On Wednesday Eastern Time, the three major US stock indexes collectively fell. As of the close, the Dow Jones Industrial Average fell 1.09% (down 422.16 points), the Nasdaq fell 0.84%, and the S&P 500 index fell 0.95%. In terms of data, the US announced a year-on-year increase of 3.5% in March CPI, higher than the market's expected level of 3.4%, which is the highest level since September 2023.
In terms of other assets, after the CPI was announced, Bitcoin fell below $68000, setting a new low for the day, and then briefly returned to the 70000 mark.
According to foreign media reports, the inflation data in March was higher than expected, and the Federal Reserve may postpone interest rate cuts. The minutes of the Federal Reserve's March meeting reflect officials' concerns about achieving the 2% inflation target, further dampening investor optimism.
The meeting minutes show that Federal Reserve officials believe that current interest rates are still well suited to cope with changing economic conditions, such as the possibility of slowing inflation and having to maintain the current restrictive stance for a longer period of time. The minutes state that attending Federal Reserve officials believe that the progress of the scale reduction has been smooth. "However, considering the experience of ending the scale reduction from 2017 to 2019, participants generally believe that it is appropriate to adopt a cautious attitude towards further scale reduction. Therefore, the vast majority of participants believe that starting to slow down the pace of scale reduction soon is a prudent move."
The target range for the federal funds rate is currently 5.25% to 5.5%, and since July last year, the Federal Reserve has not taken action at interest rate meetings for five consecutive times.
According to the Federal Reserve Watch tool of the Chicago Mercantile Exchange Group (CME), the likelihood of a rate cut by the Federal Reserve at its June meeting is only 17%. Traders are now betting that the first rate cut may be at the Federal Reserve meeting in September.
US chip stocks mostly fell, while Nvidia rebounded
Large tech stocks in the US have seen mixed gains and losses, with Apple down 1.11%, Amazon up 0.15%, Netflix up 0.06%, Google down 0.29%, Facebook up 0.57%, and Microsoft down 0.71%.
US banking stocks fell across the board, with JPMorgan Chase down 0.92%, Goldman Sachs down 2.44%, Citigroup down 2.42%, Morgan Stanley down 2.59%, Bank of America down 2.86%, and Wells Fargo down 1.12%.
The performance of US aviation stocks was weak, with Boeing falling 1.97%, American Airlines falling 3.94%, Delta Air Lines falling 2.27%, Southwest Airlines falling 3.77%, and United Airlines falling 2.46%.
Most chip stocks in the US fell, with NXP Semiconductor down 4.27%, Intel down 2.95%, Qualcomm down 2.68%, Chaowei Semiconductor down 2.13%, Asma down 1.54%, Broadcom down 0.88%, TSMC up 0.56%, and NVIDIA up 1.97%.
The Nasdaq China Golden Dragon Index closed down 0.39%. Good Future rose by over 3%, while Dingdong Maicai, Alibaba, and New Oriental rose by over 2%. Atlas Solar fell more than 7%, Daquan New Energy, Tiger Securities, and Yihang Intelligence fell more than 4%, while Huya Live, Douyu, Yaduo, and NIO fell more than 2%.
Most European stocks closed higher, with Germany's DAX index up 0.11%, the UK's FTSE 100 index up 0.33%, France's CAC40 index down 0.05%, and Europe's Stoxx 50 index up 0.2%. Reuters said that after the disclosure of high inflation data in the United States, investors will shift their attention to the monetary policy decisions of the European Central Bank.
International oil prices rose on the 10th. As of the close of the day, the price of light crude oil futures for May delivery on the New York Mercantile Exchange rose 98 cents, closing at $86.21 per barrel, an increase of 1.15%; The price of London Brent crude oil futures for June delivery increased by $1.06 to close at $90.48 per barrel, an increase of 1.19%. Reuters analysis suggests that the three sons of Hamas leaders were killed in Israeli airstrikes on the Gaza Strip, raising concerns that ceasefire negotiations may be deadlocked.
In terms of precious metals, COMEX gold experienced a sharp decline after the disclosure of US inflation data in March, dropping from $2360 to $2337.1 during trading, with a drop of over 1% at one point. As of press release, COMEX gold rose 0.17% to $2352.6 per ounce. Some analysts believe that US inflation exceeds expectations, US bond yields rise, and the US dollar climbs, suppressing the rise of precious metals.
The US dollar index rose sharply on the 10th. The US dollar index, which measures the US dollar against six major currencies, rose 1.05% on the same day and closed at 105.245 at the end of the foreign exchange market. As of the end of the trading day in New York, 1 euro was exchanged for 1.0736 US dollars, lower than the previous trading day's 1.0853 US dollars; 1 pound is exchanged for $1.2527, which is lower than the previous trading day's $1.2670.
Federal Reserve meeting minutes reveal signal of balance sheet adjustment
On Wednesday, April 10th local time, the Federal Reserve released the minutes of the Federal Open Market Committee (FOMC) monetary policy meeting from March 19th to 20th. Decision makers are concerned that the rate of inflation decline may not be fast enough and may need to maintain a tightening policy for a longer period of time, but they still expect to cut interest rates at some point this year. The report also released a signal of scale reduction adjustment, with officials tending to slow down the speed by half.
The meeting minutes show that Federal Reserve officials believe that current interest rates are still well suited to cope with changing economic conditions, such as the possibility of slowing inflation and having to maintain the current restrictive stance for a longer period of time.
Officials believe that geopolitical turmoil and rising energy prices may still push up inflation, and loose policies may increase price pressure. The minutes of the March meeting also showed that almost all participants agreed that if the economic development generally meets expectations, then it would be appropriate to lower interest rates at some point this year.
According to the meeting minutes, Federal Reserve officials also discussed the possibility of ending the reduction of the balance sheet last month. The Federal Reserve is gradually reducing its holdings of treasury bond bonds and mortgage-backed securities (MBS) at a rate of up to $95 billion per month, a process known as quantitative tightening (QT).
Although most officials believe that this process is progressing smoothly, they generally believe that it is appropriate to be cautious about further tightening the balance sheet given the market turbulence in 2019. The minutes of the meeting showed that Federal Reserve officials generally agreed to cut the scale of monthly statement reduction by about half, and they were more inclined to adjust the treasury bond debt reduction limit than MBS to slow down the statement reduction.
According to foreign media reports, the CPI increased by 3.5% year-on-year last month, higher than Dow Jones' forecast of 3.4%. This data put pressure on the stock market on Wednesday, driving up the yield of treasury bond bonds, and prompting futures market traders to postpone the expected time of the first interest rate cut by the Federal Reserve from June to September according to the FedWatch tool of the Chicago Mercantile Exchange Group.
CNBC
Stephen Stanley, Chief Economist of Santander Bank of America, said, "Ultimately, they are not really concerned about whether they can reach 2%, but the reality is that without a critical cooling in service prices, a sustained 2% inflation target cannot be achieved. Currently, we have not seen such signs."
Since the beginning of this year, Wall Street has been closely monitoring the trend of "super core" inflation indicators. Ian Lingen, head of US interest rate strategy at BMO Capital Markets, stated that the increase in the CPI data after its release in January is enough to hinder the market's perception that the Federal Reserve is winning the inflation battle. He added, "This will be an unresolved issue for the coming months."
Tom Fitzpatrick, Managing Director of Global Market Insights at R.J. O'Brien United, pointed out that another issue facing the Federal Reserve is the difference in macroeconomic background brought about by demand driven inflation and strong stimulus spending. These factors have led consumers to increase disposable spending in 2021 and 2022, while also driving up inflation levels, reaching historic highs.
He added that the current situation is more complex because some of the most stubborn components of service inflation are household necessities such as cars and housing insurance, as well as property taxes.
Fitzpatrick said, "They were scared by what happened in 2021 and 2022, and our starting point this time is different from before. The problem is, if you consider all these factors, these are not discretionary spending items, which puts the Federal Reserve in a dilemma."
Fitzpatrick pointed out that the continuously decreasing savings rate and higher borrowing costs make it more likely for the Federal Reserve to maintain restrictive monetary policy "until problems arise". He further added that this makes the background more complex. He warned that the Federal Reserve will find it difficult to lower inflation through further interest rate hikes, as the current drivers are more stubborn and less sensitive to tightening monetary policy. Fitzpatrick said that the recent rise in inflation is more similar to tax increases. Although Stanley believes that the Federal Reserve still has a long way to go before further rate hikes, as long as inflation remains above the 2% target, rate hikes are still possible.