On July 11th local time, the closing trends of the three major US stock indices diverged, with the Dow Jones Industrial Average rising 0.08% as of the close; The Nasdaq fell over 360 points, a decrease of 1.95%; The S&P 500 index fell 0.88%.
After the US CPI data was released, the US stock market "seven sisters" plummeted across the board, with Nvidia down more than 5%, Meta down more than 4%, and Apple, Microsoft, Google and Amazon down more than 2%. Semiconductors, computer hardware, and consumer electronics fell the most, with Arm falling over 7%, Qualcomm and Micron Technology falling over 4%, Dell Technologies and ASML falling over 3%, and Snap falling over 2%. The real estate, construction, and leasing services sectors rose, with Hertz Car Rental up over 12%, US real estate investment up over 9%, Hekla Mining up over 7%, aviation leasing companies and Costa up over 4%, and CRH Cement and United Leasing up over 3%.
Tesla reported $241.03, a decrease of 8.44%, ending its 11 consecutive gains, and its market value evaporated by $70.9 billion (approximately RMB 514.6 billion) overnight.
According to Securities Times, sources familiar with the matter revealed that Tesla has postponed the release of its autonomous taxi Robotaxi from August to October, in order to give the project team more time to manufacture more car prototypes.
It is reported that in recent months, Musk has prioritized the development of RoboTaxi over cheaper electric vehicle projects. Previously, it was expected that this model would be cheaper than the company's current cheapest model, Model 3. According to sources, Tesla has cancelled the development of cheaper electric vehicles, and RoboTaxi based on the same small car platform will continue to be developed.
On April 5th this year, Musk posted on social media X that the company will launch a robot taxi on August 8th. He also stated during Tesla's first quarter earnings conference call that a "new model" will be launched through existing platforms and production lines in early 2025. After Tesla's first quarter earnings conference call, Musk reiterated his vision for Tesla, which is to focus on developing robot taxis that can make money for car owners and an autonomous transportation network.
Popular Chinese concept stocks generally rose, with the Nasdaq China Golden Dragon Index up 2.24%. Xiaopeng Motors rose over 7%, JD.com and Vipshop rose over 6%, iQiyi rose over 4%, Bilibili, Ideal Auto, Weibo, and Alibaba rose over 3%, Baidu and Manbang rose over 2%, NetEase and NIO rose over 1%, and Pinduoduo rose slightly. Futu Holdings and Tencent Music experienced a slight decline.
Gold and silver have shown strong performance.
US CPI data released, Biden: Significant progress made in fighting inflation
On July 11th, the latest Consumer Price Index released by the US Department of Labor showed that the core CPI excluding food and energy costs rose by 0.1% month on month in May, the smallest increase since August 2021. The year-on-year growth rate is 3.3%, which is also the lowest level in over three years.
The market expects that the pace of the Federal Reserve's first interest rate cut this year is getting closer and closer. According to data from the Chicago Mercantile Exchange's Federal Reserve Watch, the probability of the Fed keeping interest rates unchanged in August is 95.3%, and the probability of a 25 basis point rate cut is 4.7%. The probability of the Federal Reserve keeping interest rates unchanged until September is 28.6%, the probability of a cumulative 25 basis point rate cut is 68.1%, and the probability of a cumulative 50 basis point rate cut is 3.3%.
According to the Securities Times, US President Biden stated that the CPI report shows significant progress in combating inflation, with overall prices falling last month after remaining flat in May, and core inflation at its lowest level in over three years.
With the expectation of interest rate cuts, why did the Nasdaq index experience a sharp decline?
According to China Fund News, market analysts have analyzed that the funds previously hidden in technology stocks were actually safe haven funds. The most popular strategy for the US stock market in the first half of this year is to "hide" market funds in large companies such as technology stocks whenever inflation exceeds expectations, and tend to invest in large technology companies like NVIDIA while reducing holdings in small cap stocks. Because the fundamentals of tech giants are AI driven, with low correlation to inflation and the economy, and sufficient cash flow. But once inflation slows down, market funds begin to shift towards interest rate cutting trades, selling technology stocks and buying small cap stocks.
The person further analyzed that the Nasdaq index is likely to not outperform interest rate sensitive sectors such as small cap stocks and biotechnology for a period of time.
As of the close, small cap stocks in the US represented the Russell 2000 Index ETF, up over 3%.
Federal Reserve officials' like 'CPI report: policy may face adjustment
On July 11th local time, Mary Daly, the President of the San Francisco Federal Reserve, stated that some adjustments to interest rates may be reasonable given the latest employment and inflation data.
Daley told the media during a conference call, "It is clear that the risks faced by our established goals of price stability and full employment have been better balanced, and monetary policy is playing a role
She added, "Based on the information we have received so far, including data on employment, inflation, GDP growth, economic prospects, etc., I believe it is necessary to make some (monetary) policy adjustments
The employment situation report released last week showed that the US unemployment rate unexpectedly rose to 4.1% in June, reaching a new high since November 2021. Daley expects further easing in prices and labor markets, paving the way for the Federal Reserve's first interest rate cut.
Daley said, "When to relax restrictions has become our new focus, which is a fairly clear signal. Now you hear many of us, especially Chairman Powell, talking about the importance of the labor market, rather than just the necessity of reducing inflation
Daley admitted that the future inflation process may be more "bumpy", but it will further cool down. She also mentioned that, as predicted by policy makers in June ("dot plot"), the US economy seems to be moving towards "one or two interest rate cuts within the year," and "this will be the appropriate path.
Daley pointed out that since the beginning of the year, the possibility of inflation accelerating again has weakened, but due to the difficulty in getting rid of high prices, the Federal Reserve is unlikely to cut interest rates as quickly as it did.
Gregory Faranello, Head of US Interest Rate Trading and Strategy at AmeriVet Securities, stated that the US economy has weakened and inflation rates are also decreasing. This is a good situation for the Federal Reserve, which expects employment and inflation data to become more favorable in the coming months, leading to the Fed starting to cut interest rates, albeit slowly and cautiously.
Lindsay Rosner, the head of multi department investments at Goldman Sachs Asset Management, stated that there are three inflation data releases between today and the September Federal Reserve meeting, and today's data is crucial in helping the Fed gain confidence that inflation is still moving in the right direction. The heat wave of economic data seems to have subsided, and after the cooling of labor market data last week, even cooler inflation data has been obtained, indicating that the Federal Reserve will cut interest rates in September.