On the evening of the 14th Beijing time, US stocks opened generally higher on Tuesday. The April PPI showed that inflationary pressure was still high, prompting the market to lower its bet on the Fed's interest rate cut this year. Federal Reserve Chairman Powell will speak on Tuesday. The market is watching Wednesday's CPI data to further determine the Federal Reserve's interest rate path.
As of press release, the three major indices have risen slightly.$Dow Jones Industrial Average (.DJI.US)$rose 0.19%,$S&P 500 Index (.SPX.US)$up 0.06%,$Nasdaq Composite Index (.IXIC.US)$rose 0.12%.
Stifel analysts expect that the S&P 500 may be on the verge of a sharp decline as inflation will not cool further from the current level.
The investment firm predicts in a report that the S&P 500 index will drop to 4,750 points in the second or third quarter of this year. This means that the benchmark index will drop about 10% from its current level of around 5222 points on Monday.
On Tuesday, the yield on US 10-year Treasury bonds rose to a new high since May 3, and the 2-year yield rose to a new high since May 2. The previously released PPI data for April exceeded expectations, indicating that inflationary pressure is still high, prompting the market to lower expectations of interest rate cuts.
In terms of economic data on Tuesday, the US Department of Labor reported that after adjustments, the US producer price index (PPI) rose 0.5% month-on-month compared to the previous month's data and 2.2% year-on-year compared to the same period last year.
Economists previously surveyed by Dow Jones expected PPI to rise 0.3% month-on-month in April.
The increase in the PPI index in April exceeded expectations, raising concerns that inflation is still too stubborn to the point where the Federal Reserve cannot begin to relax its policy. This prompted traders to lower their expectations of interest rate cuts. Currently, the swap contract anticipates a 40 basis point cut in interest rates before the end of the year.
Another data shows that as sales expectations improve, in April of this year, the US small business confidence index improved for the first time since this year, and the proportion of business owners planning to raise prices fell to a one-year low.
According to the National Federation of Independent Businesses (NFIB), the SME confidence index rose 1.2 points to 89.7 from its lowest level since 2012. Although the index was higher than economists' expectations, it was still far below the long-term average of 98.
The much-publicized consumer price index (CPI) report will be released on Wednesday. Economists expect the consumer price index to rise 0.4% month-on-month and 3.4% year-on-year in April.
Consumer inflation data is one of the most important figures for this month. “Today is a warm-up, but people are waiting for tomorrow's US CPI data,” said Jan von Gerich, chief strategist at Nordea.
Economists expect core CPI to rise 0.3% month-on-month in April, down from 0.4% last month's increase. The core CPI is expected to fall from 3.8% in March to 3.6% in April. Investors will be watching closely to see if some of the unexpected increases in the first quarter were fleeting or a worrying trend that could force the Federal Reserve to keep interest rates unchanged throughout this year.
Gerich said, “I think expectations of rising inflation have risen, so it is difficult to exceed expectations. You've had the accident three times in a row, so if the data is in line with expectations, then interest rates will drop.”
Federal Reserve Chairman Powell will speak on Tuesday. He said earlier this month that even though inflation data has soared in recent months, the Federal Reserve's next move is “unlikely” to raise interest rates.
Brent Schutte, chief investment officer at Northwestern Joint Wealth Management, said, “It's not unusual for Wall Street and Main Street to have different views on the economy — different views stem from different concerns. Stock market trends are based on expectations for future economic performance, not necessarily the current state of affairs.”
He added: “But while these different views are not uncommon, they highlight the potential risk for investors who are betting that interest rate cuts will falter the US economy.”
Individual stocks in focus
Star technology stocks had mixed ups and downs. Tesla rose more than 2%, Apple rose nearly 1%, and Nvidia and Amazon fell nearly 1%.
WSB concept stocks continue to soar.$AMC Entertainment (AMC.US)$Up more than 74%,$GameStop (GME.US)$Up nearly 63%,$BlackBerry (BB.US)$15% increase.
$Alibaba (BABA.US)$It fell nearly 6%, and revenue for the fourth fiscal quarter was 221,874 billion yuan, up 7% year on year.
$Tesla (TSLA.US)$The increase was more than 2%. The company allegedly re-recruited some overcharged employees who were fired in April, and the Shanghai Energy Storage Gigafactory obtained construction permits.
$Plug Power (PLUG.US)$Up more than 37%, the company received a conditional commitment from the US Department of Energy to provide loan guarantees of up to US$1.66 billion to build six green hydrogen production facilities.
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