U.S. stocks plummeted by hundreds of points, dragging down A-shares to weaken, and the opportunity to buy the bottom is coming?

Wealthy and chivalrous

2024-05-30 16:06Posted in Guangdong financial field creators

After hitting new highs repeatedly, the "hero" of U.S. stocks Nvidia couldn't pull it anymore, and U.S. stocks finally pulled back!

On Wednesday, the 29th local time, the Dow Jones Industrial Average fell 411.32 points, or 1.06%; The S&P 500 fell 39.1 points, or 0.74%; The Nasdaq Composite fell 99.3 points, or 0.58%, and the Nasdaq fell back below 17,000.

The three major indexes continued to fall after hours, with Dow futures falling nearly 1%.

So why did the U.S. stock market fall, and did the opportunity to buy the bottom come?

1. Hit a new high

In May, all three major U.S. stock indexes hit record highs, especially the Nasdaq index, which was able to hit three all-time highs in the last week.

The strong rally in the market has also brought huge profits to investors, and it makes sense to take advantage of the historical moment when the Nasdaq stands above 1,7000 points and the instability of the latest inflation data.

2. Core inflation data

On Friday, the U.S. Bureau of Economic Analysis will release the latest personal consumption expenditures report, which is the Fed's most important inflation data, which is directly related to the subsequent interest rate decision.

The consensus expectation is to be flat from March's data, however, if something unexpected happens, whether it's up or down, it will have a significant impact on the stock market.

The market is now very cautious, and judging by the performance of US stocks in the past two days, it is likely that Friday's data will once again delay the Fed's rate cut schedule.

3. Treasury yields rose

After Tuesday, the U.S. auctioned $44 billion worth of seven-year Treasury bonds at an auction rate of 4.65%, but demand remained weak and the market was tepid.

Behind the frenzied bond issuance in the United States is investors' concern that the amount of debt issued is too large and the supply of bonds exceeds demand.

The US 10-year Treasury yield, up another 7 basis points, was last quoted at 4.61%.

Rose Mayfield, an analyst at Baird Investment Strategy, said the yield was more than 4.6%, which put pressure on investor sentiment.

4. Interest rate cut & interest rate hike?

The Fed's benchmark interest rate is widely expected to remain unchanged at its June 11-12 policy meeting.

Most Fed officials have all but ruled out another rate hike, which is an insurance policy for the U.S. stock market.

But they also said they would need to see encouraging inflation data in the coming months after prices rose more than expected in the first three months of the year before they consider lowering borrowing costs.

But there are also radical officials, such as Minneapolis Fed President Neil Kashkari, who said in an interview that the central bank would do everything if inflation did not improve further, including raising interest rates.

But don't worry too much, this Neil did not have a vote at the recent Fed meeting.

The Chicago Mercantile Exchange's (CME) Fed Watch Tool shows that the market is pricing in a roughly 43% chance of a rate cut at the Fed's September policy meeting, down from around 60% last week.

5. The 5% rule in the U.S. stock market

We also introduced the 5% rule for U.S. stocks in our previous article, and relevant people backtested the data of the U.S. stock market from 2009 to 2021, showing that buying after the market falls by 5% has a greater chance of winning.

After a 5% decline, there is a 65% chance that the US stock market will recover its losses and reach new highs within three months.

But there is a 35% probability that the market will continue to fall deep to 10%, and then start to gradually recover its losses.

The author wants to say that whether it is 5% or 10%, as long as the lost ground can be repaired, I am willing to wait for as long as possible, and the big A really makes people wait too long and too long.

Risk Warning: Investment is risky, and you need to be cautious when entering the market

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