U.S. stocks rose sharply as the market priced in a sharp interest rate cut by the Federal Reserve. On September 19, local time, the Dow rose more than 500 points, and the S&P 500 closed above 5,700 points for the first time, both hitting record highs. U.S. large technology stocks rose across the board, and the Nasdaq China Golden Dragon Index rose more than 4%.
The Fed cut interest rates for the first time in four years, which the market believes will help the United States economy avoid a recession, and market confidence has been boosted. The latest unemployment claims data from United States fell to its lowest level since May, suggesting that the labor market remains healthy. There is a market view that US stocks can continue to rise until the United States election.
The Dow and S&P hit all-time highs
China Concept Stock Index Soars 4%
On Thursday local time, the three major United States stock indexes closed up across the board. At the close, the Dow rose 1.26% to 42,025.19, the S&P 500 rose 1.7% to 5,713.64, and the Nasdaq rose 2.51% to 18,013.98. Among them, the Dow and the S&P 500 both hit record highs.
Source: Wind
Large technology stocks rose, with Tesla rising more than 7%, hitting a new closing high since late July; Nvidia, Meta, and Apple rose more than 3%, Netflix rose more than 2%, and Intel, Microsoft, Google's parent company Alphabet, and Amazon rose more than 1%.
Bank stocks were broadly higher. JPMorgan Chase rose 1.49%, Goldman Sachs rose 4%, Citigroup rose 5.24%, Morgan Stanley rose 1.46%, Bank of United States rose 3.21% and Wells Fargo rose 2.84%.
Chip stocks performed strongly, Chaowei Semiconductor rose 5.7%, TSMC rose 5.27%, ASML rose 5.12%, GF rose 4.7%, Nvidia rose 3.97%, Broadcom rose 3.9%, Qualcomm rose 3.34%, and Intel rose 1.78%.
Popular Chinese concept stocks generally rose, with the Nasdaq China Golden Dragon Index up more than 4%, Yiying Securities up more than 240%, Futu Holdings up nearly 14%, GDS up more than 11%, MINISO up more than 10%, Gaotu Group and Tiger Brokers up more than 9%, Xpeng Motors, Zeekr, Good Future, and Shell up more than 8%, Weilai and BOSS Zhipin up more than 7%, JD.com, Huya Live, and Bilibili up more than 6%.
In terms of commodities, international gold and oil prices rose sharply. Spot gold rose nearly 1.1% the day after the Fed cut interest rates, approaching an all-time high.
Source: Wind
In the foreign exchange market, Asian currencies ushered in a strong rally, driven by the Federal Reserve's interest rate cut, and the RMB exchange rate ushered in a rebound. The onshore yuan closed at 7.0640 against the US dollar at 3:00 Beijing time, up 140 points from the previous trading day's overnight close. As interest rate differentials tend to converge, the renminbi may start a continuous appreciation trend.
European stock markets are trading near record highs. The STOXX Europe 600 index closed up 1.4% at 521.67, just below the record high of 525.05 hit in August. United Kingdom's FTSE 100 gave up some of its gains, still up about 0.9%, after the United Kingdom's central bank announced that it would keep interest rates unchanged and said it would not rush to cut them.
Data released by the United States Labor Department on Thursday (Sept. 19) showed that seasonally adjusted initial jobless claims were 219,000 in the week ended Sept. 14, down 12,000 from the previous week's adjusted 231,000 and the lowest since May 25 this year, indicating that the labor market remains healthy despite the slowdown in hiring.
It should be noted that UBS analysts pointed out in a report a few days ago that if the Federal Reserve takes aggressive interest rate cut measures, it may push interest rates below expectations, which may trigger a stock market bubble.
The UBS team, led by Andrew Garthwaite, said that while the Fed's 50 basis point easing cycle has been accompanied by a recession since 1981, this time UBS sees this as an aggressive performance by the Fed rather than a sign of a recession.
In addition, the current United States economy is weaker and less sensitive to interest rate changes than in the past, which could push interest rates lower further and weaken the dollar exchange rate. UBS predicts that by the end of 2025, the euro will reach 1.15 against the dollar and the yen will reach 130 against the dollar.
The market is divided on the pace of subsequent rate cuts by the Fed
Just hours after the Fed announced a rate cut, economists at Goldman Sachs Group Inc. revised their outlook to expect the Fed to cut rates by 25 basis points at every meeting from November to June. JPMorgan Chase & Co., which is betting on the first cut, insists on another 50 basis point cut in November, but how that will depend on the state of the labor market.
Economists and strategists at Bank of United States predict that the Fed "will be pushed into deeper rate cuts," cutting them by another 75 basis points in the fourth quarter and 125 basis points next year.
Citigroup maintained its expectation that the Fed would cut rates by another 75 basis points this year (50 in November and 25 in December). The bank expects the Fed to make multiple 25 basis point cuts in 2025, bringing the terminal rate target range to 3% to 3.25%.
Morgan Stanley believes policymakers may choose to cut rates by a series of 25 basis points by mid-2025, including two this year and four in the first half of next year.
Wells Fargo expects that in a hard landing scenario, the Fed could eventually cut rates by as much as 350 basis points in the first year of the easing cycle, or 150 basis points in the case of a soft landing. In any case, the Fed has a lot of room to ease.
Source: China Securities Journal
Editor: Xiaoya