30 Sep 2022

On Friday, U.S. stocks opened higher and moved lower, closing down across the board. By the close, the S&P and Nasdaq were down 1.5% and the Dow was down 1.7%. The yield on the 10-year U.S. Treasury bond rose 4 basis points to close at 3.83%, a -45 basis point difference from the yield on the two-year Treasury bond, maintaining a deep reversal. The VIX, the fear index, fell 0.69%. Crude oil prices continued to fall, with Brent down 2% at 85.34. Spot gold settled at $1,660.9 an ounce. The U.S. dollar index was up 0.17% at 112.

The U.S. core PCE price index rose at an annual rate of 4.9% in August, higher than the expected 4.7%, and the previous value of 4.6%. The monthly rate of personal spending in August was 0.4%, also higher than the expected 0.20% and the previous value of 0.10%. Institutional analysis said that PCE once again showed a hot phenomenon of inflation. The fiery August CPI report sparked the latest bout of risk aversion, but the PCE data still surprised markets.

Fed Vice Chairman Brainard said in his speech that U.S. inflation remains high and the dot plot shows interest rate hikes in the future. The Fed has pledged not to pull back from tightening prematurely, but it has also focused on financial fragility and considered spillovers from tightening global interest rates. Fed voter Daly said the U.S. economy is not in a recession and needs to slow down for now. The Fed is expected to raise interest rates further, depending on the data.

The final reading of the University of Michigan's September consumer confidence index was 58.6, lower than the expected 59.5 and the previous reading of 59.5. The median long-term inflation forecast is 2.7%, falling below the 2.9-3.1% range for the first time since July 2021. Institutional analysis said that although consumer confidence was slightly lower than expected, it remained resilient overall, the U.S. economy showed signs of cooling, and the Federal Reserve will maintain tight monetary policy in the foreseeable future to continue to reduce inflation expectations.

Institutional analysts said warnings of potentially painful interest rate hikes were still emerging, shaking investor confidence in central banks, including the Federal Reserve. Strategists at Bank of America warned that the Fed's path of action could push credit markets toward functional imbalances. "Investors shouldn't be asking if the Fed will turn, but how deep into a recession we'll be before they finally act."

Apple shares fell 3%, down about 8% in two days. Apple's South Korean headquarters was raided by antitrust agencies, accused of more than 30% App Store commissions.

Tesla fell 1.1%. The humanoid robot will be released over the weekend. Musk once again said on social media that "Tesla AI Day" will have a lot of technical details and cool hardware demos.

Microsoft, down 1.94%, is expanding Windows 11's Android subsystem to more countries, with 21 regions now announced.

Amazon shares fell 1.6% as Amazon (AMZN.US) plans to keep just one call center in the U.S. to cut expenses.

Sources from: Investing.com; Reuters.com

Louis Yap

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