The U.S. June PPI data conveyed a bearish signal for interest rate cuts, with a rebound exceeding Wall Street expectations. The U.S. June Producer Price Index (PPI) rose by 2.6% year-on-year, marking the highest since March last year, while the previous month's PPI data was revised upwards.
Commentators noted that the part of the PPI affecting Personal Consumption Expenditure (PCE) was relatively moderate, hence the core PCE is expected to increase by 0.15% to 0.20% month-on-month. Moreover, compared to the more volatile PPI inflation, the market pays more attention to the Consumer Price Index (CPI) data, which can better confirm the cooling of inflation. The bets on a rate cut in September remain high, with the CME FedWatch tool showing the probability rising from 92.7% on Thursday to 94.4% on Friday, and some traders even betting on a substantial 50 basis points rate cut by the Fed in September.
Despite the strong PPI, the market did not experience significant fluctuations. After the data release, U.S. Treasury yields slightly rebounded, with the benchmark 10-year U.S. Treasury yield rising by more than 4 basis points, but then continued to decline. The U.S. dollar index rose in the short term but eventually weakened. Gold and silver prices plunged to daily lows in the short term, then rebounded from their lows.
Advertisement
In other data, the University of Michigan survey showed that consumers' long-term and short-term inflation expectations both fell, but the July Consumer Sentiment Index still hit an eight-month low. Additionally, the second quarter earnings season for U.S. stocks kicked off with bank stocks, although the major banks' performance exceeded Wall Street expectations, the earnings and forward guidance of large U.S. banks were slightly disappointing, causing share prices to underperform the broader U.S. stock market.
Internationally, the yen performed the best among the G10 currencies, with the U.S. dollar against the yen falling sharply for the second consecutive day, dropping from a high of 159.44 to a low of 157.39, sparking market speculation about the Japanese government's intervention in the foreign exchange market again on Friday.
Looking ahead, the market is looking for clues on the next rate cut, with Federal Reserve Chairman Powell's speech at the Economic Club of Washington D.C. (Monday), U.S. retail sales data (Tuesday), Waller's speech (Wednesday), Williams' speech (Friday), and a series of earnings reports (throughout the week). Commentators said that two factors could affect the prospects for a rate cut in September: one is the deterioration of economic data, and the other is the potential threat to rate cut expectations from inflation shocks after the U.S. elections.
U.S. stocks rebounded across the board but narrowed gains at the end of the day, with the Dow breaking through 40,000 points to set a new intraday high, and small-cap stocks leading for two days.
On Friday, July 12th, major U.S. stock indices rebounded across the board, but the gains were halved before the close.
During the U.S. stock session, all three major indices fluctuated upwards and set new daily highs, with the technology stock-dominated Nasdaq rising nearly 1.5%, returning to 18,500 points; the S&P 500 large-cap index rose nearly 1.3% to 5,655.56 points, setting a new intraday high; the blue-chip Dow Jones Industrial Average rose nearly 1.3% and broke through 40,000 points, setting a new intraday high; the Russell 2000 small-cap stocks also led the major indices again, rising more than 1.8% at one point; the Nasdaq 100 rose nearly 1.6%.
By the close, major U.S. stock indices ended the previous day's downturn and successfully rebounded, with the Dow Jones Industrial Average rising for three consecutive days, approaching the historical high set on May 17th and standing above the 40,000-point threshold, with small-cap stocks having the largest relative gains among the major indices, with biotechnology, small-cap stocks, and regional bank indices rising at least 6% this week:The S&P 500 index rose by 0.55% to 5,615.35 points, accumulating a weekly increase of 0.87%; the Dow Jones Industrial Average climbed 0.62% to 40,000.90 points, with a weekly gain of 1.59%; the Nasdaq Composite index advanced 0.63% to 18,398.44 points, accumulating a weekly increase of 1.25%.
The Nasdaq 100 gained 0.59%, but experienced a weekly decline of 0.30%; the Nasdaq Technology Market Capitalization-Weighted Index (NDXTMC), which measures the performance of technology components in the Nasdaq 100, increased by 0.49%, yet saw a weekly decrease of 0.62%; the Russell 2000 small-cap index closed up by 1.09%, with a weekly increase of 6.00%; the Volatility Index (VIX) fell by 3.56% to 12.45.
The NASDAQ Biotechnology Index closed up by 0.70%, with a weekly gain of 6.76%; the Dow Jones KBW Regional Banking Index closed up by 0.22%, accumulating an 8.60% increase for the week.
During the U.S. stock market session, major U.S. stock indices successfully rebounded, with small-cap stocks surging and giving up some gains at the end of the day.
The S&P Telecommunications sector fell by 0.75%, while the Energy sector rose by 0.22%, the Financial sector by 0.22%, the Consumer Staples sector by 0.42%, the Industrial sector by 0.53%, the Healthcare sector by 0.59%, the Real Estate sector by 0.69%, the Utilities sector by 0.73%, the Technology sector by 0.92%, the Materials sector by 0.93%, and the Consumer Discretionary sector by 0.96%.
On Thursday, the S&P 500 had closed down by 0.88%, and the Nasdaq Composite had closed down by 1.95%, both ending their seven-day winning streak and pulling back from new highs, experiencing their worst single-day performance since April 30th. Small-cap stocks, however, rose by 3.6%, marking the best performance since November last year and the highest in over two years. Regional bank stock ETFs rose by more than 4%, reaching the largest increase since March, benefiting from weakening inflation, the upcoming interest rate cuts, and the steepening U.S. Treasury yield curve.
UBS estimates that the rotation of funds out of large-cap technology stocks and into small-cap stocks may continue for a month. According to Bespoke Investment Group, on Thursday, for the second time since 1979, the Russell small-cap index rose by more than 3% while the S&P 500 fell. However, Piper Sandler warns that low-quality and high-risk small-cap stocks may face a tough earnings season amid weakening macroeconomic conditions.
The "Seven Sisters of Technology Stocks" saw mixed performances, with Tesla and Nvidia, which led the decline yesterday, showing strong gains during the session. Tesla once rose by nearly 4.5% but then halved its gains, eventually closing up by 2.99% at $248.23, with a weekly decline of 1.31%, ending its four-week consecutive rise (previous weeks rose by 0.3%, 2.81%, 8.13%, and 27.11% respectively); Nvidia surged by more than 3.5% at the end of the day but ultimately closed up by 1.44%, with a weekly gain of 2.71%, ranking third in market value.
Apple rose by 1.31%, with a weekly gain of 1.86%, maintaining the top market value; Microsoft fell by 0.25%, with a weekly decline of 3.00%, ranking second in market value; Google A fell by 0.27%, with a weekly decline of 2.9%; Amazon fell by 0.29%, with a weekly decline of 2.75%; Meta fell by 2.7%, with a weekly decline of 7.6%.
Most semiconductor stocks continued to rise but gave up most of their gains at the end of the day. The Philadelphia Semiconductor Index rose by 3% but closed up by 1.3%, still approaching its historical high, with a weekly gain of 2.1%, and the industry ETF SOXX rose by 1.22%. The Nvidia double long ETF rose by 2.88%; TSMC ADR closed up by 1.54%, with a weekly gain of 1.83%, KLA rose by 0.56%, Applied Materials rose by 0.89%, Arm Holdings rose by 4.61%, Lam Research rose by 0.93%, Micron Technology rose by 2.55%, Qualcomm rose by 1.29%, Intel rose by 2.96%, while AMD fell by 0.18%, and Broadcom fell by 0.31%.AI concept stocks experienced mixed performances. SoundHound.ai rose by 15.46%, Palantir increased by 1.56%, Oracle gained 1.41%, CrowdStrike was up by 0.24%, and BigBear.ai climbed by 0.63%. On the other hand, Snowflake fell by 1.76%, and Dell dipped by 0.82%.
In terms of news:
Entering the third year of a high-interest-rate environment, the outlook for major U.S. commercial banks continues to face headwinds. However, recent slowing data points to a more optimistic expectation for rate cuts, which could pave the way for a soft landing for the U.S. economy and put an end to the pain faced by the banking industry. JPMorgan Chase's net profit soared by 25% year-over-year to a new high, and its investment banking business has significantly rebounded; Wells Fargo's profit and revenue both exceeded Wall Street's expectations, although net interest income declined by 9%; Citigroup's restructuring efforts are beginning to show results, with both banking business and stock trading revenues surging, and total revenue slightly exceeding market expectations.
Tesla: UBS downgraded Tesla's rating to "sell". Musk's SpaceX Falcon 9 rocket experienced a rare (in-orbit) failure on July 11 in space, marking the first serious failure in over 300 launch activities of the Falcon 9 rocket, and has now been "grounded" by the U.S. FAA, awaiting investigation. Earlier on July 12, Thierry Breton, the European Union's Internal Market Commissioner, stated that the blue checkmark verification system of social media platform "X" deceives users and violates the Digital Services Act. Musk, the actual controller of social media company X (formerly Twitter), expressed his desire to take legal action against the EU.
Amazon: Amazon has launched an artificial intelligence shopping assistant, Rufus, to all U.S. users. By clicking on an icon in the Amazon smartphone app, this AI shopping assistant, trained on Amazon's catalog and web content, is also familiar with the biographies of celebrities and can suggest which lakes in Maine users might enjoy visiting. It can also write short stories, offering functionalities similar to ChatGPT and other chatbots. Rufus is one of Amazon's most eye-catching consumer products utilizing generative AI.
Qualcomm: On the evening of July 12, Qualcomm Inc. issued a statement saying it has filed a lawsuit against Shenzhen Transsion Holdings to protect patent rights. Qualcomm claims that Transsion has consistently refused to obtain a comprehensive license from Qualcomm. Transsion recently signed a licensing agreement with Qualcomm for some of its products, but the vast majority of its products remain unlicensed by Qualcomm and continue to infringe on Qualcomm's valuable patent portfolio.
Meta: An employee at Meta Platforms stated that the company plans to release the largest version of the open-source Llama 3 model on July 23 (Tuesday). The latest version boasts 405 billion parameters and is capable of understanding and generating images and text.
Ericsson: The company's net sales for the second quarter exceeded market expectations.
Chinese concept stocks opened significantly higher with a gap but then gave up more than half of their gains. The China Internet Index ETF (KWEB) rose by 0.59%, accumulating a 4.38% increase for the week following last week's 2.15% gain; the China Technology Index ETF (CQQQ) increased by 0.08%, accumulating a 5.15% increase for the week; the NASDAQ Golden Dragon China Index (HXC) rose by over 2% but closed up by 0.6%,站稳6100 points above and刷新ed the highest in a month, accumulating a 4.2% increase for the week.
Among popular Chinese concept stocks, NIO closed up by 4.06%, XPeng increased by over 1.7%, EHang Intelligent rose by 3%, Daqo New Energy jumped by 2.86%, Beike surged by over 2%, Ctrip increased by about 2%, Huazhu rose by over 1.9%, New Oriental increased by over 1.7%, Alibaba gained by over 1.4%, ZTO Express and New Oriental Education & Technology Group both rose by over 1.2%, Vipinhui fell by over 0.9%, Weibo dropped by over 1%, Baidu decreased by about 1.6% but accumulated an increase of over 11% for the week, JD.com fell by about 1.7%, Sohu dropped by about 2.4%, and Bilibili fell by 5.16%.European stocks have seen a widespread increase for three consecutive days, with the French stock index rebounding by approximately 2.9% over three days, the German stock index rising by about 1.5% this week and approaching its historical high, and the Dutch stock index hitting a new historical high:
The pan-European Stoxx 600 index closed up by 0.88%, at 524.08 points, approaching the historical closing high of 524.71 points set on May 15th, with a weekly increase of 1.45%. The Eurozone STOXX 50 index closed up by 1.34%, at 5043.02 points, for the first time since June 12th closing above the psychological round figure of 5000 points, with a weekly increase of 1.28%.
The German DAX 30 index closed up by 1.15%, approaching its historical high, with a cumulative increase of 1.48% for the week; the French CAC 40 index closed up by 1.27%, with a cumulative increase of 0.63% for the week; the Italian FTSE MIB index closed up by 0.76%, with a cumulative increase of 1.74% for the week; the British FTSE 100 index closed up by 0.36%, with a cumulative increase of 0.60% for the week; the Dutch AEX index closed up by 0.95%, hitting a new historical high, with a cumulative increase of 1.19% for the week; the Spanish IBEX 35 index closed up by 0.72%, with a cumulative increase of 2.06% for the week.
Aided by the interest rate cut trade, this week's U.S. Treasury yields have fallen significantly, with short-term bond yields leading the decline.
At the end of the day, the two-year U.S. Treasury yield, which is more sensitive to monetary policy, fell by 6.16 basis points to 4.4514%, with a weekly decline of 15.21 basis points, trading overall in the range of 4.6515%-4.4472%, and had risen close to 4.53% around the time of the U.S. PPI release.
The 10-year U.S. benchmark Treasury yield fell by 2.73 basis points to 4.1829%, with a cumulative weekly decline of 9.55 basis points, hitting a daily low of 4.1867% after the release of U.S. consumer confidence data, trading overall in the range of 4.3272%-4.1656%, roughly maintaining the decline since the release of the U.S. June CPI inflation data.
Barclays stated that the market has priced in too much cumulative expectations for Federal Reserve interest rate cuts, which does not align with the resilience of the economy and the inflation risks after the U.S. election. Given the 5-year yield at the 4.13% level, it is recommended to short the 5-year Treasury notes. Approximately 200 basis points of rate cuts have been priced in, which implies that the terminal rate is "far below the mainstream expectations for the actual neutral rate."
Data from the U.S. Commodity Futures Trading Commission (CFTC) shows that in the week of July 9th (before the release of the U.S. June CPI data), speculators reduced their long positions in U.S. ultra-long 10-year Treasury futures.
The benchmark 10-year German bund yield rose by 3.3 basis points at the end of the day, to 2.496%, quickly rising to a daily high of 2.528% after the release of the U.S. PPI data, with a cumulative weekly decline of 6.0 basis points, overall showing a fluctuating downward trend, with a significant drop on July 11th when the U.S. CPI data was released.
The French 10-year government bond yield rose by 3.1 basis points, with a cumulative weekly decline of 5.8 basis points. The Italian 10-year government bond yield rose by 0.9 basis points, with a cumulative weekly decline of 14.1 basis points. The Spanish 10-year government bond yield rose by 2.8 basis points, with a cumulative weekly decline of 8.1 basis points. The Greek 10-year government bond yield rose by 1.1 basis points, with a cumulative weekly decline of 13.5 basis points. The British 10-year government bond yield rose by 3.5 basis points, to 4.109%, with a cumulative weekly decline of 1.6 basis points.Ceasefire between Israel and Hamas reduces geopolitical risks to oil supply, offsetting the rise in oil demand driven by increased fuel consumption, ending four weeks of consecutive oil price increases.
WTI crude oil futures for August settled down by $0.41, a drop of nearly 0.50%, at $82.21 per barrel. Brent crude oil futures for September settled down by $0.37, a drop of over 0.43%, at $85.03 per barrel.
Before the US stock market opened, oil prices fluctuated upwards and hit a daily high, with Brent crude rising to $86.35 per barrel, an intraday increase of over 1.1%, and US crude rising nearly 1.4% to $83.74 per barrel; during the early US stock market session, oil prices began to decline, and although they rebounded slightly after the release of the University of Michigan Consumer Confidence Index for July, the downtrend was hard to reverse. Near the end of the trading day, US crude fell nearly 0.63% to $82.1 per barrel, and Brent crude fell nearly 0.53%, breaking through the $85 psychological level.
Analysts pointed out that on Friday, Biden stated that Israel and Hamas had agreed to the ceasefire framework proposed by the US. The progress in the ceasefire between Israel and Hamas reduced geopolitical risks to oil supply, offsetting the signs of rising oil demand driven by increased fuel consumption, causing oil prices to fall.
The US Commodity Futures Trading Commission (CFTC) noted that bullish sentiment for WTI crude oil reached a nine-month high. In the week of July 9th, net long positions in WTI crude oil held by speculators increased by 3,723 contracts to 252,804 contracts, reaching a nine-month high.
US natural gas futures for August settled up by about 2.69%; the European benchmark TTF Dutch natural gas futures were reported at €31.750 per megawatt-hour, down 3.93% for the week; ICE UK natural gas futures closed at 72.870 pence per thousand calories, down 5.69% for the week.
The US dollar fell for two consecutive weeks, erasing all gains since the "non-farm day", with the yen rising 1.82% for the week to stand above 158, and Bitcoin failed to reach the $60,000 mark.
The US dollar index DXY, which measures the value against a basket of six major currencies, fell by 0.34% to 104.084 points, down 0.75% for the week, with the overall trading range between 105.208 and 104.041 points, and it had a significant drop when the US June CPI data was released.
The Bloomberg US dollar index fell by 0.34% to 1586.72 points, down 0.85% for the week.
Analysts at JPMorgan believe that the US dollar's pullback will not be sustained in the medium term and should be small, considering the uncertain cyclical backdrop outside the US, as well as the risk of trade conflicts brought about by the US elections.Non-US currencies generally rose. The euro appreciated by 0.36% against the US dollar, with a cumulative increase of 0.61% for the week, while the British pound appreciated by 0.58% against the US dollar, with a cumulative increase of 1.36% for the week.
The British pound reached its highest level against the euro in two years, boosted by the improvement of the UK economy and the prospect that the Bank of England may start cutting interest rates later than other major economies. HSBC has postponed its expectation for the first interest rate cut by the Bank of England from August to November.
The offshore renminbi (CNH) fell by 46 points against the US dollar,报价7.2723 yuan, with overall trading ranging from 7.2617 to 7.2786 yuan, but trading at a one-month high.
Among Asian currencies, the US dollar fell by 0.64% against the Japanese yen,报价157.82 yen, with a one-day drop of 1% and a breach of the 158 mark on Friday, with a cumulative drop of 1.82% for the week, trading between 161.81 and 157.38 yen. The euro fell by 0.28% against the yen,报价172.15 yen, with a cumulative drop of 1.18% for the week; the British pound fell by 0.03% against the yen,报价205.068 yen, with a cumulative drop of 0.46% for the week.
Most mainstream cryptocurrencies rose. The largest market cap leader, Bitcoin, rose by 0.39% to $57,805.00, with a cumulative increase of approximately 1.90% for the week, reaching a high of $59,895.00. The second-largest Ethereum rose by 0.19%,报价$3,121.50, with a cumulative increase of 4.15% for the week.
Gold prices remained above $2,400, achieving a three-week consecutive increase, driven by rising expectations for interest rate cuts.
The COMEX August gold futures rose slightly by 0.02% to $2,422.3 per ounce, while the COMEX September silver futures fell by 1.58% to $31.17 per ounce.
Before the release of the US June PPI inflation data, both spot gold and spot silver fluctuated downwards. After the data release, gold and silver plummeted and hit their daily lows, with spot gold falling nearly 1% and breaking through the $2,400 mark, and spot silver falling nearly 3.4% and falling below $30.50. Near the end of the trading day, both gold and silver rebounded, with spot gold hitting a daily high, rising slightly by 0.12%, and returning to the $2,400 mark.
Analysts said that after being boosted by CPI data the day before, gold prices rose to their highest level since May 22. On Friday, expectations for interest rate cuts were dampened by PPI data, adding some selling pressure. However, overall, due to investors' confidence in the Federal Reserve's interest rate cut in September, gold prices remained above the $2,400 mark.
The US Commodity Futures Trading Commission (CFTC) pointed out that gold bullish sentiment reached a seven-week high. In the week of July 9, speculative net long positions in COMEX gold increased by 13,062 contracts to 191,603 contracts, reaching a seven-week high. Moreover, net long positions in COMEX silver reached an eight-week high, and net long positions in COMEX copper reached a three-week high.London industrial base metals experienced mixed movements. The economic indicator "Dr. Copper" rose by 0.92%, trading at $9,877 per ton, with a total decline of over 0.67% for the week; lead increased by 0.5%, and nickel rose by 0.28%, bidding farewell to its lowest point in three and a half months, with a total decline of over 2.79% for the week; meanwhile, aluminum fell by nearly 0.2% to its lowest point in nearly three months, with a total decline of nearly 2.17% for the week; zinc dropped by 0.54%, with a total decline of over 1.93% for the week; tin fell by 2.80%, detaching from its highest point in mid-April.