The three major indexes collectively fell, as of press time, Dow Jones fell 0.41%, S&P 500 index fell 0.19%, and Nasdaq fell 0.02%.
After a turbulent week, last week all three major US stock indexes recorded declines. The Dow fell 0.6% for the week, the S&P 500 index fell 0.04%, and the Nasdaq fell 0.18%. Last Monday, US stocks were heavily sold off due to increasing concerns about a slowdown in US economic growth.
The US stock market experienced severe volatility last week, partly due to concerns over delayed interest rate cuts by the Federal Reserve. The Chicago Board Options Exchange Volatility Index (VIX), which measures Wall Street panic levels, has fallen from its highest level since the beginning of the COVID-19 pandemic.
Michael Wilson, the well-known strategist of Morgan Stanley, said that economic uncertainty and weak corporate earnings expectations constitute a double blow, which may limit the rise of the stock market. He stated that although the bond market has begun to digest the expectation that the Federal Reserve is "behind the curve", this risk is not reflected in current stock price-earnings ratios.
"This summer, the market may remain tense, as it tries to interpret the potential strength of the US economy, while valuations and technical extremes are fading. Strong household and corporate balance sheets suggest that economic weakness should be limited." said Seema Shah, Chief Global Strategist at Principal Asset Management.
"Market sentiment is high, which often comes with greater volatility," said Callie Cox, Chief Market Strategist at Ritholtz Wealth Management. "So if we experience another week of turbulence, I won’t be shocked."
Cox said, "People are beginning to prepare for a recession, although the crisis has not yet occurred. As stock market investors, the appearance of fear is often beneficial to us. If economic data remains stable, industries sensitive to interest rates may continue to lead the market higher after more pressure is released."
Senior investor and KunTeng Strategy strategist Luo Qi believes that the three factors--lower-than-expected interest rate cuts, a slowdown in the US economy and an artificial intelligence bubble--will lead to a 20% bear market in US stocks in 2025.
Luo expects that the Fed will not cut rates to the market's expected 3.50%. The median forecast for interest rates in 2025 by the Federal Reserve is 4.1%, while almost all market participants currently believe that rates will be lower than 4.1% by September 2025. "Secondly, profits will not meet expectations, because the economy will slow down," Luo warned.
Luo believes that the third factor that will lead to a bear market is the artificial intelligence industry. Luo said that the artificial intelligence industry has "entered the bubble field" and will emerge from the bubble in about six months, and will become one of the driving forces for the slowdown in economic growth.
According to Wedbush Securities, concerns among investors about the monetization of artificial intelligence by a few companies, including Microsoft and AMD, should be alleviated.
Analyst Dan Ives said, "Over the past few weeks, we have also seen companies and chief information officers accelerate their path to artificial intelligence strategies from conversations with our customers/partners, all of which boil down to the use cases of these budgets and investment returns."
Ives added that the performance of Microsoft and AMD "further confirms the monetization phase of artificial intelligence." He urged investors to pay attention to the comments from Apple, Amazon, Alphabet, ServiceNow, Palantir, and Microsoft, and said they should treat these companies "as a solid barometer for the markets."
Investors hope to gain a better understanding of the health of the US economy this week. Recent concerns about a slowdown in the job market have shocked traders and the market.
On Tuesday this week, the market will focus on the producer price index (PPI) report for July, followed by Wednesday's consumer price index (CPI), to determine the inflation situation in the United States. July retail sales data will be released on Thursday.
"A new round of good inflation data may help ease concerns about the Fed losing," said Callie Cox, strategist at Ritholtz. "Investors have already drawn conclusions about the economy, and now they will analyze a new batch of data to determine whether this sell-off is actually necessary."
"Retail sales data and retailer earnings may indicate that concerns about a slowdown in the job market have been overblown. So far, we have not seen too many worrying details about the US consumer situation. Therefore, it is important to consider overall spending data rather than panic about lackluster employment reports," she added.
Over the weekend, Federal Reserve Board member Bowman said that she still believes there is upward pressure on inflation and that the labor market continues to remain strong, hinting that she may not be ready to support a rate cut at the Federal Reserve's next meeting in September. According to swap data, the currency market has fully absorbed expectations of a rate cut in September and expects interest rates to fall by about 100 basis points this year.
Focus stocks
Most of the growth tech stocks are falling, Nvidia rose more than 2%, Apple and ASML rose slightly.
China concept stocks are mixed, Ke Holdings rose more than 7%, Beigene rose nearly 3%, and Bilibili fell nearly 4%.
$NVIDIA (NVDA.US)$ Nvidia rose more than 2%, and Ruihua Securities highly recommended it. Its Q2 performance will be a major catalyst and it can rise another 26%!
$KE Holdings (BEKE.US)$ Ke Holdings rose more than 7%, with a net income of 23.4 billion yuan in the second quarter of the year, an increase of 19.9% year-on-year. It plans to expand and extend the share buyback plan.
$BeiGene (BGNE.US)$After the results, it rose more than 3%, and opened at a new high.
$KeyCorp (KEY.US)$ Bank of Nova Scotia rose more than 12%, and will spend about 2.8 billion US dollars to acquire nearly 15% of KeyCorp's shares at a premium.
Editor/ping