Fed Rescues US Debt; US Stocks Jump, Tech Stocks Drag Down Market; Nvidia Down 4%, AMD Falls 9% Post-Earnings

On Wednesday this week, as expected by the market, the Federal Reserve's monetary policy decision kept high interest rates unchanged and slowed the pace of quantitative tightening (QT), more than halving the reduction of the U.S. Treasury's balance sheet scale beyond expectations. Although the decision statement warned that recent inflation has lacked progress, Federal Reserve Chairman Powell played the "savior" of U.S. Treasury bonds.

Before the arrival of the Fed's decision day, the bond market was heavily bearish, with market participants expecting Powell to take a hawkish stance, reiterating that there is no rush to cut interest rates, and acknowledging the recent deterioration in the inflation outlook. At the post-meeting press conference, Powell clearly stated that the next interest rate action is "impossible" to be an increase. Comments suggest that Powell's statement excluding the possibility of rate hikes has eased investors' concerns about inflation stickiness.

Comments believe that the basic message conveyed by the Fed is that rate cuts have been postponed, but have not deviated from the track of rate cuts. The Fed may lack confidence in rate cuts, but has not considered rate hikes. The Fed's decision statement this time is more accommodative, and the plan to slow down the balance sheet reduction is good for the bond market. Powell's press conference shows that he believes monetary policy is restrictive. If the policy is restrictive, then there should be more concern about the risk of downward economic growth, rather than the risk of upward inflation.

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Before the Fed's major decision was revealed, bond and stock market investors were restrained about economic data such as the April "small non-farm" ADP private sector employment and the U.S. Treasury's expected new quarter refinancing bond issuance scale. The U.S. Treasury bond prices, which had the worst performance in 14 months in April, rebounded, and yields fell back. The two major stock indices, the S&P and the Nasdaq, continued to decline, with fluctuations easing compared to Tuesday.

After the Fed announced its decision, the S&P and Nasdaq turned positive, U.S. Treasury bond prices jumped, and during Powell's speech, the three major U.S. stock indices' gains expanded to more than 1%. The two-year U.S. Treasury bond yield, sensitive to interest rates, fell below 5.0%, retreating more than 10 basis points from the high level set after breaking through 5.0% on Tuesday. However, U.S. stocks failed to maintain their gains, and after Powell's press conference ended, the S&P and Nasdaq returned to the downward trend, with the Dow Jones Industrial Average giving up most of its gains. The market was suppressed by some technology stocks such as Nvidia.

Earnings reports significantly affected industry leader stocks: AMD, which did not meet the market's high expectations for AI chip sales this year, fell by 10% at one point; Super Micro Computer, an AI "demon stock" with third-quarter revenue below expectations, gapped down by more than 10%, and fell nearly 19% during the day; Starbucks, which unexpectedly declined in same-store sales in the second quarter and lowered its guidance for fiscal 2024, fell nearly 18% during the day; Amazon, which had more than double the expected profit growth in the first quarter and accelerated growth in its cloud business for two consecutive quarters, rose nearly 6% during the day, supporting the Dow Jones rebound; Pfizer, which had higher-than-expected revenue in the first quarter and raised its full-year profit guidance, rose more than 7% during the day. Chinese concept stocks generally rebounded, and NIO, which delivered more than double the expected volume in April, soared more than 10%.

In the foreign exchange market, after Powell's speech, the U.S. dollar index, which had approached the five-month high set two weeks ago during the Asian market, fell back sharply, and non-American currencies generally rose. The yen suddenly surged after the U.S. stock market closed, rising more than 3% from its daily low, following a suspected Japanese government intervention on Monday, the second day this week with a surge of more than 3%, and the U.S. dollar against the yen nearly broke through 153.00, far from the 1990 high set after the sharp drop on Monday.

Commodities performed differently. After Powell's speech, as the U.S. dollar and U.S. Treasury yields fell sharply, gold, which had plummeted on Tuesday, rebounded sharply, with both spot gold and New York gold futures' gains expanding to more than 1%. As Israel and Hamas conducted ceasefire negotiations, the unexpected surge in U.S. oil inventories brought bad news for demand, and international crude oil fell sharply. U.S. oil broke through the $80 mark, and both U.S. and Brent oil hit their lowest levels since early March, falling more than 3% in a single day for the first time in two weeks, marking the worst single-day performance since Saudi Arabia unexpectedly lowered crude oil prices nearly four months ago. The U.S. Department of Energy announced that U.S. EIA crude oil inventories last week increased by more than 7.2 million barrels, the largest weekly increase since February, while EIA gasoline inventories last week increased by more than 300,000 barrels, while analysts expected a decline of more than a million barrels.

The S&P and Nasdaq fell for two consecutive days, and the three major U.S. stock indices once rose by more than 1% after Powell's speech. Chinese concept stocks rebounded, and NIO closed up nearly 12% after announcing delivery volumes.

The three major U.S. stock indices started with different gains and losses, and all rose at noon. The S&P 500 Index and the Nasdaq Composite Index opened lower. When the daily low was refreshed at noon, the S&P fell by more than 0.4%, and the Nasdaq fell by more than 0.6%. After the Fed announced its decision at noon, before Powell started speaking, both had turned positive and accelerated their rise during Powell's speech,刷新日高时，纳指涨1.7%，标普涨1.2%。高开的道琼斯工业平均指数全天仅盘初短线转跌，午盘涨幅也扩大，鲍威尔讲话后曾涨超530点、涨逾1.4%。Following Powell's press conference at the end of the day, the three major indices retreated, with the S&P and Nasdaq turning negative again. Ultimately, only the Dow Jones Industrial Average closed higher, up 87.37 points, or approximately 0.23%, at 37,903.29 points, temporarily bidding farewell to the closing low since April 19th, which was nearly 1.5% down on Tuesday. The S&P 500 closed down 0.34%, at 5,018.39 points,刷新ing Tuesday's low since April 22nd, which was down 1.57%. The Nasdaq, which fell about 2% on Tuesday, closed down 0.33%, at 15,605.48 points, with both the S&P and Nasdaq falling for two consecutive days.

The technology-heavy Nasdaq 100 Index closed down 0.7%, with both the Nasdaq and the index falling for two consecutive days to a low since April 22nd. The Nasdaq Technology Market Value Weighted Index (NDXTMC), which measures the performance of technology sector stocks in the Nasdaq 100 Index, closed down 1.15%, underperforming the broader market and falling for three consecutive days to a low since April 22nd. The Russell 2000, a small-cap index dominated by value stocks, closed up 0.32%, outperforming the broader market and bidding farewell to the low since April 22nd set by Tuesday's pullback.

Among the Dow Jones constituents, Johnson & Johnson led the gains, rising more than 4%, followed by Amazon and Boeing, both up more than 2%. Industrial giant 3M (MMM), which rose 4.7% on Tuesday's earnings report and was upgraded to overweight by JPMorgan, gained 2%.

In the S&P 500 sectors, six out of eleven closed lower on Wednesday. The energy sector, hit by a plunge in crude oil prices, fell 1.6%, while the information technology sector, home to chip stocks like Nvidia, fell nearly 1.3%. The financial sector and the non-essential consumer goods sector, where Amazon is located, fell slightly. Among the five sectors that closed higher, utilities rose more than 1.1%, and the communication services sector, where Meta is located, rose more than 0.8%.

Among the tech giants known as the "Seven Sisters," including Microsoft, Apple, Nvidia, Google's parent company Alphabet, Amazon, and Facebook's parent company Meta, as well as Tesla, there was a mixed performance, with Nvidia leading the declines. Tesla, which closed down nearly 5.6% on Tuesday, fell 1.8% and continued to move away from the closing high since March 1st set by a strong rebound of 15% on Monday.

Among the FAANMG group of tech stocks, Amazon, which reported earnings, rose nearly 6% at midday and closed up 2.2%. After falling more than 3% on Tuesday, it began to approach the closing high since April 17th set on Monday; Meta closed up nearly 2.1%, rebounding after two consecutive days of closing lows since February 1st; Microsoft, which fell to a closing low since January 12th on Tuesday, closed up nearly 1.5%; Alphabet closed up 0.6%, not continuing to fall away from the closing historical high set by last Friday's rebound; Netflix, which fell for three consecutive days to a low since January 24th on Tuesday, closed up 0.2%; while Apple, which turned negative at the end of the day, closed down 0.6%, continuing to move away from the closing high since April 12th set by Monday's rebound.

Overall, chip stocks underperformed the broader market, with the Philadelphia Semiconductor Index and the Semiconductor Industry ETF SOXX closing down about 3.5% and 3.4%, respectively, falling for two consecutive days to a low since April 23rd. Among chip stocks, Nvidia fell nearly 6% near midday and closed down more than 3.9%; AMD, which reported earnings, fell nearly 10.3% near midday and saw its losses narrow slightly after the Fed's meeting, closing down about 9%; Intel, which turned positive at midday and then negative at the end of the day, closed down nearly 0.4%, falling for four consecutive days since reporting earnings last week; Arm closed down 5.8%, Broadcom fell more than 4%, Micron Technology fell 2.8%, and TSMC's U.S.-listed shares fell nearly 1.8%; while Qualcomm, which fell more than 1%, reported second-quarter earnings and guidance for the current quarter that exceeded expectations after the bell, and its shares rose as much as 5%.

Most AI concept stocks rebounded on Tuesday. At the close, SoundHound.ai (SOUN) rose 3.8%, BigBear.ai (BBAI) rose 3.6%, Adobe (ADBE) rose 1.4%, Oracle (ORCL) rose nearly 0.8%, C3.ai (AI) rose 0.7%, Palantir (PLTR) rose nearly 0.7%, while Super Micro Computer (SMCI), which reported earnings, fell about 18.5% in the morning and closed down 14%; Astera Labs (ALAB), known as the "little Nvidia" and selling data center interconnect chips, fell 11.7%.

Chinese concept stocks generally rebounded. The Nasdaq Golden Dragon China Index (HXC) closed up nearly 0.6%, outperforming the broader market, rebounding after falling more than 3% on Tuesday to end a six-day winning streak. The Chinese concept ETFs KWEB and CQQQQ closed up nearly 0.4% and nearly 0.5%, respectively. Among the new forces in car manufacturing, at the close, NIO rose nearly 11.7%, Li Auto rose nearly 0.3%, Xiaomi's pink sheet rose 0.2%, while XPeng fell 0.1%. Among other stocks, at the close, JD.com rose more than 1%, Alibaba, Baidu, and Tencent's pink sheets rose nearly 0.9%, Bilibili rose 0.7%, NetEase rose 0.6%, while Pinduoduo fell nearly 0.6%.

Bank stock indices rebounded across the board, outperforming the broader market. The KBW Bank Index (BKX), which fell for two consecutive days to a low since April 19th, closed up nearly 0.7%; the KBW Nasdaq Regional Banking Index (KRX) closed up nearly 2.4%, and the SPDR S&P Regional Banking ETF (KRE) rose nearly 2.6%, both rebounding after falling for four consecutive days to a low since April 18th.Among individual stocks releasing earnings reports, Starbucks (SBUX) closed down 15.9% after its second fiscal quarter earnings and revenue fell below expectations and guidance for the current fiscal year was lowered; CVS Health (CVS), a pharmacy chain with earnings below expectations for the first quarter and lowered full-year profit guidance, closed down 16.8%; Estée Lauder (EL), a beauty giant with fourth-quarter earnings guidance below expectations, closed down 13.2%; Kraft Heinz (KHC), which reported first-quarter revenue below expectations, closed down 6%; Yum! Brands (YUM), the parent company of KFC with first-quarter earnings and revenue below expectations, closed down 4.2%.

On the other hand, Pfizer (PFE), which reported better-than-expected first-quarter results and raised its annual guidance, closed up 6.1%; Powell Industries (POWL), a power infrastructure company with second-quarter revenue and earnings above expectations, closed up 18.9%; New York Community Bank (NYCB), a regional bank that reported a first-quarter loss of $335 million but with the CEO stating a clear path to profitability over the next two years, closed up 28.3%; Pinterest (PINS), a social media platform with first-quarter revenue and second-quarter guidance both above expectations, closed up 21%.

In terms of European stocks, including the four major economies of the Eurozone—Germany, France, Italy, and Spain—many European stock markets were closed on Labor Day, and the pan-European stock index fell slightly for two consecutive days. The Stoxx Europe 600 index closed down 0.11%, continuing to fall away from the closing high set on April 8 for two consecutive days. The UK stock market, which slightly fell on Tuesday, continued to move away from the closing historical high set at the end of Monday for three consecutive days.

Among individual stocks releasing earnings reports, Aston Martin, a luxury car manufacturer listed in London, once fell more than 12% during the trading day and closed down nearly 6.8% after reporting a first-quarter pre-tax adjusted loss that exceeded expectations and nearly doubled year-over-year; GlaxoSmithKline, a London-listed pharmaceutical company that raised its full-year profit guidance, closed up 1.9%.

After Powell's speech, the two-year U.S. Treasury yield fell by more than 10 basis points, bidding farewell to a five-month high.

The U.S. 10-year benchmark Treasury yield once tested 4.70% in the early European stock market and once broke below 4.64% to a daily low in the early U.S. stock market. After Powell stated that the next move could not possibly be a rapid interest rate hike, it once broke below 4.60%, falling to below 4.58% at one point,刷新ing the low since April 23, with a daily drop of about 10 basis points, moving away from the high of over 4.73% on last Thursday, which刷新ed the high since November 2, 2023, to about 4.63% at the end of the bond market, with a daily drop of about 5 basis points (closed at 4.6798% on Tuesday), and other U.S. Treasury yields all fell back after rebounding on Tuesday.

The two-year U.S. Treasury yield, which is more sensitive to interest rate prospects, once tested 5.04% before the European stock market, approaching the high刷新ed since November 14, 2023, after breaking through 5.04% on Tuesday. After the European stock market opened, it continued to fall, hovering around 5.0% in the early U.S. stock market. After Powell's speech at noon, it once broke below 4.93% to a daily low, with a daily drop of about 11 basis points, and was about 4.96% at the end of the bond market, with a daily drop of about 7 basis points.

After Powell's speech, the U.S. dollar index, which had创ed a two-week high during the trading day, accelerated its decline, and the yen surged by more than 3% at the end of the day. The ICE U.S. Dollar Index (DXY), which tracks the basket of exchange rates of the U.S. dollar against the euro and six other major currencies, once approached 106.50 before the European stock market,刷新ing the high since April 16. It approached the high since November 1, 2023, after breaking through 106.50 on April 16, with a daily increase of 0.25%, and then continued to fall. It turned negative before the U.S. stock market opened and once broke below 105.80 after the Federal Reserve's resolution was announced during the U.S. stock market lunch break. The decline rapidly expanded after the U.S. stock market closed, once breaking below 105.50 to a daily low, with a daily drop of more than 0.7%.

By the end of the Wednesday foreign exchange market, the U.S. dollar index was above 105.60, with a daily drop of nearly 0.6%; the Bloomberg U.S. Dollar Spot Index, which tracks the exchange rates of the U.S. dollar against ten other currencies, fell nearly 0.2% during the day, falling from the high刷新ed on Tuesday since April 16, and fell by more than 0.5% when it刷新ed the daily low after the Federal Reserve's resolution was announced, and both the U.S. dollar index and the Bloomberg U.S. Dollar Spot Index fell back after rebounding on Tuesday.Among non-US currencies, the Japanese yen surged at the end of the day. The US dollar against the yen approached 158.00 before the European stock market session, hitting a daily high and rising by more than 0.1% during the day. It turned to a decline before the US stock market session and plunged after the US stock market closed, approaching 153.00 to 153.04, with a daily drop of 3% and a drop of more than 3.1% from the daily high. At the end of the currency market, it returned to the 154.30 level, narrowing the daily loss to 2.2%. The euro against the US dollar broke below 1.0650 before the European stock market session, hitting a low not seen since April 23. After the Federal Reserve meeting, it rose, and during the US stock market lunch break, it broke through 1.0730, approaching the high of 1.0740 set last Friday, which was the highest since April 11, with a daily increase of more than 0.6%. The British pound against the US dollar tested 1.2550 during the US stock market lunch break, hitting a daily high, with a daily increase of nearly 0.5%, and did not continue to fall away from the high of 1.2570 tested on Monday, which was the highest since April 11.

The offshore renminbi (CNH) against the US dollar refreshed its daily low to 7.2549 at the beginning of the Asian market, then continued to rise. After the Federal Reserve's decision during the US stock market lunch break, it rose to 7.2318, hitting an intraday high since it rose to 7.2177 on March 22, with a daily increase of 230 points. At 4:59 AM Beijing time on May 2, the offshore renminbi against the US dollar was reported at 7.2341 yuan, up 207 points from the New York close on Tuesday, rebounding after falling back on Tuesday.

Bitcoin (BTC) was above 60,000 US dollars in the early Asian market, refreshing its daily high, with some platforms breaking through 61,000 US dollars. During the European and American trading session, it was generally declining. During the US stock market lunch break, it fell below 56,800 US dollars, with some platforms falling below 56,600 US dollars, hitting a two-month low since the end of February for two consecutive days. It fell more than 4,000 US dollars from the daily high, a drop of more than 7%. After the Federal Reserve announced its decision, it narrowed its loss by more than half, once rising back to 59,000 US dollars, with some platforms testing 59,500 US dollars, a rebound of more than 2,000 US dollars from the daily low. At the end of the US stock market, it fell below 58,000 US dollars, and at the close of the US stock market, it was above 57,000 US dollars, with some platforms breaking through 57,100 US dollars, falling by about 4% in the last 24 hours.

Crude oil fell by more than 3%, the largest drop in nearly four months, and fell for three consecutive days to a seven-week low.

International crude oil futures were in decline all day on Wednesday, with US WTI crude oil breaking through the 80 US dollar mark during the US stock market breakfast. When the US oil hit a new low since March 12 during the US stock market lunch break, it approached 78.80 US dollars, with a daily drop of nearly 3.8%, and Brent crude oil approached 83.30 US dollars, with a daily drop of about 3.5%.

In the end, crude oil fell for three consecutive days, hitting the largest daily drop since January 8 when Saudi Arabia unexpectedly cut the official crude oil price for Asia, following the drop on April 17. The June WTI crude oil futures closed down 2.93 US dollars, a drop of more than 3.576%, at 79.00 US dollars per barrel; the July Brent crude oil futures closed down 2.89 US dollars, a drop of nearly 3.35%, at 83.44 US dollars per barrel, both hitting the lowest closing level since March 12.

US gasoline and natural gas futures continued to fall together. The NYMEX June gasoline futures closed down about 4.2%, at 2.5774 US dollars per gallon, falling for three consecutive days, hitting the lowest closing level since March 8; the NYMEX June natural gas futures closed down more than 2.96%, at 1.9320 US dollars per million British thermal units, falling for two consecutive days to the lowest level since April 22.

Gold rebounded, and the June gold futures moved away from the four-week low, rising more than 1% during the Federal Reserve meeting. London basic metal futures fell across the board on Wednesday. Tin, which fell more than 4% on Tuesday, fell nearly 2%, leading the decline for two consecutive days, hitting the lowest level in three weeks for two consecutive days, along with copper, zinc, and lead, which all fell for two consecutive days. Copper closed below 9,900 US dollars, continuing to move away from the high of 10,000 US dollars set on Monday after breaking through it. Zinc and lead continued to fall from their highs since March last year and November last year, respectively. Nickel, which rose for two consecutive days, and aluminum, which rose for three consecutive days, fell back, with nickel falling nearly 1.9%, failing to approach the high of last Monday, which was the highest since September last year.

Gold turned higher during the trading session on Wednesday. During the Asian market, New York gold futures fell to 2,291.7 US dollars, a daily drop of nearly 0.5%, and spot gold fell below 2,282 US dollars, a daily drop of about 0.2%, both hitting the lowest intraday level since April 5 for two consecutive days, then continued to rebound, and rose back to 2,300 US dollars during the European stock market session.At the close, the COMEX June gold futures rose by 0.35%, settling at $2,311 per ounce, moving away from the closing low since April 2nd set on Tuesday. It marked the fourth gain in the last five trading days, but due to a 2.3% plunge on Monday, the week is still on track for a decline.

After the Fed's decision was announced during the U.S. stock market's midday session, the gold price quickly expanded its gains. During Powell's speech, when the futures gold approached $2,340.00, it was nearly a 1.6% increase from Tuesday's close, while spot gold rose above $2,328, with a daily increase of over 1.8%.

However, some of the gains were later given back. By the time the U.S. stock market closed, spot gold was slightly above $2,310, with a daily increase of about 1.1%, and futures gold was above $2,320, with a daily increase of about 0.9%.