The market is hopeful about China’s economic recovery, and is also focusing on the minutes of the December meeting of the US Federal Reserve (Fed), which will be released later, in order to find clues about future monetary policy trends. The major US stock indexes opened higher on Wednesday (4th).
Before the deadline, the Dow Jones Industrial Index rose more than 180 points or nearly 0.6%, the Nasdaq Composite Index rose more than 70 points or nearly 0.7%, the S&P 500 Index rose 0.7%, and the Philadelphia Semiconductor Index rose more than 3%.
Major index futures moved higher ahead of the opening bell as the Chinese government considered further support for real estate developers and European data showed that French inflation unexpectedly slowed, suggesting that price pressures in the euro zone eased.
At three o’clock in the morning on Thursday (5th) Taiwan time, the Fed will announce the minutes of its December monetary policy meeting. According to market estimates, the minutes of the December meeting will explain why the Fed raised its inflation and unemployment rate expectations from 2023 to 2025 at the same time, and how much the hot job market will affect inflation.
Wall Street analysts believe that there are three major points to watch in this meeting minutes: an explanation for the upward inflation forecast, how high the unemployment rate can be tolerated, and when they will be satisfied with the progress of inflation.
The core message given by the latest economic forecast is that due to wage growth and service prices remaining high, the core personal consumption price (PCE) index will also rise accordingly, so inflation expectations are raised. But Wall Street analysts think the Fed’s forecast is too high.
In terms of the labor market, Mark Spindel, chief investment officer of investment bank MBB Capital Partners LLC, said that he will look for clues in the minutes of the meeting that the Fed has increased its tolerance for the unemployment rate, which is expected to be higher than its forecast for this year’s unemployment rate of 4.6%. That’s a full percentage point higher than the current unemployment rate.
In terms of progress in inflation, the market believes that if the unemployment rate rises rapidly according to the Fed’s will, the US economy will not be able to avoid a hard landing. According to Bloomberg Economics, the Fed minutes may suggest that it was concerns that the labor market was not cooling fast enough that prompted the 17 Federal Open Market Committee (FOMC) members to cut the end-point rate hike in the latest dot plot. to more than 5%.
Former Fed Chairman Alan Greenspan said a U.S. recession is the “most likely outcome” as the central bank tightens monetary policy to curb inflation. He pointed out that wage growth and employment growth still need to slow down further, so that the fall in inflation will not be temporary. There may be a brief lull in the U.S. on the inflation front, but Greenspan thinks “it’s too late.”
In addition to the Fed’s latest meeting minutes, investors are also waiting for the US November JOLTs job vacancies data to be released later on Wednesday, the ISM manufacturing index for December, and the non-farm payrolls report to be released on Friday (6th).
Among individual stocks, U.S.-traded Chinese technology shares jumped premarket on Wednesday after the Beijing government approved Ant Group’s plans to expand its capital. Shares of Alibaba’s (BABA-US) American Depositary Receipts (ADRs) rose more than 6% in pre-market trading, as did JD.com’s (JD-US). Elsewhere, shares of Baidu (BIDU-US) and NetEase (NTES-US) both rose more than 5%, while Ctrip (TCOM-US) rose 4.5%.
As of 22:00 on Wednesday (4th) Taipei time: Focus stocks:
General Electric (GE-US) was up 2.02% in early trade to $67.64 per share
GE HealthCare Technologies , a spinoff of General Electric , rose Wednesday as a stand-alone company in the S&P 500 . GE revealed last year plans to spin off the three companies so it can focus on aviation. The company plans to spin off its energy unit in 2024. Before the deadline, GE shares rose 0.66% before the market.
Merck (MRK-US) rose 1.15% to $112.30 a share in early trade
Merck rose about 1.7 percent premarket after Bank of America upgraded its rating on Merck to “buy” from “neutral.” Analysts pointed to continued revenue growth for Merck and significant progress in strengthening the position of its cancer drug Keytruda and mitigating the impact of patent expirations.
Microsoft (MSFT-US) fell 3.66% in early trade to $230.81 per share
Shares of Microsoft fell about 2 percent in premarket trading after UBS downgraded the tech giant’s stock to “neutral” from “buy.” UBS said investors were concerned about Microsoft’s Azure and Office businesses after a series of on-site inspections.
Today’s key economic data: US December ISM manufacturing index is expected to be 48.5, the previous value is 49 US November JOLTs job vacancies are expected to be 10.334 million, the previous value is 9.9 million Wall Street analysis:
In an interview, Vasu Menon, executive director of investment strategy at OCBC Bank Wealth Management, said that if the economy is only a mild recession rather than a severe recession, the market may have a good rebound in the second half of the year. There’s a lot of liquidity on the sidelines, waiting to come back into play with those macro cues.
Dan Niles, founder of the hedge fund Satori Fund, said a few days ago that as companies and investors continue to feel the pressure brought by the Fed’s measures to curb inflation, the S & P 500 index will fall by 20% from the current level. Satori Fund targets the S&P 500 at 3,000. Investors will see downward revisions to corporate earnings this year as economic growth begins to slow after the Fed sharply raised interest rates last year, Niles said.
