On April 16th local time, the three major indexes of the US stock market closed with mixed gains and losses. Federal Reserve Chairman Powell's speech hit expectations of interest rate cuts, and factors such as the hanging sword of the Middle East situation were seen as the main reasons for the decline in the US stock market that day. On the other hand, giants such as Union Health and Morgan Stanley reported better than expected financial results, and some large technology stocks regained upward momentum, limiting the decline. As of the close, the Dow Jones Industrial Average rose 0.17%, the Nasdaq fell 0.12%, and the S&P fell 0.21%.
The yield of US 10-year treasury bond bonds rose 3.7 basis points to 4.665% in late trading, the highest since November 13, 2023. The two-year treasury bond bond yield rose 3.4 basis points to 4.972% in late trading. The degree of inversion in the yield curves of 2-year and 10-year US Treasury bonds has narrowed to the lowest level since mid February.
On the 16th, Federal Reserve Chairman Powell and Bank of Canada Governor McLehm attended an economic forum together, stating that the Federal Reserve may need more time to have sufficient confidence in rate cuts.
Powell stated that since the rapid decline in US inflation rates at the end of last year, the Federal Reserve has lacked further progress in combating inflation. If price pressures persist, the Federal Reserve can maintain interest rates unchanged for a "necessary amount of time".
"The recent data clearly did not give us greater confidence, on the contrary, it suggests that achieving this confidence may take longer than expected." Powell added, "Given the strong performance of the labor market and the progress made by the Federal Reserve in combating inflation so far, it is more appropriate to allow time for restrictive monetary policy to take effect and let data and economic dynamics serve as a compass for us to adjust policies."
On the same day, Federal Reserve Vice Chairman Jefferson stated that if inflation does not slow down as expected, the Federal Reserve is prepared to continue implementing a tight monetary policy.
Analysts say that Powell's speech reflects a shift in his attitude towards inflation against the backdrop of strong US economic growth and job market, as well as rising inflation. The Federal Reserve may choose to initiate interest rate cuts later rather than earlier to maximize policy space and initiative.
"The idea of the Federal Reserve raising interest rates next is beginning to be brewing in the minds of many investors," said Ipek Ozkardeskaya, senior analyst at Swissquote
Recently, the escalating tensions in the Middle East, rising oil prices, and recent economic data showing ongoing inflation have suppressed market risk appetite. Paul Christopher, Global Investment Strategy Director at the Investment Research Institute of Wells Fargo, said that investors may face even more difficult times in the future.
Christopher wrote in a report on Monday, "The recent events in the Middle East have brought greater risks to potential capital market volatility in the future."
The economic data released on the day was generally weaker than expected, with the monthly rate of new housing construction dropping significantly from 12.7% to -14.7% in March, far below the expected -2.4%; During the same period, the total number of construction permits decreased from 1.523 million to 1.458 million, lower than the expected 1.514 million.
Analysts say that after the recent strong performance of CPI and retail sales exceeded expectations, these data slightly eased concerns that strong economic data may delay the timing of the Federal Reserve's first interest rate cut.
On the other hand, the first quarter financial report season is considered the next major test for the US stock market, with large bank financial reports remaining the focus.
Bank of America's pre market financial report showed that due to a significant increase in revenue from investment banking and wealth management businesses, the first quarter profit and revenue exceeded analyst expectations. The revenue was $25.98 billion, a year-on-year decrease of 1.8%, and analysts expected it to be $25.46 billion. The net profit was 6.7 billion US dollars, equivalent to 76 cents per share, a year-on-year decrease of 18%. Excluding $700 million related to the special evaluation by the Federal Deposit Insurance Corporation (FDIC), the adjusted earnings per share were 83 cents, while analysts expected 76 cents.
Morgan Stanley's financial report shows that its revenue for the first quarter was $15.14 billion, a year-on-year increase of 4%, better than market expectations; Net profit was $3.41 billion, a year-on-year increase of 14%. Earnings per share are $2.02.
As of the close, Bank of America's stock price fell by 3.53%, while Morgan Stanley's stock price rose by 2.47%.
According to data from Bank of America, as of now, 30 companies in the S&P 500 index have outperformed expectations by more than 6%. However, Evercore ISI strategists believe that as US listed companies become more cautious about the outlook, overall profit expectations may weaken.
"We believe that the outlook for the company will be more cautious and earnings per share will be revised downwards." In a recent research report, Evercore strategists stated that the institution is bullish on areas such as consumer necessities, healthcare, and communication services.
In terms of other stocks, Johnson&Johnson's stock price fell 2.15%, disappointing investors with first quarter revenue and lower than expected sales of the psoriasis drug Stelara.
United Health Group rose 5.28%, with first quarter revenue and adjusted earnings per share exceeding market expectations. The first quarter earnings per share were $6.91, which was $0.30 higher than the market expectation of $6.61. Revenue increased by 8.6% year-on-year to $99.8 billion, with a market expectation of $99.23 billion.
In terms of commodities, oil prices have fallen for the second consecutive day, with crude oil futures for May delivery on the New York Mercantile Exchange closing down $0.05, a decrease of approximately 0.05%, at $85.36 per barrel.
Gold futures prices rose 1% to close at $2407.8 per ounce. The escalating tensions in the Middle East have brought about a need for safe haven, which analysts say offsets the impact of the market's expectation of a Fed rate cut.