US Inflation Cools in April, Giving Fed Room to Pause Rate Hikes

The latest U.S. economic data report showed that inflation cooled slightly in April, revealing that the Federal Reserve’s interest rate hikes so far are working, giving the central bank room to pause rate hikes, while traders increased bets for a rate cut this year. Note that major US stock indexes opened higher on Wednesday (10th).

before the deadline,Dow Jones Industrial Averagefell more than 20 points or nearly 0.1%,Nasdaq Composite Indexrose nearly 100 points or nearly 0.8%,S&P 500 Indexup 0.3%,Philadelphia SemiconductorThe index rose nearly 1%.

The U.S. Department of Labor announced inflation in April, which showed that the annual growth rate of overall and core inflation was lower, supporting the Fed to keep interest rates unchanged in June. Specifically, the U.S. consumer price index (CPI) increased by 4.9% last month, lower than market expectations and the previous value of 5%; the core CPI excluding food and energy costs increased by 5.5% in line with market expectations, slightly lower than the previous The value is 5.6%.

On a monthly basis, April CPI grew by 0.4%, in line with market expectations, but an increase from the previous value of 0.1%. Core CPI grew by 0.4%, in line with market expectations and the previous value of 0.4%.Major U.S. index futures were higher after the data, while yields on the rate-sensitive two-year note fell to 3.93%, while 10-Year Treasury Bond Yield3.45%. Traders have begun pricing in around 75 basis points of rate cuts this year, swap contracts showed.

Despite the good news from the inflation report, investors are wary of the risks posed by the stalled U.S. debt-ceiling talks, with some of Wall Street’s most seasoned traders warning of unimaginable long-term damage if a debt default could occur.

The cost of insuring U.S. debt against default now exceeds that of some emerging markets or countries with junk credit ratings. Investors are increasingly concerned about the prospect of default, making it more expensive to insure U.S. Treasuries than countries such as Greece, Mexico and Brazil. These countries have repeatedly defaulted and have credit ratings many notches below that of the United States.

U.S. President Joe Biden and congressional Republicans have made little real progress in avoiding a first debt default. They have pledged to engage in deep talks on spending, leaving the door open for a deal. Biden and House Speaker Kevin McCarthy (Kevin McCarthy) plan to hold another meeting on Friday (12th).

As of 21:00 on Wednesday (10th) Taipei time:

Focus stocks:

ideal car (LI-US) rose 8.11 percent to $26.78 a share in early trade

Li Auto’s first-quarter revenue surged 96.5% toRMB 18.79 billion yuan; the delivery volume achieved the best result in a single season, reaching 52,584 vehicles, ranking among the top in ChinaRMB The top three new energy brands with a sales volume of more than 200,000 yuan, with a market share of about 11%.In the first quarter, the profit and net profit (Non-GAAP) reachedRMB 890 million yuan andRMB 1.41 billion yuan; the delivery volume in April broke through 25,000 vehicles for the first time, a record high, and the cumulative delivery exceeded 330,000 vehicles. The performance outlook for the second quarter hit a new high in a single quarter. It is expected to deliver 76,000 to 81,000 new cars, an annual increase of 164.9% to 182.4%, and the estimated revenue is 24.22 billion to 25.86 billion yuan, an annual increase of 177.4% to 196.1%.

Airbnb(ABNB-US) fell 12.44% in early trade to $111.26 per share

The profit per share of the travel platform Airbnb in the first quarter was US$0.18, compared with a loss of US$0.03 per share in the same period last year, and revenue reported US$1.82 billion, analysts expected US$1.79 billion, and adjusted EBITDA reported US$262 million, higher than analysts Expected $259.4 million. The company forecast second-quarter revenue of between $2.35 billion and $2.45 billion, compared with analysts’ expectations of $2.42 billion, and will repurchase up to $2.5 billion of Class A common stock.

Rivian(RIVN-US) rose 9.09 percent to $15.12 a share in early trade

Rivian’s first-quarter revenue was $661 million, far better than the $95 million in the same period last year, and Refinitiv expected $652.1 million; $1.45 per share.

Rivian reiterated that it is still on track to achieve its annual production target of 50,000 electric vehicles this year, about twice that of last year, and its total capital expenditure for the year is estimated to be about US$2 billion.

Today’s key economic data:

• U.S. April CPI annual growth rate reported 4.9%, expected 5.0%, previous value 5.0%
• U.S. CPI monthly growth rate in April reported 0.4%, expected 0.4%, previous value 0.1%
• U.S. core CPI annual growth rate in April reported 5.5%, expected 5.5%, previous value 5.6%
• U.S. core CPI monthly growth rate reported 0.4% in April, expected 0.4%, previous value 0.4%

Wall Street Analysis:

Vishnu Varathan, head of economics and strategy at Mizuho Bank, said: “The bar for the Fed to respond to unexpected data in either direction is high. After completing a cumulative 500 basis points of interest rate hikes and predicting a restructuring among regional banks will lead to a credit crunch, Unless inflation re-accelerates, the Fed is unlikely to tighten monetary policy further simply because inflation is ‘sticky’.”

Bank of America technical strategists believe that the technical background supports the US stock market to maintain the bull market pattern. “sinceS&P 500 IndexSince bottoming out in September and October, several technical indicators have triggered bullish signals.The average and median returns predicted by these signals show that:S&P 500 IndexIt is expected to rise further by the end of the year and in the first quarter of 2024. They noted that both cyclical and long-term technical indicators are bullish for the U.S.S&P 500 IndexAt the same time, it does not show that the market is generally bearish.