On the evening of the 12th Beijing time, US stocks opened higher on Friday. The US June PPI increased by 0.2% month-on-month, slightly higher than market expectations. Investors were looking forward to the financial reports of financial giants such as Wells Fargo & Co and JPMorgan, and continue to pay attention to the recent sector rotation.
As of press time, the three major indexes rose across the board, with the Dow Jones Industrial Average up 0.21%, the S&P 500 up 0.37%, and the Nasdaq Composite Index up 0.6%.
Several financial giants announced their financial reports on Friday. Wells Fargo & Co said that the key indicator of measuring bank loan profitability, net interest income, was lower than expected in the second quarter. The bank also saw net interest income decline from 7% to 9% this year.
JPMorgan's second-quarter revenue exceeded Wall Street expectations, as investment banking fees increased.
US stocks closed mixed on Thursday. The Nasdaq fell 0.88%, and the technology-focused Nasdaq Composite Index fell 1.95%. These two indexes ended their continuous seven-day gains and recorded the largest single-day decline since April 30th.
Investors withdrew from technology stocks on Thursday and turned to cheaper cyclical stocks, including real estate and banks, because the Consumer Price Index (CPI) report released that day showed a significant cooling of inflation, prompting traders to flock to market areas that may benefit from Fed interest rate cuts. Meanwhile, small-cap stocks were sought after. In fact, the Russell 2000 small-cap stock index rose by about 3.6% on Thursday.
Warren Pies, the strategist and co-founder of 3Fourteen Research, said that the market sector rotation that appeared on Thursday "represents what will happen in the second half of the year." Pies added that the upcoming corporate earnings season and credit expansion background will continue to drive the market until the end of the year.
"In many ways, the US economy has been fairly strong in the past few years, but in some ways, it has been limited by the Fed's interest rate policy," he said. He pointed out that with policymakers of central banks cutting interest rates, some economic corners that have been "dormant", such as second-hand home sales and new car sales, will "wake up again".
On the economic data front, US producer prices rose slightly higher than expected in June, as service provider profit margins rose to offset the drop in commodity costs. According to data released by the US Bureau of Labor Statistics on Friday, final demand PPI rose 0.2% month-on-month in June and 2.6% year-on-year.
Before the wholesale inflation report was released, the US Department of Labor released the more closely watched Consumer Price Index (CPI) on Thursday, which showed the first decline in consumer prices since the outbreak of the new crown epidemic and made the Fed expected to start lowering interest rates as early as September.
The lower-than-expected inflation data released on Thursday strengthened the bet that the Fed will cut interest rates in September. The market expects that the interest rate will be cut by 0.25 percentage points in September, and the probability a month ago is only slightly higher than 50%, and the interest rate will be cut at least twice before the end of this year.
Data released by the US Department of Labor on Thursday showed that CPI rose 3% year-on-year in June, a decrease of 0.3 percentage points from May, and unexpectedly fell 0.1% month-on-month, and the growth rate slowed by 0.1 percentage points from the previous month.
Excluding food and energy prices with large fluctuations, core CPI rose by 0.1% month-on-month in June, a decrease of 0.1 percentage points from the month-on-month increase in May; Core CPI increased by 3.3% year-on-year in June, falling to the lowest level since April 2021.
Chicago Fed President Goolsbee said the CPI data was "excellent" and that the report provided the evidence he had been waiting for, making him confident that the Fed is moving towards a 2% target.
"CPI data is good news, obviously stocks welcome it to some extent, but we see other indicators indicating that the US economy may be slowing down," said James Rossiter, global macro strategy director at Dowling Securities.
"Especially the stock market, we must consider the easing policy that the Fed may bring in September, and the economic growth prospects are obviously turning. For some stocks, this will be more worrying." He said.
Focus stocks
Growth tech was mixed, with Micron Technology and Apple up more than 1% and Meta down nearly 3%.
China concept stocks continue to rise. PDD Holdings rose nearly 4%, Ke Holdings rose more than 3%, and Alibaba and Baidu both rose more than 2%
Automotive stocks are up, with Lucid up nearly 15%, Xpeng, Rivian, and Polestar up over 4%.
$Wells Fargo & Co (WFC.US)$Falling more than 6%, the company's Q2 net interest income did not meet expectations.
$Tesla (TSLA.US)$Up more than 2%, previously fell nearly 3%.
$Rivian Automotive (RIVN.US)$Ryuho raised the company's target price from $11 to $15, an increase of over 4%.
$Meta Platforms (META.US)$Falling nearly 3%, the EU Commission is investigating X under the Digital Services Act, and Meta Platforms is also facing similar investigations.
Edited by Jeffrey