26 Aug 2022

Last night, the three major U.S. stock indexes closed up collectively. As of the close, the Dow closed up 0.98%, the Nasdaq closed up 1.67%, and the S&P closed up 1.41%. The yield on the 10-year U.S. Treasury bond fell 2.48% to close at 3.031, a difference of about -34 basis points compared with the yield on the two-year Treasury bond. The fear index VIX closed down 4.56%. Brent crude closed down 2.87%. Spot gold closed up 0.36% at $1,757.79 an ounce. The dollar index remained high, closing at 108.42.

Fed Chairman Jerome Powell is about to face a big challenge, he needs to show the world's major central bankers how to cool price growth without hurting the economy, said Allianz Chief Economist Elrian. Asked how long it would take to bring inflation down to the Fed's 2 percent target, Elian said "it will take a while because the Fed has been almost asleep at the wheel" in the past.

Bank of America said the Fed will cut interest rates on a regular basis, and the Fed will cut interest rates six months after reaching the terminal rate, that is, before September 2023. During the 1995 interest rate cycle, the Fed held the terminal rate for more than five months, and in the 1980s, when monetary policy was more volatile, the Fed turned more quickly. The Fed's rule for keeping interest rates unchanged when inflation is falling is that the annual rate of PCE should not be lower than 2%, otherwise the Fed may turn to cutting interest rates (exception in the early 1980s). And after 1984 (except for the 2018 rate cycle), job growth has cooled before the Fed cut rates.

The revised annualized quarterly rate of real GDP in the second quarter of the United States was -0.6%, the expected -0.8%, and the previous value of -0.90%. Institutional analysis said that the annualized quarterly rate of U.S. real GDP in the second quarter was milder than the initial value, as consumer spending eased some of the drag caused by the slowdown in inventory buildup, dispelling fears of a brewing recession. While two consecutive quarters of declines in GDP meet the standard definition of a technical recession, broader measures of economic activity point to slow growth rather than a recession. Underlying retail sales were much stronger than the preliminary report in May, a strength that continued in June and July. Industrial output quickly rose to a record high in July, while business spending on equipment was solid. The labor market continues to grow rapidly with job creation.

In the United States, the number of initial jobless claims for the week ended August 20 was 243,000, compared with an expected 253,000, and the previous value of 250,000. U.S. jobless claims fell for a second straight week, a sign that employers are holding on to workers despite mounting economic uncertainty. Still, some employers have been laying off workers or freezing hiring, especially in the tech sector, and that could continue in the coming months as the Federal Reserve raises interest rates to curb demand and tame inflation.

Apple rose 1.49%, and Apple's 2022 autumn conference was officially announced, set for September 8.

Google rose 2.62%. Google disclosed the design logic of its self-developed transcoding chip.

Amazon rose 2.6 percent as it closes its Amazon Care telehealth business by the end of the year.

Tesla fell 0.35%, and the Tesla Dojo project was made public for the first time.

Sources from: Investing.com; Reuters.com

Louis Yap

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