In the early morning of the 2nd, Beijing time, U.S. stocks closed mixed on Wednesday. The Federal Reserve kept interest rates unchanged for the sixth time in a row, in line with market expectations. Powell said that inflation in the United States is still too high, but the Fed's next interest rate adjustment is unlikely to be a rate hike. The ADP private employment data in the United States in April rose by the most since July 2023, and the ISM manufacturing index fell back into contraction territory in April.
The Dow rose 87.37 points, or 0.23%, to 37,903.29, the Nasdaq fell 52.34 points, or 0.33%, to 15,605.48 and the S&P 500 lost 17.30 points, or 0.34%, to 5,018.39.
The Federal Reserve announced on Wednesday that it would keep its benchmark interest rate unchanged at a range of 5.25%-5.50%, in line with market expectations. This is the sixth consecutive time that the Fed has left interest rates unchanged. The Fed statement said it would slow the pace of balance sheet reduction starting in June.
The statement said the decision to keep interest rates unchanged was unanimously supported by FOMC members.
Nick Timiraos, a well-known financial journalist known as the "mouthpiece of the Federal Reserve", said: "In its policy statement, the Fed acknowledged the recent setback in inflation progress, but did not change the policy guidance part. In June, the redemption ceiling for U.S. Treasuries will be lowered from $60 billion to $25 billion. ”
Fed Chair Jerome Powell acknowledged at a press conference after the FOMC meeting that US inflation is still too high and further progress is uncertain. He pledged to remain focused on the Fed's dual responsibilities – maximum employment and price stability.
Powell said the economy has made great strides toward its goals. The Fed is committed to bringing inflation back to its 2% target. Inflation shows a lack of further progress. The labor market remains relatively tight but more balanced.
Powell acknowledged that this year's inflation data was higher than expected and that labor demand still outstrips labor supply. He said U.S. inflation has slowed significantly, but is still above the 2% target.
Powell said short-term inflation expectations have risen. It will take longer than expected to be confident about a rate cut. Slowing the pace of quantitative tightening does not mean that the Fed's balance sheet will shrink more slowly than expected. Labor demand remains strong but has cooled. Slowing the pace of quantitative tightening (QT) will ensure that policy effects are transmitted smoothly.
Powell said that the FOMC monetary policy is restrictive and is dragging down demand. Restrictive policies will be maintained as necessary. Over time, monetary policy will become sufficiently restrictive.
Powell pledged to maintain a restrictive policy stance for the appropriate time. The next policy rate adjustment is unlikely to be a rate hike. Powell also hinted that the unemployment rate would have to rise by more than 0.2 percentage points for the Fed to cut interest rates.
U.S. earnings remain the focus of the market. Amazon's fiscal first quarter earnings and revenue were both better than expected. Chipmaker AMD was largely in line with expectations. Supermicro's stock price fell sharply, and its revenue fell slightly below Wall Street's consensus estimate. Starbucks shares tumbled, disappointing same-store sales and lowered its guidance. CVS Health fell hard after reporting disappointing earnings and cutting its profit guidance.
In April, all three major stock indexes performed sluggishly. The S&P 500 and Nasdaq both fell more than 4%, and the Dow Jones fell 5%, its worst monthly performance since September 2022.
On Wednesday's economic data front, the ADP employment agency reported that the number of ADP private payrolls in the United States increased by 192,000 in April, the largest increase since July 2023. The forecast was 175,000, compared with 184,000 previously.
ADP employment data shows that after a slowdown late last year, the average pace of hiring by U.S. private companies has accelerated over the past three months, almost matching the increase in the first half of 2023. In addition, wage growth continues to slow.
According to the report, wages for employed people rose 5% year-on-year in April, essentially unchanged from a year earlier. Wage growth for job-hoppers slowed to 9.3% from 10.1% in March, but remained above the level at the beginning of the year.
ADP chief economist Nela Richardson said hiring in April was broad-based. Only the information sector – telecommunications, media and information technology – has been weak, with job losses and the lowest rate of wage growth since August 2021.
The ADP report showed a strong pace of hiring for U.S. businesses in April, indicating strong demand for employees across multiple industries.
Despite rising interest rates, demand for workers has been healthy and unemployment is low, which has helped spur consumer spending and keep prices rising. In addition, wage growth has slowed. The wages of those who changed jobs rose by 9.3 percent, down nearly one percentage point from the previous month. Median wages for non-leavers rose 5 percent, similar to the increase in March.
The other data showed that U.S. manufacturing activity contracted in April due to a drop in demand, with a price measure hitting its highest level since inflation peaked in 2022.
The Institute for Supply Management (ISM) manufacturing index fell 1.1 points to 49.2, rising above 50 for the first time since 2022 in the previous month. A reading below 50 indicates a contraction in industry activity, with April reading weaker than the median estimate of economists surveyed.
Gauges of raw material and other input costs rose for the second month in a row, suggesting stubborn inflationary pressures. The price indicator of payments rose 5.1 points to 60.9, the highest since June 2022.
At the same time, a production indicator for April fell by 3.3 points after rising sharply in the previous month, and a new orders indicator returned below 50.
Stocks in focus
S&P upgraded Nvidia to AA- with a stable outlook and a continued healthy investment in AI.
BofA predicts that Tesla's Full Self-Driving (FSD) landing in China is expected to increase its annual earnings by more than $2 billion.
AMD's outlook for the AI chip business was worse than expected. The company expects the MI300 series of chips — so-called AI accelerators — to generate about $4 billion in revenue this year, up from a previous forecast of $3.5 billion, but some analysts have the highest expectation of $8 billion.
AMD is seen as a major competitor to Nvidia in the accelerator market, and the company is working hard to close the gap with the former.
Apple has announced that it will hold a special "Let's Fly" event on May 7 at 10 p.m. Beijing time, and it will be "an unusual Apple conference". The event is scheduled to take place online and is expected to feature new iPad hardware and accessories, including the rumored OLED version of the iPad Pro, iPad Air, Apple Pencil and Magic Keyboard.
It is also reported that Apple is planning to add artificial intelligence to its Safari browser, a move that is expected to be launched alongside the release of iOS 18. This innovation is expected to be unveiled at Apple's Worldwide Developers Conference this year, bringing users a smarter and more personalized web browsing experience.
Eight U.S. newspaper publishers, including the New York Daily News, a subsidiary of hedge fund Alden Global Capital, sued Microsoft and OpenAI for infringement in federal court in New York.
Amazon's fiscal first-quarter net sales were $143.31 billion, compared to analysts' expectations of $142.59 billion, and adjusted earnings per share were $0.98, beating expectations of $0.83 and increasing 216% year-over-year.
Starbucks sales fell for the first time since 2020. The company's fiscal second-quarter same-store sales fell 4%, compared to analysts' expectations of a 1.46% increase, of which U.S. same-store sales fell 3%, compared to analysts' expectations of a 2.31% increase.
Starbucks reported fiscal second-quarter net revenue of $8.56 billion versus analysts' expectations of $9.13 billion, and adjusted earnings per share of $0.68 versus analysts' expectations of $0.80. Some analysts said that Starbucks' earnings report was the worst report card released in this fiscal quarter.
Walmart announced the closure of 51 of its clinics across the United States. The company will close all 51 of its U.S. clinics and cease online healthcare services within the next 45 days to 90 days.
Pfizer posted revenue of $14.9 billion in the fiscal first quarter versus an estimate of $13.91 billion, and still expects full-year revenue of $58.5 billion to $61.5 billion, with full-year adjusted earnings per share of $2.15 to $2.35, compared with a previous estimate of $2.05 to $2.25. Pfizer's U.S. stock rose nearly 5% premarket.
Pinterest, a U.S. interactive media and services company, reported adjusted earnings per share of $0.20 for the fiscal first quarter, compared to analysts' expectations of $0.14. After Pinterest's earnings report, brokerage Bernstein raised its price target to $38 from $35.
CVS shares were lower after the company slashed its full-year profit forecast.
New York Community Bank's credit loss allowance for the first quarter was $315 million, compared to the consensus of $249.6 million, and loan loss provisions are expected to rise for the remainder of 2024. According to the company, 2024 will be a transition year, with more normalization expected in 2025/2026.