Source: Wall Street News
Author: Du Yu

Federal Reserve Chairman Powell attended the US House Financial Services Committee hearing. He emphasized that no decision has been made on the March interest rate policy. More economic data such as job vacancies, CPI, PPI, and employment reports are essential, and reiterated that strong data since this year shows that terminal interest rates will be higher than expected, and that inflation is falling but is still at a fairly high level.

A reporter known as the “New Federal Reserve News Agency” said that the Federal Reserve may speed up interest rate hikes by 50 basis points because “confidence among central bank officials about whether interest rates are sufficiently restrictive has declined.” Traders' bets on the 50 basis point rate hike announced on March 22 rose to 80%. The probability before Tuesday is around 30%. US interest rates may peak above 5.6% and remain above 5.5% until the end of this year.

In view of the Federal Reserve's emphasis on economic data, the market is closely watching the US non-farm payrolls for February announced on Friday and next Tuesday's CPI inflation. Non-farm payrolls are expected to increase by 225,000 last month, which is half the previous value, but the unemployment rate may have stabilized at 3.4% to its lowest level in more than 53 years. Next year's FOMC voting committee and Richmond Federal Reserve Chairman Barkin said that interest rate hikes are not over yet, and the labor market is showing incredible resilience.

The increase in private sector employment of “small non-farmers” in the US in February exceeded expectations by 242,000, and doubled from the previous value. JOLTS job vacancies fell to 10.82 million in January. The decline was less than expected and is still at an all-time high, all highlighting the imbalance between labor supply and demand, putting upward pressure on wages and inflation.

The Federal Reserve's Beige Book shows that price increases in many parts of the US have slowed, overall economic activity increased slightly in early 2023, the job market situation is still solid, and inflationary pressure is widespread in various fields. Respondents expect price increases to continue to slow, but in the face of heightened uncertainty, they don't think the outlook for the next few months is optimistic.

The Bank of Canada kept the benchmark interest rate unchanged at 4.50% in line with expectations. It became the first developed economy among the G10 countries to suspend interest rate hikes, but said it would raise interest rates again if necessary. The increase in the US dollar against the Canadian dollar extended to a five-month high. The two-year bond yield once dived 9 basis points to 4.25%. US stocks turned up after midday trading and remained high since 2007.

The market insists that the ECB will hit a peak interest rate of 4% this fall, but the debate within the ECB over the interest rate hike is more intense, and the governor of the Bank of Italy bluntly criticized his hawkish colleagues. Bank of England member Dhingra called for the suspension of interest rate hikes and keeping interest rates unchanged. Traders fully priced the Bank of England's interest rate to peak at 5%, the first time since October last year.

US stocks fluctuated and uneasy throughout the day. The S&P, NASDAQ, and European stocks all turned up at the end of the session, and the Dow fell for two consecutive days to a new low in a week

On Wednesday, March 8, US stocks opened slightly higher before Powell's speech, and major stock indexes fell one after another at the beginning of the session. After Powell's speech, stock indices other than the Dow rose and hit daily highs. The Dow's decline continued to deepen, and US stocks fluctuated throughout the day.

At noon trading, the S&P market, NASDAQ, and Russell small-cap stocks all turned down. The deepest fall of S&P was 0.4%, the deepest drop of the Dow was over 240 points or 0.7%, the deepest decline of the NASDAQ index was 0.4%, and the deepest decline of 0.7%. In the end, S&P, NASDAQ, and small-cap stocks closed higher.

The S&P 500, NASDAQ, and NASDAQ 100 all rebounded from a one-week low since March 2. The NASDAQ index stopped falling for two consecutive days, and Russell's small-cap stocks also stopped falling for two consecutive days and broke away from their lowest level in a month and a half. The Dow fell for two consecutive days to its lowest level since March 1. US stocks fell more than 2% across the board on Tuesday, and S&P fell 1.5% to the biggest decline in two weeks:

The S&P 500 closed up 5.64 points, or 0.14%, to 3992.01 points, and rose above the 4,000 point mark in the intraday period. The Dow closed down 58.06 points, or 0.18%, to 32798.40 points. The NASDAQ closed up 45.67 points, or 0.40%, to 1,1576 points. The NASDAQ 100 closed up 0.5%, while Russell 2000 small-cap stocks closed up 0.04%.

Most of the 11 S&P sectors closed higher. Real estate led by 1.32%, information technology/technology and utilities rose 0.8%, optional consumption fell by more than 0.2%, and finance fell 0.4%, continuing the previous day's 2.54% decline. Healthcare fell by more than 0.5%, and energy fell by more than 1% for the worst performance.

Most of the star tech stocks rose. The “metaverse” Meta fell 1.7% and then turned 0.3%, approaching a four-week high. Amazon fell 1.5% and then turned 0.4%, all of which stopped falling for two consecutive days. Apple rose nearly 1%, and Google A closed up 0.4% after rising more than 2%, all close to a three-week high. After falling 1.3%, Microsoft closed down 0.2%, falling for two consecutive days from a two-week high. Netflix rose more than 1% to break out of a two-month low. After falling more than 4%, Tesla closed down 3%, falling three consecutive weeks to a five-week low since February 1.

Chip stocks generally rose. The Philadelphia Semiconductor Index rose 2.7% to close at a daily high, rising above 3,000 points, and stopped falling to a three-week high for two consecutive weeks. Intel rose nearly 2% to break out of a one-week low. AMD rose 4% to a three-week high. Nvidia rose nearly 4% to an 11-month high.

The decline in the popular mid-session narrowed markedly at the end of the session. China Security ETF KWEB fell nearly 1%, CQQQ closed, and the Nasdaq Golden Dragon China Index closed down 0.6% after falling more than 2%. Among the four constituent stocks of NASDAQ, JD turned up nearly 1%, Pinduoduo fell 0.7%, Baidu fell 0.4%, and NetEase fell 0.6%. Among other individual stocks, Alibaba fell 2%, Tencent ADR fell 0.7%, and Station B fell 1.5%. NIO Auto rose 2.4%, Xiaopeng Motors fell more than 2%, Ideal Auto fell by more than 5%, Manbang fell by more than 4%, and BYD ADR fell 0.5%.

According to the news, Google released the largest “generalist” AI model in history, which can make robots more autonomous. Apple will restructure its overseas sales department to focus more on the Indian market, and will include India as its own sales area for the first time. The US automobile safety regulator investigated the fall off of Tesla's steering wheel, involving more than 120,000 Model Ys. Investment bank Berenberg downgraded the rating to “hold,” saying that the sharp rise in stock prices at the beginning of the year lacked momentum. Musk said there are plans to manufacture small cars with production costs only half of the Model 3. BYD, which is favored by Buffett's investment partner Munger, will vigorously promote the commercial vehicle business in China, Europe, and Japan. According to Pengpai, the smart logistics ecosystem platform Manbang Group, an independent investigation concluded that none of the main allegations in the shorting report could be confirmed.

Other stocks that have changed a lot include:

Buffett's Berkshire Hathaway increased its holdings of Occidental Petroleum by nearly 5.8 million shares in the three trading days from last Friday to Tuesday. This is the first increase since September last year. The total shareholding rose above 200 million shares to about 12.2 billion US dollars. After rising 4.5%, Occidental Petroleum closed up more than 2% to a three-week high since February 16. Occidental Petroleum's stock price doubled last year, and it is one of Berkshire's top ten largest stocks.

The coin bank Silvergate Capital, which is mired in bankruptcy fears, fell by half after falling more than 12%, breaking the record low since the US IPO in November 2019 for many days. It was only 2% of the record high of $239.26 in November 2021. Negotiations with the US Federal Deposit Insurance Corporation (FDIC) on a rescue plan are still ongoing.

Coworking leader WeWork rose more than 11% and then turned down for a while. Eventually, it closed up more than 3%, breaking away from the record low set at the end of December last year. The company is currently negotiating to restructure debt and raise cash.

Cybersecurity company CrowdStrike closed up more than 3% after rising 8%, the highest in three and a half months since the end of November last year. Revenue and profit for the fourth quarter both exceeded expectations, and free cash flow increased to over 200 million US dollars.

Clothing subscription fashion e-commerce Stitch Fix once fell 15% to a new low of three and a half weeks, and eventually closed down 0.4%. The loss per share for the second fiscal quarter exceeded expectations, but achieved the first positive quarterly free cash flow in more than a year.

Adidas's European stocks and US stocks both rose more than 2%, approaching four-week highs. Due to the end of cooperation with Kanye's Yeezy brand in October last year, it recorded huge losses in the fourth quarter and drastically cut dividends by 80%. It is predicted that revenue will drop by a high single-digit percentage in 2023. Operating losses may reach 700 million euros for the first time in 31 years, but profits are expected to resume in 2024.

After Powell's speech, European stocks stopped falling and turned up at the end of the session. The pan-European Stoxx 600 closed up 0.08% and broke away from a one-week low. Healthcare stocks led the decline by 0.7%, while bank stocks rose more than 1% to lead the decline. Only French stocks fell in major national stock indexes; the rest turned up at the end of the session.

European and American short-term bond yields hit a new high of more than ten years. The two-year US bond yield remained stable at 5%, and the inversion of the curve hit the deepest in decades

Prior to Powell's speech, two-year US Treasury yields surged and fell, reaching their highest level since 2007 earlier, then fell 4 basis points and fell below the 5% mark. The decline in the 10-year base bond yield at the beginning of the US stock market widened to more than 7 basis points and fell below 3.90%.

After Powell's speech, US bond yields turned up, and short-term bond yields increased even more, reflecting expectations of interest rate hikes. The 10-year yield stood at 3.99% and rose above 4% earlier in the day, approaching the four-month high set last week. The two-year yield was 5% and the overall intraday increase was 5 basis points. During the Asian session, it rose to 5.084%, the highest since June 2007.

Short-term European bond yields also surged higher and fell, and the decline in long-term yields was prominent. The decline in the Eurozone's benchmark 10-year German bond yield widened to nearly 5 basis points at the end of the session, falling below the 2.70% mark. The two-year yield increase was cut in half to 3.33%. Earlier, it had risen to 3.367%, the highest since 2008. The yield on two-year Italian bonds, the benchmark for peripheral countries, hit 3.907% before turning down, slightly below the 10-year high set on Tuesday.

Market fears of an impending recession are heating up. The 2-year/10-year US Treasury yield curve widened inverted to 111 basis points after Powell's speech, the deepest since the end of 1980. The 2-year/30-year US Treasury yield was inverted by more than 120 basis points, hitting record lows for two consecutive days. The 2-year/10-year German bond yield was inverted by more than 69 basis points, approaching the deepest level since the inversion of 74 basis points in September 1992.

US oil fell nearly 2% in the intraday period, hitting a one-week low with oil falling more than 1%. US natural gas closed down 5% to a new low in a week and a half

Prior to Powell's speech, the fall in international oil prices, which fell by more than 3% yesterday, widened to more than 1%. The market is worried about the impact of hawkish interest rate hikes on oil demand. WTI crude oil futures for April closed down $0.92, or 1.19%, to $76.66 per barrel. Brent crude oil futures for May closed down $0.63, or 0.79%, to $82.66 per barrel

The deepest decline in US oil WTI was 1.45 US dollars or 1.9%, the daily low was 76 US dollars, and the deepest drop of oil was 1.23 US dollars or 1.5%, and the daily decline was close to 82 US dollars, all of which hit new lows in the week since February 28. U.S. oil plummeted 4% in the Tuesday session, the biggest drop in nearly two months.

Last week, US EIA oil reserves fell by nearly 1.7 million barrels, breaking the 10-week trend. West coast crude oil inventories recorded the biggest weekly decline since July 2021. East coast inventories fell to a record low, and crude oil inventories in Cushing, where futures were delivered, fell for the first time in a single week so far in 2023.

Barclays lowered the 2023 oil price forecast by $6 to $92 per barrel and the WTI price forecast by $7 to $87 per barrel, on the grounds that Russian supply will be more resilient than expected. However, it is expected that the continued recovery in demand for civil aviation fuel in China and neighboring countries, stable industrial activity, and a slowdown in non-OPEC+ supply growth will cause a supply deficit in the oil market later this year.

Dutch TTF gas futures, the benchmark for Europe, fell more than 4% in the intraday period and remained stable above 40 euros/megawatt-hour, but are once again approaching the one-and-a-half-year low since August 2021. ICE British natural gas fell 3.5% in the intraday period, falling below 105 ps/kcal at one point. US NYMEX natural gas futures for April once fell 6% to a new low in a week and a half, and fell nearly 16% in the intraday session on Monday, the biggest drop since late January.

The US dollar reached a three-month high, the yen fell below the 200-day EMA to its lowest level in nearly three months, and the offshore renminbi rose 470 points to break above 6.95 yuan

The DXY index measured against a basket of six major currencies rose 0.3% to 105.88, a record high of more than three months since the end of November last year. It rose 1.3% yesterday, the biggest increase in nearly six months since late September last year.

EUR/USD fell as deep as 0.2% to a new low of more than two months, and GBP/USD rose 0.3%, still close to a four-month low. The yen fell as deep as 0.6% against the US dollar and fell to 138. For the first time since this year, it fell below the 200-day EMA to its lowest level in nearly three months. Offshore RMB once rose above 6.95 yuan against the US dollar, up nearly 470 points or 0.7% from the previous day's closing price, breaking away from a two-month low.

Futures fell to a one-and-a-half-week low. Spot gold fell below 1,810 US dollars and then turned up. Most industrial metals in London rebounded

COMEX's April gold futures closed down nearly 0.1% to $1818.60 per ounce, falling two consecutive weeks to a one-and-a-half-week low since February 24. Silver, which fell nearly 5% on Tuesday, fell slightly to a four-and-a-half-month low.

Spot gold once fell below the integer level of 1,810 US dollars, but US stocks turned up at the beginning of the session and broke away from a one-week low. Yesterday, it fell more than 30 US dollars or nearly 2%. Analysts say gold may fall below 1,800 US dollars.

Most of London's industrial base metals, which fell by more than 1% across the board yesterday, closed higher:

Lun Copper, which fell 1.8% yesterday, closed up 147 US dollars, or 1.7%, to 8,900 US dollars. Lunaluminum and Lun lead closed slightly higher, both rebounding from a low of more than a week. Copper and aluminum fell to their lowest level in two months yesterday. Lunzinc, which fell 2.6% yesterday, rose 0.7%, breaking away from its three-and-a-half-month low.

However, Lunnickel fell 0.7% and fell below 24,000 US dollars, hitting its lowest level for four consecutive days. Renxi fell 1.8% and fell below 24,000 US dollars, the lowest in nearly three months since December 19 last year.

Editor/Somer