After the Federal Reserve (Fed) recently released the minutes of its July meeting, investors were looking for clues about future interest rate hikes after the pace of tightening policy weakened. The major U.S. stock indexes were mixed on Thursday (18th).
Before the deadline,Dow Jones Industrial Averagedown nearly 0.3%,Nasdaq Composite Indexfell nearly 0.2%,S&P 500 Indexfell nearly 0.2%,Philadelphia SemiconductorThe index rose nearly 1 percent.
The number of Americans receiving unemployment benefits last week reported 250,000, the first decline in three weeks, indicating that the labor market is still healthy. At the same time, the Philadelphia Fed manufacturing index reported 6.2 in August, not only far higher than expected – 5.0, but also far ahead of the previous value – 12.3 , but business conditions and new orders remained weak at -10.6 and -5.1, respectively.
Although the Fed’s latest meeting minutes did not clearly indicate the specific speed of interest rate hikes from the September 20-21 meeting, it showed that US central bank policymakers pledged to raise interest rates as high as possible to curb inflation.
Subtle signals are not enough to keep the market in a risk-on stance. Caution is the tone for the market right now, with more clues coming at the Fed’s annual symposium in Jackson Hole, Wyoming, next week.
Swap contracts tied to the date of the Fed’s policy meeting show a lower chance of a 3-yard rate hike (75 basis points) next month than a 2-yard rate hike (50 basis points). Before the deadline, according to the CME Group FedWatch Tool, the probability of a rate hike of 2 yards was 63.5%, and the probability of a rate hike of 3 yards was 36.5%.
Expectations of a slower pace of policy tightening and a shift to rate cuts later next year have pushed global stocks up 12 percent from their June lows. Market sentiment, however, may be too optimistic and, in a worst-case scenario, could lead to persistent price pressures, forcing limits on borrowing costs as the economy shrinks.
In Europe, Isabel Schnabel, executive member of the European Central Bank, said in an interview today that the inflation outlook has not changed since the European Central Bank (ECB) raised interest rates by 2 in July, and even a recession will not be enough to ease prices. Pressure, suggesting another sharp rate hike is likely next month. European Central Bank Governing Council member Martins Kazaks also said the ECB will continue to raise interest rates.
In other news, according to Chinese media reports, China’s high temperature power cuts have restricted the production of the automobile industry chain in the Sichuan-Chongqing region. Tesla (TSLA-US), Weilai (NIO-US) until the charging service is suspended.
As of 21:00 on Thursday (18th) Taipei time:
Stocks in focus:
Kohl’s (KSS-US) fell 5.33% to $32.14 a share in early trade
Kohl’s announced last quarter’s financial report before the market. Although revenue and profit were better than market analysts’ expectations, it lowered its full-year financial forecast due to rising promotions and costs. Kohl’s reported revenue of $4.09 billion and adjusted earnings of $1.11 per share last quarter, both beating analysts’ estimates of $3.85 billion and $1.03. The company expects fiscal 2022 revenue to fall 5% to 6%, compared with a previous forecast for a year-on-year increase of 1%.
Cisco (CSCO-US) rose 5.97% to $49.45 a share in early trade
Network equipment giant Cisco (Cisco) announced last-quarter revenue and profit after the market on Wednesday (17th) that were better than market expectations, diluting concerns of slowing corporate technology spending, and the new year’s financial forecast surprised the market, suggesting that As supply chain bottlenecks caused by wafer shortages ease, it is able to fulfill more orders.
Bed Bath & Beyond(BBBY-US) plunged 20.28% to $18.40 in early trade
U.S. homeware retailer Bed Bath & Beyond tumbled more than 14% in premarket trading after investor Ryan Cohen, president of GameStop, said in a filing that he would sell his 7.78 million Bed Bath shares for a total purchase price of about $119.4 million, excluding brokerage commissions.
Today’s key economic data:
- U.S. initial jobless claims reported 250,000 last week, 265,000 expected, and 252,000 previously
- The number of people receiving unemployment benefits in the United States reported 1.437 million last week, 1.438 million is expected, and the previous value was 1.43 million
- US August Philadelphia Fed manufacturing index reported 6.2, expected – 5.0, the previous value – 12.3
- U.S. existing home sales in July are estimated at 4.89 million units, compared with 5.12 million units previously
- U.S. existing home sales in July – 5.4%
- The monthly rate of the leading indicator of the U.S. Conference Board in July is expected to be -0.5%, the previous value -0.8%
Wall Street Analysis:
Kathryn Kaminski, chief research strategist and portfolio manager at AlphaSimplex Group, said investors were a little too optimistic about a quick resolution to inflation, arguing that more policy and interest rate hikes would not be necessary.
Analysts at Deutsche Bank said that risk assets rose strongly due to the saying that “inflation peaked” in the market, but yesterday’s event came to an abrupt end, and many newspapers reported the content of the minutes of the meeting, which is about to be released by the central bank. Expectations of a slower pace of interest rate hikes poured cold water.
Mohammed Apabhai, head of Asia-Pacific trading strategy at Flagship Group, said the environment that led to the current bear market rally is about to change as investors desperately need a safe haven. He also said that the Fed has seen some loosening of monetary conditions and is now ready to continue tightening monetary policy, especially starting on September 1, doubling the scale of quantitative tightening from the current $47.5 billion to $95 billion.