The U.S. stock market has once again played out the scenario of "the better the economy, the worse the stock market."
Affected by some recently released economic data that exceeded expectations, U.S. stocks experienced another significant decline last night.
Next week will see the release of the latest CPI data, followed by the Federal Reserve's interest rate meeting, which will determine whether the rate hike will be reduced in December. It is expected that the stock market will still experience significant fluctuations this week.
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Last night, the three major U.S. stock indices fell in sync. The Dow Jones Industrial Average fell by 482 points, a decline of 1.4%, which was the smallest among the three indices.
The Dow Jones Industrial Average closed at 33,947 points, narrowing the gain from the lowest of 28,660 points in October to 18%. It had just entered a technical bull market a few days ago but has now moved out of the bull market range.
The S&P 500 index fell by 1.8% last night. The index surpassed the 200-day moving average last week, but the decline for the year still stands at 16%.
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The Nasdaq index once again performed the worst, falling nearly 2% last night, with the annual decline still at a high of 28.2%.
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Regarding the future trend, most analysts in the market believe that as long as the current Federal Reserve interest rates remain at high levels, economic growth will be further hindered.A survey indicates that over half of investors believe that the S&P 500 index will experience a drop of around 20% in 2023, which aligns with the forecasts of Wall Street investment banks. Wall Street is concerned that the suboptimal revenue and profit of the listed companies included in the S&P 500 over the next 12 months will affect their stock prices. Currently, the UK has confirmed it has entered a recession, and at the beginning of 2023, Europe will also experience an economic downturn, with the US potentially facing a significant contraction.
At the same time, although the ongoing Russia-Ukraine conflict is unlikely to escalate, the failure to resolve it effectively will greatly impact energy supply and the development of the global economy.
However, on the other hand, the current robust economic data in the United States leaves investors feeling helpless. Firstly, the GDP for the third quarter of the US has been revised to an annualized rate of 2.9%, dispelling the shadow of the sequential declines in the previous two quarters. Subsequently, employment data exceeded expectations by 30%, and personal income continued to rise sequentially by 0.7%, indicating that the job market remains strong and compensation is still on the rise.
Last night, the ISM services PMI was also announced, significantly surpassing the 50 threshold. Concurrently, factory orders from the Department of Commerce also showed strength. These economic indicators suggest that the Federal Reserve still has room for substantial interest rate hikes. Therefore, it is not ruled out that the Federal Reserve could make an unexpected interest rate decision increase next week.In response to this, the majority of surveyed investors believe that long-term bonds and technology stocks are currently at a buying opportunity.
Furthermore, they also believe that in 2023, the real estate risk remains high. Influenced by the rise in borrowing costs, potential buyers have exited the market, which may also lead to further declines in housing prices.
On the other hand, the continuously extended interest rate hike cycle makes it difficult for the market to rise, while the economy continues to decline.