25 Aug 2022

Last night, the three major U.S. stock indexes closed up collectively. As of the close, the Dow closed up 0.18%, the Nasdaq closed up 0.41%, and the S&P closed up 0.29%. The yield on the 10-year U.S. Treasury note rose 1.934% to close at 3.109, a difference of about -29 basis points compared with the yield on the two-year Treasury bond. The fear index VIX closed down 5.35%. Brent crude closed up 1.52%. Spot gold closed up 0.25% at $1,752.32 an ounce. The dollar index remained high, closing at 108.62.

The three major stock indexes collectively opened lower. Nick, a Wall Street Journal reporter known as the "New Federal Reserve News Agency," wrote, "Central bankers worry that the recent spike in inflation may not be a temporary phenomenon, but a transition to a new, enduring reality." The article reviewed the long-term trends surrounding inflation. Some of the arguments include: weakening globalization trends, ageing workforces and “demographic inversions”, tight commodity markets and green transitions, and vulnerabilities from supply shocks. Finally, several former Fed officials who have worked closely with Powell said he may err in raising rates too much rather than too little, because tolerating too much inflation means a bigger institutional failure for the central bank .

The U.S. durable goods orders recorded a monthly rate of 0% in July, and the number of orders was basically the same as the previous month, reaching US$273.5 billion, a new low since February. Shipments of durable goods manufacturing in July rose 0.4% from June to a total value of 270.5 billion yuan. Also, backlogs rose 0.7% to $1,126.5 billion, rising for 23 straight months but still well below pre-pandemic levels, and in any case, the backlog of orders should keep factories busy for a while. Manufacturing inventories of durable goods rose 0.2% to $486.2 billion.

The U.S. existing home contracted sales index fell 22.5% year-on-year to 89.8 in July, the largest drop since the outbreak of the novel coronavirus. For the current housing market cycle, contract signings may be nearing the bottom. The very modest decline this month reflects the recent pullback in mortgage rates. Inventory of homes in the upper price bracket is increasing, but limited supply in the lower price bracket is hindering transaction activity. Year-on-year house price growth is still rising by double-digit percentages, but by the end of this year and into 2023, year-on-year price growth should slow to a typical 5%. Home sales are set to start rising early next year as mortgage rates are expected to stabilize near 6% and jobs are steadily increasing.

The total U.S. oil exports last week hit a record 11.076 million barrels per day, and the strategic petroleum reserve inventory fell the most since the week of August 20, 1982, the 50th consecutive week of declines. The Atlanta Fed's GDPNow model expects U.S. GDP to grow 1.4% in the third quarter, compared with a previous forecast of 1.6%. According to Al Arabiya TV, the United States rejected all the additional conditions proposed by Iran, urging Iran to lift any restrictions on international inspections, and the United States also said that Iran should not be allowed to enrich uranium with a purity of more than 4%. "FedWatch" shows that Fed fund futures are currently pricing in a 60.5% probability of a 75 basis point rate hike by the Fed in September, compared with about 45% on Tuesday.

Apple, up 0.18%, will hold a special event at 1 a.m. on September 8.

Microsoft slid 0.24% as the gaming CEO said he was optimistic about the review process for the Activision Blizzard acquisition.

Google fell 0.06%, the digital payment boom set off, and Google Wallet was launched in the South African market.

Tesla rose 0.22%, and the plan for a 3-for-1 stock split will officially take effect.

Sources from: Investing.com; Reuters.com

Louis Yap

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