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Late at night, important US economic data was released.

The US GDP in the second quarter exceeded expectations, showing that economic growth has not slowed down. The market expects that the Federal Reserve will not be under great pressure to cut interest rates in July.

After the U.S. stock market opened, the Nasdaq continued its decline on Wednesday, with the decline expanding to 1% at one point before narrowing. On Wednesday, the Dow fell 1.25%, the Nasdaq fell 3.64%, and the S&P 500 fell 2.31%.

Continued economic growth

On July 25th local time, the Bureau of Economic Analysis of the U.S. Department of Commerce simultaneously released the annualized quarterly rates of U.S. real GDP and PCE inflation data for the second quarter.

Data showed that the annualized quarterly rate of US GDP in the second quarter was 2.8%, and analysts' expectations were roughly around 2%. This figure is nearly double the annualized quarterly rate of 1.4% in the first quarter, but it is still slower than the growth rates of 4.9% and 3.4% in the second half of last year.

Quarterly GDP change in the United States (data source: Bureau of Economic Analysis, U.S. Department of Commerce)

Quarterly GDP change in the United States (data source: Bureau of Economic Analysis, U.S. Department of Commerce)

According to the GDP report, U.S. consumer spending was driven mainly by a rebound in durable goods such as automobiles and furniture and a modest increase in services spending from the first quarter. In addition, boosted by defense spending, U.S. government spending contributed more to GDP than in the first quarter of this year. Residential investment dragged down economic growth for the first time in a year as high mortgage rates curbed sales activity and new construction.

Business investment grew at its fastest pace in nearly a year, with equipment investment growing the strongest, the fastest pace since early 2022. Another report on Thursday showed that orders for business equipment at U.S. factories in June, excluding aircraft and defense equipment, increased by the most since the beginning of last year, suggesting that such spending will continue to boost economic growth in the coming months.

Also released was the second quarter PCE price index annualized quarterly rate of 2.9%, which was higher than the expected 2.7%, but significantly lower than the 3.7% in the same period last year. In addition, the June PCE data will be released before the market opens on Friday.

U.S. stocks usher in earnings season

After the release of the US economic data, spot gold fell in the short term, falling below $2,360/ounce. Spot silver fell 4.54% during the day, now at $27.59/ounce.

The U.S. stock market performed steadily after opening on Thursday, with the three major indexes rising and falling slightly. But then, the Nasdaq fell by 1% at one point, and then narrowed its decline. U.S. chip stocks fell sharply at one point, with ARM falling by more than 10% at one point, Nvidia falling by more than 6% at one point, and Qualcomm and Broadcom falling by nearly 2%.

As more and more technology companies release their financial reports, the uncertainty of the US stock market trend is gradually increasing. On Wednesday, Tesla and Google, two of the "Big Seven" in the US stock market that released their second-quarter financial reports, both had direct negative data or negative interpretations. In fact, the recent correction of the Nasdaq index, which is dominated by technology stocks, is much greater than that of the Dow Jones Index. The market is increasingly controversial about the bull market of technology stocks. If the financial reports of other technology giants do not meet investors' expectations, the US stock market may usher in a greater adjustment.

Bank stocks also received bad news. Buffett's Berkshire Hathaway sold more Bank of America shares this week, reducing its holdings of Bank of America shares for six consecutive trading days. A new regulatory filing shows that Berkshire sold another 18.9 million shares at an average price of $42.46 on Monday, Tuesday and Wednesday, cashing in $802.5 million. In the past six trading days, Berkshire has reduced its holdings of 52.8 million shares of Bank of America, worth $2.3 billion, and its shareholding ratio has dropped to 12.5%. Berkshire still holds 980.1 million shares of Bank of America, with a market value of $41.3 billion.

New York Community Bank fell more than 16% after opening on Thursday, the biggest drop since March. The company's stock price plunge has raised concerns about whether the crisis of small and medium-sized banks in the United States is returning.

As for Chinese concept stocks, New Oriental fell rapidly after opening, with a drop of more than 4% at one point. Dongfang Zhenxuan announced that anchor Dong Yuhui had resigned. Yu Minhong said that all the profits from "Walking with Hui" would be given to Dong Yuhui.

When will the Fed cut interest rates?

After the release of Thursday's macro data, the probability of a rate cut shown by the Chicago Mercantile Exchange's "Fed Watch" tool has not changed much, still with a 100% chance of a rate cut in September, but the probability of a rate cut in July is less than 10%.

Analyst Kristine Aquino said that the unexpected upward trend in U.S. economic growth and inflation indicators has solidified the market's belief that it is too early for the Federal Reserve to cut interest rates in July. Although former New York Federal Reserve Bank President Dudley believes that interest rates need to be lowered immediately, a September rate cut is still the basic expectation for traders. Nevertheless, they clearly believe that there will be more economic weakness in the final months of the year as they continue to hold out hope for the possibility of a third rate cut before December.

Volker Schmidt, portfolio manager at Ethenea, said in a report that the Federal Reserve is unlikely to cut interest rates in July as it is looking for more evidence of a slowdown in inflation and the labor market, but a rate cut will no longer be a surprise. The U.S. unemployment rate is climbing, and wage growth and new job openings also indicate a gradual slowdown in the job market, but Fed policymakers are cautious about cutting interest rates. "The current 'green light' is not green enough for policymakers," he said. Ethenea expects the Fed to cut interest rates for the first time in September at the latest.

Source: Securities Times

Column Editor: Qin Hong Text Editor: Li Linwei Title Image Source: Shangguan Title Image Image Editor: Su Wei

Source: Author: Securities Times