22 Sep 2022

The three major U.S. stock indexes closed down in shock last night. As of the close, the Dow fell 1.7%, the Nasdaq fell 1.79%, and the S&P fell 1.71%. The yield on the 10-year U.S. Treasury bond fell 1.037% to close at 3.532%, a difference of about -52 basis points compared with the yield on the two-year Treasury bond. The fear index VIX rose 3.06%. Brent crude closed down 2.24%. Spot gold closed up 0.54% at $1,673.8 an ounce. The dollar index remained high, closing at 111.37.

Russian President Vladimir Putin signed a partial mobilization order. Existing-home sales in the U.S. totaled an annualized 4.8 million in August, the lowest level since May 2020. Before the winter energy crisis, the UK sought to secure LNG supply contracts from the US with proposals for up to 20 years.

The Fed raised interest rates by 75 basis points, raising the benchmark interest rate to a range of 3% to 3.25%, and the interest rate level rose to a new high since 2008. The Fed point chart shows that the Fed is not expected to cut interest rates before 2024, and at least one rate hike of 75 basis points will occur in 2022. The Fed also hinted that it will raise interest rates by 125 basis points this year, and the market expects a rate hike of 75 basis points in November. , will raise interest rates by 50 basis points in December. The Fed swaps indicate that the final rate for this cycle of rate hikes is above 4.6%. Fed forecasts show waning confidence in a soft landing. Aggressive moves to reduce inflation to the 2 percent target will take years to complete, at the cost of a marked rise in unemployment and slower economic growth, according to forecasts released by policymakers on Wednesday.

While Fed inflation expectations haven't changed much from June, Fed officials expect monetary policy to take a more hawkish line. In June, officials expected the funds rate to end the year at 3.4%, and now they expect 4.4%, with a new target range of 3%-3.25%. Rates are expected to have some room to rise to 4.6% next year, but are expected to cut slightly in 2024 and to 2.9% in 2025.

Federal Reserve Chairman Jerome Powell said at a news conference that he will continue to raise interest rates until he is confident that the task of reducing inflation to 2% has been completed. That could spell pain for the job market. Analyst Omair Sharif said that if the Fed’s 2023 unemployment rate forecast reaches 4.4%, then, other things being equal, it would mean an additional 1.235 million job losses. When the cost of lower inflation is taken into account, at least a million more people will lose their jobs. The Fed expects the unemployment rate to rise by 0.6% to 4.4% next year. Historically, the U.S. has never avoided a recession with such a rise in unemployment. The Fed is implicitly acknowledging that a recession is inevitable.

Apple fell 2.03%, predicting that by 2025, Apple may move a quarter of iPhone production to India; Apple's new patent shows that a folding iPhone can repair scratches and dents on its own display.

Amazon fell 2.99%, and its Twitch will reduce its revenue share with top streamers; e-commerce is sluggish, and Amazon's cargo flight growth rate hit a record low.

Tesla fell 2.57%. As of August 31, the backlog of orders was about 414,000 vehicles, a decrease of nearly 90,000 vehicles; humanoid robots will be unveiled at the end of the month, and thousands of them will be deployed in the Texas factory.

Meta, down 2.72%, has started to cut jobs through restructuring and is expected to cut costs by at least 10% in the next few months.

General Mills rose 5.72%. In fiscal year 2023, Q1 revenue increased by 4% year-on-year to $4.7 billion, and net profit increased by 31% year-on-year to $820 million.

Spotify fell 1.92% and cooperated with Amazon's Audible to launch an audiobook service in the United States. At present, the audiobook market has only a market share of 6%-7%, but the annual growth rate is expected to reach 20%.

Sources from: Investing.com; Reuters.com

Louis Yap

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