On the evening of the 11th Beijing time, US stocks opened higher on Thursday. The increase in US PPI in March was lower than expected, slightly easing market concerns about rising US inflation. Investors are waiting for the US stock first earnings season, which is about to begin on Friday. A number of large banks will be the first to announce financial reports.
As of press release, the three major indices had mixed ups and downs. The S&P 500 index rose 0.01%, the Nasdaq Composite Index rose 0.32%, and the Dow Jones index fell 0.12%.
On Thursday, US investors welcomed the second major inflation data of the week.
The US Department of Labor reports that the producer price index (PPI) rose 2.1% year on year and 0.2% month on month in March. The market expected a 2.2% year-on-year increase and a 0.3% month-on-month increase.
The Ministry of Labor also revised the PPI for February to a 1.6% year-on-year increase and a 0.6% month-on-month increase.
According to another Department of Labor data, the number of people claiming unemployment benefits for the first time in the US last week was 211,000, estimated at 215,000, compared to 221,000 previously.
Most traders are still optimistic that the Federal Reserve will cut interest rates for the first time in September, but after the PPI data was released, they think the possibility of cutting interest rates in July increased slightly.
Investors are now hinting that the Federal Reserve will cut interest rates twice this year, starting in September. This is lower than the Federal Reserve's recent bitmap. The bitmap shows that the Fed will cut interest rates three times in 2024. At the beginning of this year, market pricing indicated that interest rates were expected to be cut 6 times.
Former US Treasury Secretary Summers further stated that people must “seriously consider the possibility of raising interest rates the next time rather than cutting interest rates.” He said the probability of this is between 15% and 25%.
Federal Reserve Bank of New York Governor John Williams said on Thursday that he still expects inflation to continue to fall this year, although he admits that the process will not be easy.
Williams said, “I expect inflation to continue gradually returning to 2%, although there may be bumps in the process, as we have seen in some recent inflation data.”
The day before, the US CPI rose 3.5% year on year in March, far higher than the Federal Reserve's 2% target. Although Williams notes that the inflation rate has progressed since its peak in June 2022 (over 9%), he said the work of the Federal Reserve is not done yet.
Williams said, “The economy has come a long way in achieving a better balance and meeting the 2% inflation target. However, we have yet to see our dual tasks fully aligned. I am committed to achieving maximum employment and price stability over the long term.”
Jack Manley, a strategist at J.P. Morgan Chase, said that if the Federal Reserve wants to reduce the inflation rate to a long-term target of 2%, it needs to start cutting interest rates. His idea is contrary to traditional economic theory, which argues that high interest rates curb inflation by reducing aggregate demand, and vice versa.
However, Manley said that if the Federal Reserve starts cutting interest rates, housing costs will actually reverse their decline. Housing costs have been a key driver of inflation in the current economic cycle.
He said, “You won't see substantial downward pressure on housing costs until the Federal Reserve lowers interest rates, and mortgage interest rates fall to a more reasonable level, and supply returns to normal.” The US housing market has always been very tight, and prices have remained high due to very tight supply and stable demand.
Thursday's PPI report comes after a rough day on Wall Street.
U.S. stocks were sold off on Wednesday, with the Dow down 1.1% and the S&P 500 down 0.95%. The Nasdaq Composite Index fell 0.84%.
The March Consumer Price Index (CPI) data released on Wednesday is booming, showing that the Fed's efforts to fight inflation have been thwarted, causing investors to lower their bets on the Fed's interest rate cut this year. Furthermore, the minutes of the US Federal Reserve's March monetary policy meeting released on Wednesday also show that some officials are still worried about whether the inflation rate can move towards the central bank's 2% target.
CPI rose 0.4% month-on-month and 3.5% year-on-year in March, prompting Goldman Sachs chief economist Jan Hatzius to adjust the number of interest rate cuts he expects the Federal Reserve to cut interest rates from three to two, and believes that the first rate cut will occur in July rather than in June as previously anticipated.
Jan Hatzius said: “I am optimistic that the labor market is being rebalanced and that inflation will decrease over time. For me, none of these things have changed; however, what has changed is the timing of the Fed's interest rate policy adjustments, because that will depend more on economic data, and the month-on-month increase in the inflation data released on Wednesday is clearly disappointing.”
Entering the first earnings season for US stocks, investors are paying attention to the financial reports that large banks such as J.P. Morgan Chase, Wells Fargo, and Citigroup are scheduled to release on Friday.
Individual stocks in focus
Star Technology stocks rose sharply; Tesla, Nvidia, and Google rose about 1%, while Microsoft, Mate, Microsoft, and Amazon rose slightly.
Popular Chinese securities rose collectively. Dajian Yunchang rose more than 6%, Ali and Jingdong rose about 1%, and Pinduoduo, Baidu, and NIO rose slightly.
On April 10, local time, social giant$Meta Platforms (META.US)$The latest version of the self-developed MTIA chip was announced. MTIA is Meta's custom chip family designed specifically for AI training and inference work. Compared with Meta's first-generation AI inference accelerator MTIA v1, which was officially announced in May of last year, the latest version of the chip has improved significantly in performance, and is specially designed for the ranking and recommendation system of Meta's social networking software. The analysis points out that Meta's goal is to reduce dependence on chip manufacturers such as Nvidia. As of press time, the stock has risen slightly.
Bank of America cuts sharply as concerns about potential demand for electric vehicles grow$Tesla (TSLA.US)$Target price. Although the bank's rating of Tesla is still “neutral,” it lowered the target price from $280 to $220, a drop of up to 21%. However, the target price still means that Tesla's stock price has room to rise 28% from current levels.
Just a week before the Bank of America cut Tesla's target price, Tesla announced that the delivery volume for the first quarter was far lower than Wall Street's expectations. As of press time, the stock has declined slightly.
J.P. Morgan says hedge fund investors are right$Apple (AAPL.US)$Confidence is improving as the valuation premium on Apple stock has eased somewhat. J.P. Morgan analysts also pointed out that investors are increasingly interested in the AI-based iPhone upgrade cycle.
J.P. Morgan analyst Samick Chatterjee said, “While the fundamentals of hardware demand and service growth prospects have deteriorated, interest in Apple stock has improved from a wider range of investors. The AI upgrade cycle will be temporarily accelerated by 2-3 years.”
J.P. Morgan cut Apple's price target from $215 to $210, which is an overrated rating. As of yesterday's close, Apple had a cumulative decline of 13% this year, with a forward price-earnings ratio of 24 times, less than 25 times the Nasdaq 100 index. As of press time, the stock has risen slightly.
Citi published a report stating that the bank's analysts participated$Microsoft (MSFT.US)$Fabric Community Conference and talk with Microsoft partners to learn about the opportunities and challenges of customers using the Microsoft Fabric data architecture.
Citibank believes that Microsoft's first hosting of this project has received a good response, showing that Microsoft is willing to invest in and build a more comprehensive Azure data platform, which can increase the competitive environment and modernize Data Estate.
Citi pointed out that there are still pain points related to product maturity, safety and management issues, but Microsoft is rapidly innovating and believes that combining Fabrit, Co-Pilot, and other generative artificial intelligence-related services will once again strengthen Microsoft's leading position in the AI generation investment cycle. Citi currently gives Microsoft a “buy” rating, with a target price of $480. As of press time, the stock is up nearly 1%.
$Alphabet-A (GOOGL.US)$Approximately $1 billion will be invested to improve digital connectivity between the US and Japan by supporting the construction of two new submarine cables, Proa and Taihei. According to information, the announcement was made on the occasion of Japanese Prime Minister Fumio Kishida's visit to the US to meet with US President Joe Biden and strengthen defense and security cooperation between the two countries.
It is reported that Google will cooperate with several partners, including KDDI, Arteria Networks, Citadel Pacific, and the Commonwealth of the Northern Mariana Islands (CNMI). As of press time, the stock is up nearly 1%.
A US federal jury said on Wednesday that as the world's largest cloud service provider,$Amazon (AMZN.US)$The cloud computing service (AWS) requires compensation of $525 million for infringing on technology company Kove's data storage technology patent rights.
According to reports, the jury found that AWS infringed three of Kove's patents. Kove says these patents have become “essential” technology for Amazon's cloud computing department's ability to “store and retrieve large amounts of data.” As of press time, the stock has declined slightly.
edit/ruby