Winter negative news is coming, and US stock collapses again.
U.S. stocks plummeted
On October 7th local time, the US stock market staged a "Black Friday".
The three major U.S. stock indexes plummeted after opening. As of the close, the decline was more than 2%, and Nasdaq Index fell by 3.8%.
In addition, US chip giant AMD announced its third-quarter performance forecast, which was lower than market expectations, resulting in a "chip shortage" in the market. As of the close, AMD plummeted 14%, dragging down the entire chip sector, Nvidia fell 8.03%, Intel fell 5.37%, and Philadelphia Semiconductor Index fell more than 6%. Among the
technology stocks, Apple fell 3.67%, Microsoft fell 5.09%, Google fell 2.61%, Amazon fell 4.77%, Tesla fell 6.32%, Meta fell 4.04%, and the industry closed down 4.14%. On the
news, the biggest news is that the number of non-farm employment in the United States in September increased by 263,000, higher than the expected 255,000. The U.S. unemployment rate in September was 3.5%, with an estimated value of 3.7%, and the previous value was 3.7%, far better than market expectations.
This also shows from another perspective that the current economic data in the United States is still very strong. Even with the impact of changes in the international situation and changes in energy prices, the unemployment rate is still low.
However, this strong employment data will undoubtedly attract the attention of another department, that is, Feder .
As we all know, the Federal Reserve is in a cycle of interest rate hikes, and is about to compress inflation to less than 2%, but it is still above 8%. The probability of continuing to raise interest rates in is very high.
In addition, The Federal Reserve's interest rate hike has been greatly affected by employment data because interest rate hikes will affect the economy. If interest rate hikes are too strong, the economy will decline and the unemployment rate will increase, it will cause a chain reaction; on the contrary, if the employment data is very strong and the unemployment rate is low, then interest rate hikes will have a greater possibility of violent interest rate hikes.
U.S. federal funds rate shows that the probability of the Federal Reserve hike of interest rates by 75 basis points in November is 92%, higher than the 85.5% before the September non-farm report.
Strong employment data is a big positive for the US economy, but it is a big negative for the US stock market. The Federal Reserve, which is under the interest rate hike cycle, is likely to raise interest rates by 75 basis points again in November, which directly hit the US stock market on Friday.
According to the Fed's interest rate hike dot chart, there will be another 125 basis points in 2022. There is a high probability of 75 basis points in November, so there is a high probability of 50 basis points in December.
is visible, and the negative news for the US stock market is continuous and may even continue until 2023.
Since 2022, the US stock market has fallen continuously for nearly 9 months, from around 15875 points at its highest point to around 10652 points, down 5223 points, a drop of more than 30%!
If the Fed continues to raise interest rates in the last four months, then US stocks still have room for decline, and the decline in 2022 may reach 40%.
At the beginning of 2022, Director of Yingda Stock Exchange Li Daxiao predicted that "the biggest bubble in the history of the US stock market will burst in 2022." If you look at it again, the decline has exceeded 30%, which is very obvious that the bubble will burst.
In addition to the US stock market, the European market is also relatively pessimistic. As of the close of October 7 local time, the UK's FTSE 100 index fell by 0.09%, French CAC40 index fell by 1.17%, and German DAX30 index closed down by 1.59%, with a relatively small overall decline.
It is worth mentioning that due to the National Day holiday, the domestic stock market was closed from October 1 to 9. When the foreign market was in decline during the National Day period, A shares did not follow.
The Federal Reserve may find it difficult to balance between suppressing inflation and stabilizing the stock market!
US stock bubble burst
Since entering 2022, perhaps everyone has not expected that the inflation data in the United States would be so terrifying, reaching a maximum of 9.1%. No one expected that the Federal Reserve would raise interest rates so vigorously, causing the US stock market to plummet rapidly.
However, even though the US stock market fell by more than 30% this year, the US inflation data remained above 8%. It seems that the Fed is not pessimistic about this, but is a more radical interest rate hike.
Is the US stock bubble bursting, isn’t itching to the Fed?
In fact, from the perspective of Wall Street , the plunge of US stocks will definitely make their wealth evaporate, which is what they oppose. But the Fed is independent of government departments, and once the interest rate hike cycle is started, it will be difficult for Wall Street to stop it.
And, for the entire market, the US stock market plunge this time may be just a return to normal state.
We are often very sensitive to the bursting of the stock market bubble, perhaps because of publicity. However, even A-shares have experienced the stock market crash in 2015, plummeting from more than 6,000 points to below 3,000 points, and evaporating half directly. Are you not living the same life now?
From the trend of the Nasdaq Index, it can be seen that from 2016 to the beginning of 2020, the trend of the US stock market was considered normal and it rose steadily.
However, in March 2020, due to the impact of the epidemic, US stocks suddenly plummeted for two months. Subsequently, the Federal Reserve turned on the money printing machine , releasing days of funds into the market to push up the stock market, allowing the US economy to overcome the crisis.
From March 2020 to November 2021, the US stock market soared from the lowest level of around 6610 points to around 15700 points, with an increase of more than double!
We might as well assume that is the epidemic good or bad for the US economy?
is undoubtedly a negative news, that is, if the stock market truly reflects the economy, then the stock market should be lower than in 2019. However, under the stimulus of the Federal Reserve, US stocks soared and set new highs.
Even though the US stock market has plummeted for nearly September, it is still at 10652 points, higher than in 2019. Only when the Fed's interest rate hikes, the US stock market plummeted to the level before the outbreak of the epidemic in 2020 can it be considered that the bubble has been completely removed.
In other words, the US stock market will only be considered a healthy level if it falls below 10,000 points, and the above are all bubbles of printing money.
If the Fed really raises interest rates by 75 basis points and 50 basis points respectively in November and December, then the US stock market will most likely return below 10,000 points, just like a cycle of reincarnation under the stimulus of the Fed.
However, when the Federal Reserve violently raised interest rates, the US stock market fell, but the inflation data still did not see any major changes.
The U.S. CPI in August was 8.3%, the September issue has not yet been announced, and the highest point in June was 9.1%. Now the inflation rate has not fallen below 8%.
In comparison, the phrase "to curb inflation within 2%" by Federal Reserve Chairman Powell seems out of reach.
On the one hand, there is an uncontrollable inflation, and on the other hand, the stock market that continues to fall after the interest rate hike. The Fed's attitude is to firmly suppress inflation and not protect the stock market, but the interest rate hikes from zero to between 3% and 3.25%, inflation still cannot be suppressed. This is a deadlock.
Perhaps the US stock market bubble burst in 2022, but it is difficult to know where it will go after it burst.
As long as the Fed's pace of interest rate hikes continues, US stocks will continue to fall.
