U.S. real gross domestic product (GDP) grew at an annualized rate of 1.6% in the first quarter of 2024, a significant narrower increase than the 3.4% growth rate in the fourth quarter of last year.
Unlike other countries, the United States regards the annualized rate of real GDP as the most common measure of economic growth, believing it to be more reflective of economic trends.
According to the analysis, due to the intensification of inflation in the United States, consumer and government spending cooled, resulting in a significant slowdown in growth in the first quarter.
The inflation gauge, which the Fed pays the most attention to, also sent bearish signals.
According to the latest U.S. quarterly inflation data, the U.S. core PCE price index in the first quarter was preliminarily adjusted to a quarter-on-quarter annualized rate of 3.7%, with an estimate of 3.4% and a previous value of 2.0%, the first quarter-on-quarter acceleration in a year.
The preliminary seasonally adjusted quarter-on-quarter annualized rate of real personal consumption expenditures in the United States in the first quarter was 2.5%, with an estimate of 3.0% and a previous value of 3.3%.
This means that the risk of core inflation in the United States has risen again.
According to overseas networks, Brian Jacobsen, an economist in Wisconsin, said that the United States failed to achieve GDP growth in the first quarter, and the inflation data was not encouraging. The annualized rate of service price growth rose again to 5.4%, leaving the Fed in a difficult position. Stuart Cole, an economist in London, said the Fed now finds itself in a dilemma, with GDP data suggesting that monetary policy seems to have cooled the economy, but inflation data suggesting that the Fed may need to tighten monetary policy further.
Following the release of the data, the interest rate swap market adjusted its interest rate expectations and now believes that the Fed will not start cutting interest rates until December this year, rather than November. The price of the OIS contract, which is tied to the Fed's meeting, reflects a rate cut of about 22 basis points in November, totaling 33 basis points for the year to December.
According to the Financial Associated Press, after the release of the data, the yield on the 10-year Treasury bond rose to 4.731%, and the yield on the 2-year Treasury note, which is most closely related to the Fed's interest rate expectations, also rose above 5%, both hitting the highest level since November last year.
It is worth noting that, according to the Securities Times, for the latest data, US President Joe Biden said that GDP shows stable economic growth, but more jobs are still needed.
The continued strength of the US dollar has caused headwinds in many countries
The dollar strengthened again on the data, and the dollar index rose nearly 20 points in the short term, approaching 106, but then fell back to 105.68.
It is worth noting that in recent days, the dollar index has continued to climb and has now risen to its highest point since early November last year and remains around 106. The U.S. dollar index has risen more than 4% so far this year.
The backdrop to the dollar's strength was a drop in expectations for the Federal Reserve to cut interest rates. With the US inflation data higher than market expectations, there is a growing belief that the Fed will delay the start of interest rate cuts. Previously, most predicted that the agency would cut interest rates starting in June.
Fears about the depreciation of their currencies have intensified, and the currencies of Asian countries, including Japan, South Korea, and Indonesia, are under tremendous depreciation pressure.
According to CCTV News, on April 25, the exchange rate of the yen against the US dollar in the foreign exchange market in Tokyo, Japan, once fell to about 155.40 yen per US dollar, hitting a new low in 34 years.
Some analysts have pointed out that one of the important reasons for the depreciation of the yen is the aggressive interest rate hike by the Federal Reserve. Analysts believe that the depreciation of the yen is highly related to the Federal Reserve's aggressive interest rate hikes, and the Japanese people's wallets have shrunk and consumption has been sluggish; although the appreciation of the yen is inevitable in the future, it is difficult to change the general trend of Japan's economic contraction in the long run.
The market is worried that under the huge depreciation pressure, the Bank of Japan may "air strike" the market. The Bank of Japan (BOJ) will announce its latest monetary policy decision on 26 April, and the market expects the BOJ to keep interest rates unchanged.
Morgan Stanley's chief Japan economist Takeshi Yamaguchi believes that Bank of Japan Governor Kazuo Ueda may make more hawkish remarks. The Bank of Japan is expected to raise interest rates by 15 basis points in July 2024, bringing the policy rate to 0.25%, and another 25 basis points in January 2025.
Editor|Sun Zhicheng Du Hengfeng
Proofreading|Cheng Peng
Cover image from Visual China (unrelated to the picture and text)
Daily Economic News, CCTV News, Xinhua News Agency, Finance Associated Press, China Business News, Securities Times, etc
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The Dow Jones fell by more than 680 points, the market value of technology giants evaporated by 1.2 trillion yuan, and Biden responded urgently to "appease" -
The Dow Jones fell by more than 680 points, the market value of technology giants evaporated by 1.2 trillion yuan, and Biden responded urgently to "appease" -
The Dow Jones fell by more than 680 points, the market value of technology giants evaporated by 1.2 trillion yuan, and Biden responded urgently to "appease" -
The Dow Jones fell by more than 680 points, the market value of technology giants evaporated by 1.2 trillion yuan, and Biden responded urgently to "appease" -
The Dow Jones fell by more than 680 points, the market value of technology giants evaporated by 1.2 trillion yuan, and Biden responded urgently to "appease" -
The Dow Jones fell by more than 680 points, the market value of technology giants evaporated by 1.2 trillion yuan, and Biden responded urgently to "appease" -
The Dow Jones fell by more than 680 points, the market value of technology giants evaporated by 1.2 trillion yuan, and Biden responded urgently to "appease"