The Zhitong Finance App learned that on Friday, the three major indices rose, but US stocks closed down this week. The Dow fell 1.57% this week, S&P fell 0.58%, and the NASDAQ fell 0.66%. After the US core inflation data was higher than expected, the interest rate swap market further raised expectations for the Fed's interest rate hike. Currently, market pricing shows that the probability that the Fed will raise interest rates next week has reached 90%, and the two interest rate hikes during the year have been fully included in the price. David Rees, head of global economics at Schroder, said: “The Federal Reserve is lagging behind the situation. The Federal Reserve can choose to raise interest rates next week so that the cost of short-term US borrowing can rise in an orderly manner; it can also stay on hold, but then we run the risk that America's long-term borrowing costs will rise out of control.”
[US stocks] At the close, the Dow rose 509.19 points, or 0.98%, to 52573.29 points; the S&P 500 rose 65.28 points, or 0.86%, to 7656.98 points; and the NASDAQ rose 251.32 points, or 0.96%, to 26333.04 points. Qualcomm (QCOM.US) rose 2.88%, Intel (INTC.US) rose 2.61%, SpaceX (SPCX.US) rose 2.04%, Amazon (AMZN.US) rose 1.94%; SanDisk (SNDK.US) fell 3.5%, Oracle (ORCL.US) fell 1.82%, and Micron Technology (MU.US) fell 0.22%. The Nasdaq China Golden Dragon Index rose 0.4%, Baidu (BIDU.US) rose 0.89%, and Alibaba (BABA.US) rose 0.68%.
[European stocks] Major European stock indexes rose collectively at the close. The British FTSE 100 index rose 0.39%, the French CAC40 index rose 0.78%, the German DAX30 index rose 0.82%, and the FTSE Italian MIB index rose 1.36%.
[Asian Stock Market] The Nikkei 225 Index fell 1.93%, and the Korea Composite Index fell 1.76%.
[US Dollar Index] The US dollar index, which measures the US dollar against the six major currencies, rose 0.07% on the same day and closed at 99.122 at the end of the foreign exchange market. As of the end of the exchange market in New York, 1 euro was worth 1.1596 US dollars, lower than 1.1613 US dollars on the previous trading day; 1 pound was worth 1.3525 US dollars, up from 1.3513 US dollars on the previous trading day. 1 US dollar was worth 153.72 yen, lower than 154.32 yen on the previous trading day; 1 US dollar was worth 0.8166 Swiss franc, higher than 0.8129 Swiss franc on the previous trading day; 1 US dollar was worth 1.3865 Canadian dollars, higher than 1.3830 Canadian dollars on the previous trading day; 1 US dollar was worth 9.7044 SEK, up from 9.6782 on the previous trading day.
[Cryptocurrency] Bitcoin rose 0.33% to 7,7061 yuan as of press release; Ethereum rose 2.8% to 2,512 US dollars.
[Crude oil] Light crude oil futures for October delivery on the New York Mercantile Exchange fell $2.43, or 2.37%, to close at $100.05 a barrel; London Brent crude oil futures for November delivery fell $3.02, or 2.81%, to close at $104.61 a barrel. However, US oil continued to rise by nearly 10% this week, and oil surged 8.6%, boosting market expectations for US inflation and suppressing stock market performance.
[Precious Metals] Spot gold rose 0.74% to $4348.43 per ounce; spot silver rose 1.42% to $64.499 per ounce. Goldman Sachs continues to believe that the forecast for gold to reach 4,900 US dollars per ounce by the end of 2026 faces a net upward risk, but the two-way fluctuation on the path will also increase. Goldman Sachs said its fair value forecast of 4,900 US dollars per ounce at the end of 2026 assumes continued strong demand from central banks. If ETF investors' capital inflows resume and current high bullish option positions continue, traders may mechanically amplify the rise, driving the price of gold far beyond their forecasts. Goldman Sachs also said that if the expectation of the Fed's interest rate hike heats up again, it may trigger traders to hedge and close their positions, leading to a sharper correction in gold prices than usual.
[Macro News]
The US CPI accelerated in August, and expectations for market interest rate hikes heated up rapidly. Consumer prices in the US accelerated in August as gasoline costs rebounded after falling for two consecutive months, which strengthened the financial market's expectations that the Federal Reserve might raise interest rates next week. The US Department of Labor Bureau of Labor Statistics said on Friday that after a slight increase of 0.1% in July, the consumer price index rose 0.4% per month last month. Consumer inflation rose 3.4% in the 12 months to August, the same increase as in July. After the August seasonal adjustment, the monthly core CPI rate recorded 0.3%, higher than market expectations of 0.2%. Thursday's data already showed that the producer price index rose in August, with several key segments rising strongly. These segments will be included in PCE inflation calculations. This, combined with last week's strong August employment report, further boosted market expectations for next week's interest rate hike. After the release of the US CPI data for August, the market expects the probability that the Fed will raise interest rates next week to be about 90%. Some economists believe that price pressure will continue due to import tariffs (recently imposed on Canada, one of America's largest trading partners). Dissatisfaction with rising prices, particularly gasoline and food prices, has led to a sharp decline in Trump's approval rating and may cause his Republican Party to lose control of the US Congress in the November midterm elections. Federal Reserve Chairman Walsh said last month that if policymakers do not get the confidence they need, that is, inflation is falling back towards the 2% target, the Fed still “has work to do.”
“Federal Reserve microphone”: The Federal Reserve is likely to raise interest rates next week, but raising interest rates only once will not solve the problem. “Federal Reserve microphone” Nick Timiraos recently wrote that investors have basically decided that the Federal Reserve will raise interest rates for the first time in three years next week. The more difficult question is what will happen later. Since almost no one within the Federal Reserve thinks that a single interest rate hike of 25 basis points is enough to lower inflation, if it decides to raise interest rates next week, it reflects the judgment that interest rates were previously at the wrong level, and a single rate hike cannot solve the problem. The Federal Reserve has only raised interest rates once since the 1990s. In July, Walsh said he didn't think the Federal Reserve was good at “fine-tuning”. Analysts said that a chairman who is skeptical about fine-tuning is unlikely to announce the completion of the task after raising interest rates by 25 basis points. Walsh said last month that there isn't much evidence that borrowing conditions are limiting economic activity. If interest rate hikes are promoted for this reason, the market will naturally ask how high interest rates need to be raised. In the absence of an explanation, the market may interpret a rate hike as the beginning of a larger scale action. As a result, investors this week are no longer treating the September meeting as a matter of a single meeting. The market currently expects the cumulative number of interest rate hikes to reach at least three times by June next year, which is higher than the two previously anticipated.
US consumer confidence declined for the second month in a row, and one-year inflation expectations rose. The initial value of the US Consumer Confidence Index of the University of Michigan recorded 47.8 in September, falling for the second month in a row, but the decline was less than 4 index points. Democrats and Republicans both declined sharply, while the Independents didn't change much compared to August. Expectations for personal financial and business conditions over the next year have declined sharply. As fuel prices rebound and trade tensions rise, consumers expect more pressure on their wallets in the future. Business conditions are expected to remain stable over the five-year period, but the reading is far below the historical average, indicating that consumers believe that the new risks that have emerged this month may not have further worsened the long-term outlook. Overall, consumer confidence is currently 16% lower than before the Iran conflict began in February, and 13% lower than a year ago. The inflation forecast for the next year jumped from 4.0% last month to 4.6% this month, the highest reading since June. The current reading is significantly higher than the 3.4% reading in February before the start of the Iranian conflict, and also surpasses all readings in 2024. Long-term inflation expectations rose slightly to 3.4%, ending a situation where it remained at 3.3% for three consecutive months. These expectations are still higher than the 2024 2.8% to 3.2% range.
Hassett: Trump believes more wealth should be returned to the people. Hassett, director of the US White House National Economic Council, downplayed the view that Trump's proposal to issue a $5,000 check to every American adult would heighten the government's historically high borrowing concerns. Hassett said, “We can do this in a fiscally responsible way. This is a serious proposition.” He argued: “Because of all the growth and wealth America has created, the President believes we need to return more wealth to the American people. One way is to pass a reconciliation bill — a legislative mechanism that the House and Senate majorities can use for fiscal packages to bypass the need for opposition parties to vote.” When asked what offsetting measures might be used to match these checks — at a time when the US federal debt burden is reaching a record high, this will increase spending by more than 1 trillion dollars — Hassett said this must be “negotiated with Congress.” Analysts are skeptical about whether the $5,000 payment will be realized. Previously, senior Republican members of the House of Representatives and Senate reacted lukewarm to the idea.
[Individual Stock News]
SpaceX plans to deploy the first batch of v3 Starlink satellites with Starship test flights as early as next week. SpaceX (SPCX.US) has big plans for Starships. If all goes according to plan, this 407-foot-tall rocket will one day be used to build an orbital artificial intelligence data center network and send humans to the Moon and Mars. But first, the company plans to use Starship to launch a new and improved batch of money-making tools — Starlink satellites — into space. SpaceX plans to launch its first batch of V3 satellites into orbit during a key Starship test mission as early as next week. Getting the Starship to run as intended is critical to SpaceX and its shareholders. The company needed Starship not only to revive its own Starlink communications network — which contributed nearly 55% of the company's revenue in the second quarter — but also to launch satellites for a range of commercial purposes. Then it is probably its most profitable mission: to launch a futuristic orbital data center into space, which SpaceX says could help open up a $26.5 trillion artificial intelligence market.
[Major Bank Ratings]
Analysts are bearish on Lululemon's $70 target price as the second-lowest on Wall Street. BMO Capital Markets covered Lululemon (LULU.US) for the first time this week and gave it a runner-up rating, saying that the sportswear company's transformation will not be quick or easy because it is ceding market share to competitors and is experiencing an increase in sales decline. Analysts led by Kelly Crago said the Vancouver-based company's weak quarterly reports and lowered full-year outlook revealed a business facing deep challenges. As emerging brands such as Alo and Vuori become more popular with younger consumers, regional performance in the Americas is deteriorating. Crago's target price of $70 — the second-lowest price on Wall Street according to compiled data — means a drop of about 28% from Thursday's closing price. BMO is only the latest agency to be bearish on this retailer. Since June, at least four brokerage firms have downgraded their ratings. Currently, the stock has 6 ratings equivalent to selling, 29 holdings, and 2 buys.