On the evening of the 30th Beijing time, US stocks opened lower on Thursday. SAFTSE's quarterly revenue fell short of expectations, guidance was weak, and stock prices fell sharply. The revised annualized quarterly rate of real GDP for the first quarter of the US recorded 1.3% lower than expected. This week, the market focuses on Friday's April PCE inflation data.
As of press release, the three major indices have plummeted.$Dow Jones Industrial Average (.DJI.US)$It fell nearly 0.82%,$Nasdaq Composite Index (.IXIC.US)$fell 0.19%,$S&P 500 Index (.SPX.US)$It fell more than 0.23%.
J.P. Morgan CEO Dimon issued another warning. He previously expressed concern that America is repeating the mistakes of the 1970s. Everything seemed beautiful at the beginning, but then quickly turned into a “stagflation” period where high unemployment, high inflation, and low demand coexisted.
Dimon said that it is really hard for him to imagine that large-scale fiscal and monetary stimulus policies in the past five years would result in anything other than stagnation.
Legendary investor John Hussman, president of Hussman Investment Trust, recently released a report saying that the historical high of the US stock market gives the impression of a crazy rebound, but this is a bull market that will eventually collapse. The investor, known for accurately predicting the stock market crashes in 2000 and 2008, reiterated that the US stock market could fall by as much as 70% during this cycle.
As the S&P 500 continues to break through record highs in 2024, Hussman's long-term bearish views may seem out of place. However, according to Hussman, the extreme rise in US stocks was driven by investors' impatience and FOMO (fear of missing out) — a key factor in the upcoming pullback.
He said risk factors include overvaluation, fragmentation of the stock sector, and unbalanced market sentiment. Another thing to be wary of is that more and more stocks are hitting new 52-week lows, while the stock indexes themselves are surging.
Ross Mayfield, an investment strategy analyst at Baird, said that the yield on US 10-year Treasury bonds broke 4.6% for the first time in a month on Wednesday, seriously dampening investor sentiment. The sharp rise in treasury yields may be bad news for stock investors, as they make safer investments (such as treasury notes and money market funds) more attractive, thereby reducing investors' risk appetite for stocks.
Ross Mayfield said, “We have a background where 'currency interest rates have remained high for a long time. 'This is not new news, but in the (current) catalyst vacuum, it is putting pressure on average stocks, especially in our current high stock valuation environment.”
US 10-year Treasury yields fell below 4.6% on Thursday.
Goldman Sachs strategists believe that rising US bond yields will set a deceleration zone for the rise in the US stock market. The bank's strategist Peter Oppenheimer said that due to rising bond yields and higher valuations, the strong gains in the stock market may subside this year. Bond yields are rising, which limits the current upside, and profit growth of US companies excluding tech giants is also moderate. We think the stock market will basically be trading sideways in the next few months.
In terms of Thursday's economic data, data released on Thursday showed that the revised annualized quarterly rate of real GDP in the first quarter of the US recorded 1.3%, lower than the previous initial value of 1.6%, reflecting lower consumer spending than expected. Personal spending, the main growth engine of the US economy, increased by 2.0% compared to the previous initial value of 2.5%.
In terms of inflation, the Federal Reserve favors the US PCE Price Index annualized quarterly rate correction value of 3.3% in the first quarter, which is slightly lower than the initial forecast (3.4%). Excluding food and energy, the revised annualized quarterly rate of the US core PCE price index for the first quarter recorded 3.6%, which is also lower than the previous forecast of 3.7%.
Analysts said that the revised annualized quarterly rate of real GDP in the first quarter of the US recorded 1.3%, which was lowered as scheduled, not only lower than the previous estimate of 1.6%, but also significantly lower than the 3.4% growth rate in the fourth quarter of 2023. In addition to this, recent retail sales and equipment spending data have also weakened. However, due to the continued strength of the job market, this year's weak start is not expected to last until the current second quarter.
According to a report from the US Department of Labor, the number of jobless claims for the week ending May 25 was 219,000, which is expected to be 218,000, compared to the previous value of 215,000.
This week, the US stock market will focus on the US April core personal consumption expenditure (PCE) price index to be announced on Friday. This is the Federal Reserve's preferred inflation indicator. The market expects the index to remain stable month-on-month.
Matt Simpson, senior market analyst at City Index, said, “If we look at the data that led us to this point, it's hard to believe that a weaker-than-expected personal consumption expenditure report will be released on Friday. Seen from this perspective, it may be a pleasant surprise that personal spending is not rising. But if it heats up further from the stickiness level, risk appetite will be kicked hard from behind.”
“The market is already bewitched by the bond market and the spell of higher yields,” said Tony Sycamore, a market analyst at IG Australia Pty. “If tomorrow's US or European inflation data is stronger than expected, then the focus has turned to managing downside risks.”
Individual stocks in focus
Star technology stocks generally fell, with Saifse falling more than 18%, Adobe falling more than 4%, Microsoft and Meta falling more than 1%, Tesla up more than 1%, and Nvidia rising slightly.
Popular Chinese securities had mixed ups and downs. NIO and JD rose more than 1%, Pinduoduo rose slightly, Tencent Music fell more than 1%, and Alibaba fell slightly.
In terms of individual stocks,$Tesla (TSLA.US)$Up more than 1%. According to Reuters, Tesla is considering selling FSD software on a monthly subscription basis.
$Salesforce (CRM.US)$It fell more than 18%. The company's sales in the first quarter exceeded expectations, but revenue guidance for the second quarter fell short of expectations.
$Faraday Future Intelligent Electric Inc. (FFIE.US)$It rose nearly 15% and plummeted 62% on the previous trading day. The company's earnings report said “it may never be profitable.”
$HP Inc (HPQ.US)$Up more than 11%, the company's second-quarter results were better than expected, and the full-year EPS guidelines were raised.
$C3.ai (AI.US)$It rose more than 11%. The company's fourth fiscal quarter results were better than expected, and the performance outlook was better than expected.
Editor/jayden