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"S&P 1500-Point Swing: CPI Tops Expectations, 100bps Rate Hike Looms, Gold Dips"
Last night, the U.S. CPI was announced as scheduled, and the financial market played out a bizarre scene.
Looking only at the opening of the U.S. stock market, no one could have imagined what the outcome would be, and it was unexpected that by the time of closing, all U.S. stocks had surged, and European stocks also rose significantly.
However, the yen's exchange rate broke through the low point during the 1998 financial storm.
The market began to predict that the U.S. would raise interest rates by 100 basis points in November. If this really happens, the financial market may still face catastrophic turmoil.
Perhaps the current surge in U.S. stocks is just for the next round of harvesting.
01
On Tuesday this week, the U.S. announced consumer survey data, and on Wednesday, it announced PPI data. Both sets of data were not very optimistic, and the market had already anticipated a rebound in the CPI data announced on Thursday.
According to the market's forecast last week, the CPI for September would rise by 8.1%, which is a decline compared to the previously announced data from the previous month. However, the final CPI data announced last night was 8.2%, higher than the market's expectations.
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Although looking only at the announced value, there was still a monthly decline, but the stock market plummeted, which is a normal reaction.
Looking back at the announcement of the CPI in September, at that time, although the announced value was lower than the previous month, it was also higher than the market forecast, leading to an immediate drop of more than 4% in the S&P 500 Index.Therefore, last night's CPI data greatly exceeded market expectations and should also lead to a significant market decline.
02
The CPI data was released at 8:30 PM Beijing time, when the U.S. market had not yet opened. However, we could already observe in the futures market that all three major U.S. indices experienced a sharp, straight-line decline in an instant.
Taking the Dow Jones Industrial Average as an example, within just 10 minutes after the announcement, the index fell by 800 points.
After the U.S. stock market opened, the Dow Jones opened low, with the lowest point being 28,660 points, but it soon began to rebound. Within just two hours, it had already turned positive, and it continued to rise until the close, with the highest point during the session reaching 30,168 points. The Dow Jones's maximum increase in a single trading day yesterday reached 1,500 points.
The Nasdaq Composite Index ended up rising by 2.23%, narrowing its annual decline to below 32%, and the S&P 500 Index rose by 2.6%.
03
Looking at the current economic data, the Federal Reserve's interest rate hikes could even potentially reach a special situation of 100 basis points in a single month.
This is because, up to now, although the CPI has shown a certain decline, it has been above 8% for seven consecutive months. This indicates that the current interest rate hikes are not sufficient to control inflation; at best, they have only delayed the possibility of further increases in inflation.
At the same time, relatively good employment data also provide the Federal Reserve with greater confidence in its interest rate hikes.Previously, the Federal Reserve has indicated that its primary focus is on economic conditions rather than changes in financial markets. However, the financial markets have not experienced a significant downturn; instead, they have stabilized and rebounded, undoubtedly giving the Federal Reserve greater resolve to implement substantial interest rate hikes.
As a result, market predictions for a 100 basis point interest rate increase in November have surprisingly reached 8.7%.
In addition, the commodities market has shown a similar trend, with oil prices initially falling and then rising, with WTI crude oil prices closing near $89.
However, despite gold also experiencing a drop followed by an increase, it still closed lower, remaining under strong pressure from the US Dollar Index.
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