In the early morning of the 2nd, Beijing time, U.S. stocks were mixed on Wednesday afternoon. The Federal Reserve announced that interest rates would remain unchanged, in line with market expectations. Fed Chair Jerome Powell is about to speak, and there are widely bets that he will maintain a hawkish tone. 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 137.06 points, or 0.36 percent, to 37,952.98, the Nasdaq lost 23.69 points, or 0.15 percent, to 15,634.13 and the S&P 500 lost 8.45 points, or 0.17 percent, to 5,027.24.
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 said it would slow the pace of balance sheet reduction starting in June.
Fed Chair Jerome Powell will hold a press conference after the meeting, and markets will look to his speech for clues on the future path of interest rates.
Given stubborn inflation, market expectations for the Fed's interest rate cut in 2024 have been repeatedly postponed this year. Traders now expect the Fed to cut rates only once this year, well below the number of times they expected about six at the beginning of the year.
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.
U.S. stocks closed lower on Tuesday, with the Dow falling 570 points, the S&P closing down nearly 1.6%, and the Nasdaq closing down more than 2%. A higher-than-expected Q1 employment cost index released on the same day reignited concerns that the Federal Reserve will keep interest rates high for longer.
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.