On Wednesday, May 8th, the three major U.S. stock indexes showed mixed movements. At the close, the Dow rose by 0.44%, the Nasdaq fell by 0.18%, and the S&P 500 remained flat.
Federal Reserve's Collins, speaking at an event at MIT, mentioned that achieving the 2% inflation target might take longer, indicating a need for the U.S. economy to cool down. Collins suggested slowing economic activity to better align demand and supply. She also noted that monetary policy might need to stay at current levels until inflation approaches 2%, expressing optimism about eventually reaching the inflation target.
Tesla dropped by 1.74%. Reports indicate that U.S. prosecutors are investigating whether Tesla misled investors and consumers in its promotion of the electric car's autonomous driving capabilities, potentially involving securities and telecommunications fraud.
Bullish investors decrease as the market awaits next week's inflation data.
On Wednesday, May 8th, the three major U.S. stock indexes showed mixed movements. At the close, the Dow gained 172.13 points, up by 0.44% to 39,056.39 points; the Nasdaq dropped 29.80 points, down by 0.18% to 16,302.76 points; and the S&P 500 remained flat at 5,187.67 points.
The S&P 500 closed flat today, still below the brief touch of the 5,200 level earlier this week, hovering around 5,190 points, marking the largest four-day gain since November 2023. Tesla and Google led the declines among large-cap stocks. Intel's stock price fell as the company expects revenue to drop below previous forecasts. The 10-year Treasury yield rose by 3 basis points to 4.49%.
Citigroup's Chris Montagu believes that investors lack confidence in the sustained rebound of U.S. stocks, indicating the market is far from fully bullish. Montagu stated, "Recent short covering has brought the S&P 500 close to a net long position, but investors seem reluctant to add to existing bullish positions."
Montagu added, "Fund flows tell a passionate but limited story, with new long positions increasing slightly, and risk appetite rising marginally."
Following a pullback last month, U.S. stocks resumed their rise in early May, supported by solid corporate earnings boosting market sentiment, and speculation heating up about the Fed's potential rate cuts this year.
Matt Maley from Miller Tabak noted the small magnitude of the rebound from the April lows. He said, "If this rebound can expand in the coming days and weeks, it would be more positive."
Data shows that since the end of October 2023 to April this year, the S&P 500 has risen significantly, pushing stock valuations to trade at around 20 times expected earnings, about 11% higher than the 10-year average. Investors are now looking for reasons to justify the high valuations and hoping for greater future growth.
David Barnson, Chief Investment Officer at Barnson Group, stated, "The recent stock market rally indicates traders are more driven by fear of missing out than confidence in fundamentals, as uncertainty remains about where profits are headed, and the market lacks new catalysts in the short term." He pointed out, "There's no chance of a rate cut before July, and unlikely before September. With two months until the next earnings season, besides speculation around various economic data, there are no clear catalysts to change the recent market trend."
The market is currently awaiting next week's inflation data. Collins from the Federal Reserve mentioned on Wednesday that interest rates may need to stay at elevated levels for a longer period than previously expected to curb demand and alleviate price pressures.
Mark Haefele from Nationwide stated, "Despite the lack of good news on inflation, there is still a glimmer of hope for patient investors. Historical data shows that the longer the Fed delays rate cuts, the better the stock returns tend to be. This should give investors reason to remain optimistic."
Google Introduces New Model, Tesla Faces New Troubles
Sector-wise, among the eleven sectors of the S&P 500, 4 rose and 7 fell, with the utilities sector leading the gains. The utilities sector closed higher for the 14th time in 16 trading days.
Tech stocks showed mixed movements. TSMC, Broadcom, and Cisco rose by over 1%, while Meta, Texas Instruments, Netflix, ASML, AMD, Microsoft, Qualcomm, Apple, and Micron Technology saw slight gains. Nvidia, Eli Lilly, and Amazon saw slight declines, while Google Class A and Tesla dropped by over 1%, and Intel fell by over 2%.
Google fell by 1.09%. Google's DeepMind released its new AI protein structure prediction model, AlphaFold3, aimed at helping scientists design drugs and target diseases more effectively. This version of AlphaFold3 can map the behavior of all molecules in life, including human DNA. Compared to existing prediction methods, AlphaFold3 has improved interactions between proteins and other molecule types by at least 50%, with accuracy doubling for some critical interaction categories. These research findings were published in the renowned international academic journal Nature on Wednesday, expected to significantly reduce the time and resources needed for developing treatment methods.
Meanwhile, Google's parent company Alphabet faces a lawsuit of up to $169 billion, accusing it of abusing its dominant position in the online advertising market. The lawsuit comes from publishers of UK websites and apps, claiming losses due to Google's anti-competitive behavior. On Wednesday, lawyers requested the Competition Appeal Tribunal (CAT) to prove during a three-day hearing that the case can proceed to trial. Google denied all allegations, stating its impact on the advertising technology industry promotes competitiveness and urging the London court to stop a large-scale lawsuit. Tesla fell by 1.74%. According to reports, U.S. prosecutors are investigating whether Tesla misled investors and consumers in its promotion of the electric car's autonomous driving capabilities, involving allegations of securities fraud and telecommunications fraud. The investigation revolves around Tesla's fully automated driving system, which, despite having assisted driving functions, is not fully autonomous. Although Tesla has consistently reminded drivers to be prepared to take control of the vehicle at any time, the U.S. Department of Justice is reviewing potentially misleading statements made by Tesla and CEO Elon Musk. Additionally, the Securities and Exchange Commission is also investigating Tesla's representations to investors. The case is still in the investigation phase with no definitive conclusions yet.
In other news, to boost sales, Tesla executive Zhu Xiaotong is set to return to China. He previously led Tesla's entry into the Chinese market. Zhu Xiaotong was promoted to Senior Vice President in April 2023, overseeing global production, sales, delivery, service, and operations at the company's factory in Austin. Recently, vehicle deliveries at Tesla's Shanghai factory dropped by 18% year-on-year in April.
Amazon declined by 0.40%. On Wednesday local time, according to Spanish telecom executives, Amazon took a bold step in expanding its presence in the global telecom market through a partnership with Telefónica Germany (branded as O2 in Germany). As part of this collaboration, Telefónica Germany will migrate 1 million 5G users to Amazon Web Services (AWS) cloud platform later this month. This marks the first instance globally where an existing mobile operator is moving its core network to the public cloud.
Telefónica has 45 million customers in Germany, and the company's Chief Technology and Information Officer, Malik Rao, expressed his desire to see the system running for at least one to two quarters and plans to migrate 30% to 40% of the customer base to the cloud platform by 2025 to 2026.
Meta rose by 0.93%. The Turkish Competition Authority imposed a fine of 1.2 billion lira (approximately $37.2 million) on Meta for data sharing issues on Wednesday local time. This fine comes after two separate investigations into Meta's Facebook, Instagram, WhatsApp, and Threads platforms. The Competition Authority initiated an investigation last December into Meta's potential violations of competition law, particularly regarding data linking between its social media platforms Threads and Instagram, and implemented temporary measures in March to restrict data sharing between these two platforms.
Furthermore, the Competition Authority fined Meta $160,000 per day in January for failing to provide sufficient investigation documents and $149,000 per day in March for a notice message related to data sharing. These fines concluded on May 3.
Major banks collaborate to test new technology
Stocks of major banks showed mixed movements. JPMorgan Chase rose by over 2%, Wells Fargo, Citigroup, and Goldman Sachs rose by over 1%, Morgan Stanley, BlackRock, and Bank of America saw slight declines, while UBS Group fell by over 2%.
JPMorgan Chase increased by 2.03%. JPMorgan Chase expects to record approximately $8 billion in accounting gains following a transaction with Visa. Additionally, JPMorgan Chase plans to donate around $1 billion of Class C stock to the JPMorgan Chase Foundation as a prepayment of future donations to the institution over the next few years, categorizing it as non-compensation expense.
Citigroup rose by 1.21%, and Wells Fargo increased by 1.61%. Mastercard is collaborating with several major U.S. banks to test shared ledger technology to facilitate the joint settlement of tokenized assets such as commercial bank money, treasury bonds, and investment-grade bonds. In a statement on Wednesday, Mastercard stated that the regulated settlement network concept verification will simulate dollar transactions, aiming to accelerate cross-border and cross-system transactions, reducing errors and fraud risks. Currently, these assets exist independently in different systems, but by converting them into tokens on a distributed ledger, settlement on the same system can be achieved.
This experiment builds on a 12-week test conducted at the end of 2022 for domestic interbank payments and U.S. dollar cross-border payments. Participants in the new trial include Citigroup, JPMorgan Chase, Bank of America, Wells Fargo, Visa, Swift, TD Bank North America, Zions Bancorp, among others, with the New York Innovation Center of the Federal Reserve Bank of New York observing the research and experiments of these participants.
Energy stocks mostly declined. Occidental Petroleum fell by over 2%, Shell, ConocoPhillips, Murphy Oil, BP, Chevron, and Exxon Mobil saw slight declines, while Petrobras and U.S. Energy rose slightly.
Popular Chinese concept stocks generally fell. The Nasdaq Golden Dragon China Index dropped by 0.71%. XPeng Motors fell by over 6%, NIO by over 5%, Li Auto by over 4%, Weibo by over 3%, Futu Holdings, iQIYI by over 2%, Bilibili, Full Truck Alliance, Alibaba by over 1%, Baidu, Tencent Music, JD.com, NetEase saw slight declines, while Pinduoduo rose by over 1%.
Editor: Ye Shujun
Proofreader: Li Lingfeng
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