Source: Global Market Broadcast
In the early morning of the 19th, Beijing time, U.S. stocks fell at the end of Wednesday. The Fed announced a 50 basis point rate cut, the first rate cut since 2020. Fed Chair Jerome Powell said a 50 basis point rate cut would help keep the economy and labor market strong. Economists predict that the Fed is expected to continue to cut interest rates at a rapid pace.
The Dow fell 41.12 points, or 0.10 percent, to 41,565.06, the Nasdaq lost 26.56 points, or 0.15 percent, to 17,601.50 and the S&P 500 lost 5.56 points, or 0.10 percent, to 5,629.02.
After the Fed announced a 50 basis point rate cut, the S&P 500 rose as high as 5,689.75 and the Dow rose as high as 41,981.97, both hitting intraday all-time highs.
At 2 p.m. ET on Wednesday, the Federal Reserve announced its latest policy decision, cutting interest rates by 50 basis points. Previously, the central bank was widely expected to cut by at least 25 percentage points, but traders were divided on the size of the rate cut.
The United States Federal Open Market Committee (FOMC) announced a 50 basis point rate cut after its two-day policy meeting in Washington on September 18, lowering the target range for the federal funds rate to 4.75%-5%.
Fed officials expect interest rates to fall to 4.4% by the end of 2024 and 3.4% in 2025.
The Fed said the risks to employment and inflation targets were balanced and reaffirmed its firm commitment to supporting full employment and the 2% inflation target.
The analysis pointed out that the Fed cut interest rates by 50 basis points sharply, aiming to boost the labor market through a major U-turn in monetary policy.
The dot plot of the projection path for future interest rates shows that 10 out of 19 policymakers favor at least one more 50 basis point rate cut at the last two interest rate meetings of the year.
The Federal Open Market Committee (FOMC) voted 11-1 to lower the federal funds rate target to 4.75%-5%. Fed Governor Michelle Bowman, who supports a smaller 25 basis point rate cut, is the only governor to disagree with the rate decision since 2005 and the first FOMC member to vote against it since 2022.
Wednesday's decisive action underscores policymakers' growing concerns about the employment situation.
The Fed's interest rate statement said that "the Committee's confidence in a sustainable 2% slide in inflation has increased, and that the risks to achieving the twin goals of full employment and price stability are broadly balanced." Moreover, in addition to getting inflation back on target, officials are "strongly committed to supporting full employment."
Based on the median projections of policymakers, they expect another percentage point rate cut in 2025.
In the statement, policymakers said they would consider "additional adjustments" to interest rates based on "economic data to be released, a changing outlook and a balance of risks".
They also noted that inflation "remains somewhat elevated" and that job growth has slowed.
Officials updated their quarterly economic forecasts, raising the median unemployment rate forecast to 4.4% at the end of 2024 from 4% in June, which would be a slight deterioration from the current level of 4.2%. Powell said last month that further cooling of the labor market would be "unwelcome."
The median forecast for inflation at the end of 2024 fell to 2.3% and the median forecast for economic growth to 2%. Policymakers still believe that inflation will not return to the 2% target until 2026.
Fed officials again raised their expectations for the long-term federal funds rate to 2.9% from 2.8%.
At the press conference that followed, Fed Chair Jerome Powell reiterated that the Fed remains fully focused on dual objectives.
"Today the Fed has reduced the magnitude of its policy tightening," Powell said. Our decision today reflects growing confidence that the strong performance of the labour market can be sustained; The labor market has cooled from its previous overheated state. Consumer spending has remained resilient. Investment in the housing sector fell in the second quarter. Our forecasts suggest that GDP growth is expected to remain robust. ”
"The Fed can keep the labor market strong through policy adjustments," he said. Inflation has eased significantly, but remains above our target; Long-term inflation expectations appear to remain stable. ”
"Upside risks to inflation have diminished, while downside risks to the labor market have risen," Powell said. With the balance of risks in mind, we are cutting rates by 50bps today. The Fed is not in any preset mode. ”
"Our economic forecast is not a plan or a decision; If the economy remains solid and inflation remains stubborn, policy adjustments may be slower; As economic conditions develop, monetary policy will be adjusted to better achieve its objectives. ”
Powell concluded: "Taking risks into account, we cut rates by 50 basis points today, and this adjustment will help maintain the strength of the economy and labor market; We think a 50bp rate cut is the right choice. ”
On the neutral rate, Powell said: "I have a feeling that the neutral rate is likely to be significantly higher than it was before the pandemic. My personal view is that we will not go back to the low level of neutral rates we have seen before. ”
Previously, traders had been expecting the Fed to cut rates by a quarter percentage point for much of August, but over the past week, the possibility of a super-large rate cut by the Fed has started to come into focus.
Nationwide's chief economist said there was more work to be done, and fast: "We expect the Fed to continue to lower interest rates at a rapid pace to support a soft landing – that's our base case." ”
Peter Cadillo, chief market economist at Sparta Capital Securities, said: "I was expecting the Fed to cut rates by 25 basis points, expecting the Fed to be gradual, but they were much more 'generous' than I thought. The most surprising thing is that they have already indicated that they will cut rates further, possibly by another 50 basis points by the end of the year. ”
"The Fed's move was dovish," Cadillo said. I think their biggest concern is that the labor market is becoming too weak, and I think that's why they're doing that today. The initial reaction of the market was positive. But what we're seeing in the market right now could change in the coming days as investors start worrying about the economy. ”
The start of the rate-cutting cycle will support the stagnant economy and further boost an already strong market. The S&P 500 has risen 18% so far this year and hit an all-time intraday high yesterday. According to Canaccord Genuity, the S&P 500 is up about 16% on average, typically within 12 months of the Fed's first rate cut.
Despite market expectations, some investors remain cautious about cutting rates too quickly and too soon. Peter Cecchini, head of research at Axonic Capital, said it was "extraordinary" for the Fed to cut rates by 50 basis points for the first time in its rate-cutting cycle, given the current state of the housing market.
JPMorgan Chase CEO Jamie Dimon said that whether the Fed cuts rates by 25 basis points or 50 basis points, the move "will not have an earth-shattering impact." "They need to do this," Dimon said, but "when the Fed raises rates or cuts rates, it's just a small thing, because there's the real economy underneath that."
Dimon said last month that he "doesn't think it's as important as others think," citing ongoing economic uncertainty and inflationary pressures. For more than a year, he has been warning that inflation could be trickier than investors expect, and wrote in his annual letter to shareholders in April that his company was ready for interest rates of 2% to 8% or more.
Dimon reiterated that geopolitical issues, including the war in Ukraine and the Middle East, are his top concerns. "This issue has been more important than anything I've had since I've been working," he said.
On Wednesday's economic data, United States housing starts rebounded in August after a sharp decline in the previous month, highlighting the volatility of residential construction activity as builders weigh inventory levels and a brighter outlook for demand from lower borrowing costs.
Housing starts rose 9.6 percent to an annualized rate of 1.36 million units in August, the fastest pace since April, according to official data released on Wednesday. Economists surveyed by Bloomberg forecast a median of 1.32 million units.
Building permits, a measure of future building activity, rose 5% to an annualized rate of 1.48 million units, while single-family residential building permits rose to a four-month high, the report showed. Single-family housing starts rose nearly 16% to an annualized rate of 992,000 units, the fastest growth in three months. Multifamily housing starts fell for the first time since May.
United States real estate builders are waiting for demand to continue to pick up to help bring down high inventories. Mortgage rates have fallen to their lowest level since 2022 in anticipation of the Fed's monetary policy easing, which will help support sales and absorb unsold homes.
Stocks in focus
Nvidia is in discussions to acquire software startup OctoAI. Nvidia has bid about $165 million to buy the Seattle-based startup, according to media citing a document sent to shareholders by OctoAI. It is understood that the company sells software for customers to use and make their AI models run in a more efficient manner.
OctoAI的股东包括Tiger Global Management、Madrona Venture Group和Amplify Partners。
GM announced on September 18 that starting today, customers will have access to more than 17,800 Tesla Superchargers using GM-approved NACS DC adapters, and with the addition of the Tesla Supercharger network, GM customers will have access to more than 231,800 public Level 2 and DC fast charging stations in North America, and that number will continue to grow. GM-approved NACS DC adapters will be available to customers in the United States first, followed by customers in Canada later this year.
A few days ago, the famous analyst Ming-Chi Kuo said that the sales of iPhone 16 in the first weekend decreased by 12.7% year-on-year compared with the iPhone 15 series, and the lower than expected demand was the main reason why the overall sales did not meet the target, and the shipment time of the iPhone 16 series was also delayed compared with the iPhone 15 series, which had some adverse effects on sales.
Ming-Chi Kuo summarized some of the reasons for the poor sales of the iPhone 16 series, but the core of the focus is that consumers are more rational and even less interested in the iPhone 16 series. The fundamental reason for this mentality lies in the configuration and features of the iPhone 16 series.
Microsoft said it wants more "clarity and consistency" from the United States government on export controls that delay shipments of cutting-edge AI chips to the Middle East. At the same time, Microsoft announced the opening of a new artificial intelligence research institute with its partner G42 in Abu Dhabi.
This year, Microsoft invested $1.5 billion in G42 in hopes of using the U.A.E.'s largest AI company as a gateway to markets in Africa and Asia, where Microsoft believes the demand for AI is unmet and growing. However, the United States has restricted the export of AI-specific chips to the Middle East, and Microsoft has yet to obtain the component export license required for the G42 cooperation program.
The General Court of the European Union ruled on September 18 that it upheld most of the European Commission's rulings but annulled the Commission's decision to fine Google nearly 1.5 billion euros. The European Commission fined Google almost 1.5 billion euros on one of the grounds that it did not take into account all relevant circumstances when assessing the duration of Google's contract terms, and therefore ruled to rescind the Commission's decision to impose a fine of nearly 1.5 billion euros on Google. The European Commission fined Google €1.5 billion in 2019 for blocking ads from rivals such as Yahoo and Microsoft.
Amazon CEO Andy Jassy officially announced that from now until January 2 next year, Amazon requires employees to gradually return to the working state of 5 days a week before the epidemic. It is understood that Amazon has previously required employees to return to the office at least three days a week, and now Amazon intends to increase it from 3 days to 5 days, fully returning to the state before the epidemic. In addition, Andy Jassy also demanded that Amazon's organization be flattened and that the ratio of ICs to managers should reach at least 15%.
Some foreign analysts said that Amazon could benefit from the Fed's interest rate cuts. Because interest rate cuts will bring multiple benefits to consumers and businesses.
Meta Platforms faces a hefty fine from the European Union for allegedly monopolizing the classified ads market, according to people familiar with the matter. According to the report, EU regulators will accuse Facebook's parent company, Meta, of linking its free marketplace service to the social network in order to weaken competitors.
The EU's decision could be made as early as next month, which would be one of the last investigations overseen by the EU's outgoing competition chief, Margrethe Vestager. Meta and the European Union did not immediately respond to media requests for comment.
The Intuition Machine was awarded a $4.82 billion contract from NASA.
The CEO of United States Steel said he was confident that the acquisition would eventually be approved by the United States government.
Stellantis is taking steps to avoid plant closures.
Virgin Galactic was slashed by Virgin Galactic, with a price target of $5.
EHang was approved to conduct EH216-S flight test in Brazil.