14 Sep 2022

The three major U.S. stock indexes closed down collectively last night. As of the close, the Dow closed down 3.94%, the Nasdaq closed down 5.16%, and the S&P closed down 4.32%. U.S. 10-year Treasury yields closed up 1.428% at 3.410, about -35 basis points lower than two-year Treasury yields. The fear index VIX closed up 14.24%. Brent crude closed down 0.76%. Spot gold closed down 1.29% at $1,702.44 an ounce. The dollar index remained high, closing at 109.93.

The U.S. CPI recorded 8.3% in August, higher than the expected 8.1%. Core CPI came in at 6.3%, also above expectations of 6.1%. Inflation remains stubborn, especially in services. After the data is released, the market adjusts the Fed's policy expectations. According to the dot plot, the probability of raising interest rates by 75 basis points in September is 80%, and the probability of raising interest rates by 100 basis points is 20%. The probability of raising interest rates to 350-375 basis points in November is 40.2%, and the probability of raising interest rates to 375-400 basis points is 49.8%. The expected interest rate at the end of the year is 4.25%, and the expected interest rate next year is 3.75%.

Institutional analysis said that the Federal Reserve had previously signaled that it would not cut interest rates next year, and it is likely to maintain this attitude at the September meeting under the higher-than-expected inflation data, and the stock market will be under obvious pressure in the short term. But the real economy is still likely to contract faster, which is why the dot plot shows interest rates at less than 4% by the end of next year. The Fed's tightening policy is still data-driven in the end, and we will pay close attention to high-frequency economic data in the future.

JPMorgan expects a 50% drop in fee income from its investment banking unit in the third quarter. Institutional analysis said the higher-than-expected inflation rate increased the possibility that the Fed may adopt a more hawkish policy stance, with expectations for a rate hike next week rising from 75 basis points to a full 100 basis points. The global head of energy strategy at JPMorgan said oil prices will be pushed further higher as demand grows more than supply and alternative energy sources such as natural gas and renewables fail to fill the gap. When crude prices fall to around $80 a barrel, the U.S. government may start buying crude to replenish the emergency Strategic Petroleum Reserve, and Biden administration officials are considering the timing of such actions to protect U.S. oil production, according to people familiar with the matter. grow and prevent crude oil prices from plunging.

Apple fell 5.87% after it was reported that Apple plans to place ads on the App Store by the end of this year.

Microsoft fell 5.50%, Microsoft developed a new solution to provide digital signature services in Teams.

Google fell 5.86%. Google established Aalyria, a high-speed Internet project, to provide a full range of network services by sea, land and air.

Tesla fell 4.04%. Tesla plans to increase the weekly production of the Berlin Gigafactory to 5,000 vehicles early next year.

Meta fell 9.37% after Meta issued a subpoena asking hundreds of companies to provide confidential information on the grounds of defending against antitrust lawsuits.

Sources from: Investing.com; Reuters.com

Louis Yap

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