Investors in the US stock market suddenly came to their senses and decisively sold off in large quantities, leading to a significant decline in the three major US stock indices in the early hours of today.
Although Federal Reserve Chairman Powell has repeatedly emphasized that the US economy can achieve a soft landing, it now appears that under the backdrop of substantial interest rate hikes, a recession is inevitable.
01. US Stock Market Plunge
Last night, the Nasdaq index fell by 4.1%, losing 453 index points, and closed at 10,646 points, setting a new low for this round of adjustment. The Nasdaq index has fallen by 32% so far this year. Although the A-share market has also declined significantly this year, the market has been relatively independent during this period. In contrast, the ChiNext index has fallen by 22.2% this year, which is actually a 10-point excess return compared to the Nasdaq index.
Additionally, at the close in the early morning, the Dow Jones Industrial Average plummeted by 741 points, breaking through the 30,000-point threshold, and closed at 29,927 points, down by 2.4%.
The S&P 500 index also fell by 3.25%, with a cumulative decline of 23% so far this year. All three indices set new lows for this round of adjustment.
Yesterday, after the Federal Reserve announced a substantial interest rate hike of 75 basis points, the US stock market actually surged against the odds. At that time, I had already pointed out that this was a fake market trend.
In the afternoon yesterday, the A-share and Hong Kong stock markets plunged, with the Hang Seng Tech Index eventually falling by more than 3%. Subsequently, European stock markets opened lower, and I made an early prediction that a plunge in the US stock market was inevitable last night.
Ultimately, the perfect storm in the US stock market arrived as expected.The United States' significant interest rate hikes have also had a substantial impact on the global financial markets, affecting stock, bond, and foreign exchange markets. Currently, global stock markets have experienced a significant decline, and due to the interest rate hikes, bond prices have plummeted.
Under the expectation of interest rate hikes, the US Dollar Index has rapidly jumped, leading to substantial devaluation of various countries' currency exchange rates, with funds dumping emerging market currencies.
02. Entering Recession
It is not the first time this year that the US stock market has shown a similar pattern, with the market initially surging significantly after the announcement of bad news, as if the bearish factors have been exhausted.
However, on the second trading day, investors suddenly realized that the future could be even worse, leading to a significant sell-off and a sharp decline in US stocks.
In fact, it is not just the Federal Reserve that is rapidly raising interest rates, but some economic data in the United States has already begun to cause concern.
The new housing starts data for May showed a significant drop, and the increasingly high average mortgage interest rates indicate that future home sales will be difficult to meet expectations. There may also be a decline in subprime loan repayment rates, further引爆 risk.
The data model from the Atlanta Federal Reserve shows that the GDP growth rate of the United States in the second quarter of this year has dropped to 0%. If the GDP growth rate falls into negative territory for two consecutive quarters, it means that the US economy has entered a full recession.
Of course, it is not just the Federal Reserve that has to raise interest rates in the face of high inflation. Last night, the Bank of England also announced an interest rate hike of 25 basis points. It is predicted that the European Central Bank will raise interest rates in July.
Last night, stock markets across Europe also saw a general decline. However, although the stock markets of France and Germany have fallen by more than 17% this year, they are still far lower than the decline in the US stock market.Individual Stocks
In terms of individual stocks, large-cap technology stocks experienced a decline across the board, with META down by 5%, and Apple, Google, and Amazon all falling by more than 3%. Microsoft's drop was close to 3%. Tesla plummeted by a staggering 8.5%.
New energy vehicles from China also saw significant drops, with XPeng falling by 5%, NIO by 4.6%, and Li Auto by 2.1%.
Chinese concept stocks also showed an overall decline, with the NASDAQ Golden Dragon China Index down by 4.44%.
Alibaba fell by 6.1%, Baidu by 5.1%, JD.com by 3.6%, and Pinduoduo by 2.4%.
Before the close of trading yesterday afternoon, the Hang Seng Technology Index in Hong Kong also saw a rapid decline, ending with a drop of 3.33%.
However, the impact on the A-share market was relatively minor. Although there was a certain degree of decline yesterday afternoon, for most indices it was merely a reduction in gains, and the ChiNext index still managed to rise by 0.4%.
Currently, the FTSE China A50 Index futures are down by 0.2%, with no signs of a significant plunge at the moment.