Nasdaq Rises 1%, Is US Stock Market Bottoming Out?

01 Market Trends

Following the Federal Reserve's announcement of an interest rate hike, the U.S. stock market experienced a consecutive three-day decline, which finally came to a halt with a significant drop last night.

As of last night's closing, the three major U.S. stock indices showed mixed results, with the Nasdaq Composite up by 1%, the S&P 500 up by 0.25%, and the Dow Jones Industrial Average down by 0.26%. Although the Dow Jones has fallen for four consecutive days, last night's decline was minimal, effectively stopping the continuous significant downward trend.

In last night's U.S. stock market, the semiconductor sector saw higher gains, with Nvidia, Intel, and Texas Instruments all increasing by more than 2%, with Nvidia's gain approaching 4%.

New energy vehicles showed mixed performance.

The Nasdaq Golden Dragon Index rose by 1.8%, halting the previous day's significant decline, and Li Auto, which just released its quarterly report, increased by 4%.

Prior to this, European stock markets closed generally higher. The UK and France saw modest gains, but Germany rose by 1.15%.

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02 Bullish and Bearish Views

Regarding the future trend of the U.S. stock market, there is a clear divergence of bullish and bearish opinions.

A legendary hedge fund manager who once created a myth told the media that he has stopped shorting the Nasdaq index, implying that the index is close to the bottom and there is limited room for further decline.However, some analysts believe that after the Nasdaq index retracts by more than 30%, many people feel that the market has already started to reach the bottom. But often when everyone thinks it has reached the bottom, the market will continue to probe lower.

At present, for the U.S. stock market, the most concerned is the upcoming release of the Consumer Price Index (CPI). Once this index is released, it may directly determine whether the Federal Reserve will raise interest rates in June and by how much.

In April, many investors believed that the Federal Reserve needed to raise interest rates significantly in June, with more than half predicting that the rate hike would reach 75 to 100 basis points. However, after the Federal Reserve announced an interest rate hike in May, it also claimed that there is no need for future interest rate hikes of 75 basis points or more. This statement left the market puzzled.

But if this time's CPI and the subsequent PPI released on Thursday continue to rise, it is not ruled out that the Federal Reserve's interest rate hike in June will increase.

03, Concession

To curb rising prices, the United States is constantly thinking of various ways, with interest rate hikes being a standard choice, but not the only one. Moreover, interest rate hikes are likely to affect economic recovery, which is also the main reason why the Federal Reserve does not dare to raise interest rates significantly to curb inflation.

Looking at the current stock price reactions, everyone understands that it is precisely the expectation of a significant interest rate hike that has led to the continuous downward adjustment of growth stock valuations, and the turmoil in the financial market will have a reverse effect on American companies and the economic front.

Since the trade conflict between China and the United States in 2018, the United States has been making things difficult for China on import tariffs, which has also had a certain impact on our country's exports. But at this moment, U.S. President Biden realized that without Chinese products to help stabilize market prices, U.S. price levels would continue to rise.

The current inflation in the United States is, of course, due to the large amount of money injected into the market to deal with the COVID-19 pandemic, but it is also affected by the reduction in commodity supply. After the outbreak of COVID-19, the industrial chain and supply chain have encountered problems, so some commodities in the U.S. market have seen a reduction in supply, leading to price increases.

Reducing tariffs on Chinese goods can not only increase the supply of goods but also benefit from the low prices of Chinese goods, which will help the U.S. CPI data to peak and fall.In this context, China's economic development in the face of the pandemic has attracted more global attention.