On July 9th local time, the three major US stock indexes closed with mixed gains and losses. The Dow Jones Industrial Average fell 0.13%, the Nasdaq rose 0.14%, and the S&P 500 index rose 0.08%.
Large tech stocks have fluctuated, with Tesla rising more than 3% for ten consecutive trading days, marking the longest consecutive rise in a year. Nvidia rose more than 2%, while Microsoft fell more than 1%. Apple rose over 0.6%, still ranking first in market value.
On July 9th local time, well-known investor Bill Gross posted on X stating that Tesla "behaves like an internet celebrity stock, with fundamentals continuing to weaken and prices rising sharply.". Gross said, "It seems like there is a new internet celebrity stock appearing every other day, most of which is pushing up shipments.".
Airports and aviation services, tourism, and regional banks were among the top performers, with Hawaii Holdings up over 6%, New York Community Bank up over 5%, ABC Bank up over 4%, Pacific Airport up over 3%, Norwegian cruise up nearly 3%, and Carnival cruise up nearly 2%. Metal raw materials and oil and gas saw the largest decline, with Century Aluminum falling more than 6%, American Aluminum falling more than 3%, and American steel falling more than 1%.
Popular Chinese concept stocks generally rose, with the Nasdaq China Golden Dragon Index rising 2.39%. Baidu rose over 8%, Tencent Music rose over 5%, Bilibili rose over 4%, Alibaba and Futu Holdings rose nearly 3%, iQiyi, Weibo, Pinduoduo, Manbang, and Vipshop rose over 2%, NetEase and JD.com rose over 1%, and NIO and Xiaopeng Motors rose slightly. Ideal cars saw a slight decline.
Powell spoke heavily
On the evening of July 9th Beijing time, Federal Reserve Chairman Powell delivered a semi annual monetary policy testimony in the US Senate, accepting inquiries on issues such as monetary policy and bank regulation.
Powell stated in his speech that recent inflation data shows some progress towards the 2% target. Until the Federal Reserve's confidence in inflation continuing towards 2% increases, interest rate cuts are not appropriate; Premature and excessive relaxation of policies may harm the progress of inflation.
Powell stated that inflation has significantly slowed down, but still exceeds the target of 2%. More good data will enhance confidence in the decline in inflation.
Powell pointed out that restrictive policies can help bring downward pressure on inflation, and reducing restrictions too early or too much carries the risk of reversing the inflation process.
Powell stated that given the progress made in reducing inflation and cooling the labor market over the past two years, rising inflation is not the only risk we face. Reducing policy constraints too late or too little may excessively weaken economic activity and employment.
In terms of monetary policy, Powell stated that the Federal Reserve "continues to make decisions on a meeting by meeting basis.". When considering adjusting the target range of the federal funds rate, the committee will continue its consistent practice of carefully evaluating the upcoming data and its impact on the constantly changing outlook, risk balance, and appropriate monetary policy path.
Powell emphasized that Congress grants the Federal Reserve the necessary operational independence so that it can pursue its dual mission of full employment and price stability with a longer-term perspective. The Federal Reserve remains committed to the goal of reducing inflation to 2% and maintaining long-term inflation expectations stable. Restoring price stability is crucial for achieving long-term full employment and price stability.
The Wall Street Journal reporter Nick Timiraos, known as the "New Federal Reserve News Agency," said that Federal Reserve Chairman Powell hinted that given inflation has returned to decline and the labor market shows signs of cooling, the Federal Reserve is paying more attention to when to cut interest rates. However, Powell has made little change to his expectations of when the central bank may start cutting rates.
Goldman Sachs Asset Management stated that the United States is "close" to its first interest rate cut.
Wall Street analysts say that although the Federal Reserve operates independently and is not affected by political pressure, Powell will face pressure from both the Democratic and Republican sides on the eve of the US election. The Democratic Party criticized the Federal Reserve for not lowering interest rates, and the Republican Party was dissatisfied with the new bank regulations that raise capital requirements.
The following is the full text of Powell's speech:
Recent indicators indicate that the US economy continues to expand at a steady pace. After impressive strong growth in the second half of last year, the growth of Gross Domestic Product (GDP) seems to have slowed down in the first half of this year. However, private domestic demand remains strong, and consumer spending growth has slowed down, but remains stable. So far this year, we have seen moderate growth in capital expenditure and a rebound in residential investment. Over the past year, improvements in supply conditions have supported resilient demand and strong performance in the US economy.
In the labor market, a wide range of indicators indicate that the situation has returned to pre pandemic levels: strong but not overheated. The unemployment rate has increased, but it remained at a low level of 4.1% in June. In the first half of this year, an average of 222000 job opportunities were added per month. In the past few years, with the increase of labor supply, employment growth has been strong. The increase in labor supply is mainly reflected in the increase in individual labor force participation rate between the ages of 25 and 54 and strong immigration growth. Therefore, the gap between job positions and workers is far below its peak and currently only slightly higher than the level in 2019. The nominal wage growth has slowed down in the past year. The strong labor market has helped to narrow the long-standing employment and income gap between different population groups.
Inflation has significantly eased in the past few years, but still exceeds the Federal Reserve's long-term target of 2%. As of May, the total personal consumption expenditure (PCE) price has increased by 2.6% in the 12 months. Excluding volatile food and energy categories, core personal consumption expenditure (PCE) also increased by 2.6%. Earlier this year, we did not make progress in achieving the 2% inflation target, but recent monthly data shows moderate further progress in inflation. From extensive surveys of households, businesses, and forecasters, as well as indicators from financial markets, it appears that long-term inflation expectations are still under control.
Our monetary policy actions are guided by the dual mission of promoting maximum employment and stabilizing prices for the American people. In order to support these goals, the committee has maintained the target range of the federal funds rate between 5.25% and 5.5% since July last year. In the previous year and a half, the committee significantly tightened its monetary policy stance. At the same time, we continue to reduce our holdings in securities. At the May meeting, we decided to slow down the pace of balance sheet reduction starting from June, consistent with the previously announced plan. Our restrictive monetary policy stance helps to better balance demand and supply conditions, and puts downward pressure on inflation.
The Federal Open Market Committee stated that it is not appropriate to lower the target range for the federal funds rate until we have greater confidence in inflation continuing to move towards 2%. The data released in the first quarter of this year did not support this confidence boost. However, recent inflation data has shown some mild further progress, and more positive data will enhance our confidence that inflation is continuing to move towards 2%.
We will continue to make decisions in each meeting. We know that reducing policy constraints too early or too much may delay or even reverse the progress we have made in inflation. Meanwhile, given the progress made in reducing inflation and cooling the labor market over the past two years, high inflation is not the only risk we face. Reducing policy constraints too late or too little may excessively weaken economic activity and employment. When considering adjusting the target range of the federal funds rate, the committee will continue to carefully evaluate the upcoming data and its impact on the changing outlook, risk balance, and appropriate path of monetary policy.
Congress has granted the Federal Reserve operational independence, which is necessary for a longer-term perspective in pursuing the dual mission of maximum employment and stable prices. We are still committed to the goal of reducing the inflation rate to 2% and maintaining stable long-term inflation expectations. Restoring price stability is crucial for achieving maximum employment and long-term price stability. Whether we can successfully achieve these goals is related to all Americans.