Nvidia led the gains in U.S. stocks, and sentiment was high before the interest rate meeting, but a rate cut is not necessarily optimistic!
The U.S. stock market is open. Let’s pay attention to the situation of the U.S. stock market first.
The Nasdaq, S&P, Russell and Dow Jones Industrial Average all rose. Nvidia led the US stock market with an intraday increase of 11%. The seven technology giants rose collectively except Microsoft.
Microsoft released its financial report yesterday, which did not meet market expectations. Traders are more looking forward to the financial reports of Meta and Apple this week. Meta's financial report will be released after the close of trading this morning.
Data from the past few days show that the rate of decline in the U.S. labor market in the second quarter was somewhat beyond the Federal Reserve's expectations. Although this will accelerate the arrival of interest rate cuts, the Fed is not necessarily optimistic about the upcoming interest rate cuts in September.
The market is currently looking forward to Powell's speech after tonight's interest rate meeting with optimism, hoping that the speech can confirm the September interest rate cut. Currently, the CEM's probability of a September interest rate cut is 87.7%, and the probability of a rate cut is gradually decreasing in the evening.
The market's current concern about tonight's speech is the Fed's attitude. Although the current economic environment and labor market conditions are sufficient to support the necessary conditions for a rate cut in September, given the current excessive cooling of the labor market, once the interest rate is cut, it may cause the market to pre-trade expectations of an economic recession, which is a result the Fed does not want to see.
I have said something similar before. The result that the Federal Reserve or Powell most wants is stable economic growth, a moderate cooling of the labor force, slower wage growth, balanced growth of the labor force and industrial structure, while inflation driven by the supply side is weakened and the financial market is stable. This is what Powell hopes for and is also a normal manifestation of a soft landing.
However, the current labor market is accelerating its recession. Although labor costs are also decreasing, which is of great benefit to inflation, it will also lead to a reduction in consumer desire, thereby weakening domestic demand, which is unfavorable to the real economy and may even trigger expectations of economic recession.
Currently, Wall Street believes that Powell’s speech tonight may not reveal too many details about the interest rate cut, but as long as it can consolidate the September interest rate cut, it is still a good thing for now.
For the crypto market,
The improvement in the risk situation of the U.S. stock market during the day can play a positive role, but the renewed increase in the technology stocks will inevitably absorb a lot of market liquidity, which will lead to short-term volatility in the crypto market. The crypto market still has to wait for Powell to reveal more tonight.
In fact, based on the current global liquidity bias, the crypto market is relatively passive compared to traditional financial markets such as the U.S. stock market. Macro-positive factors may lead to liquidity being snatched away, and macro-negative factors may also lead to a decline, which is relatively difficult.
