The US stock market plummeted by 1100 points! NASDAQ drops 4%

Investors are aware that the global central bank conference is to be held, and they are also aware that Federal Reserve Chairman Powell will attend and deliver a speech. Many investors have anticipated that Powell will take a more aggressive stance towards inflation. However, unexpectedly, Powell's remarks last night still caused a significant shock to the U.S. stock market, leading to a panic sell-off, with the Dow Jones Industrial Average plunging as much as 1,100 points.

The impact was not limited to the United States but also affected the European stock markets, with both Germany and France experiencing declines. Germany's stock market fell by as much as 2.3%.

The commodity market was also affected, with the international gold price falling by over $20 yesterday.

On the other hand, the U.S. Dollar Index rebounded in a V-shape after 10 p.m. Beijing time last night, while other currencies depreciated to varying degrees.

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After 10 p.m. Beijing time last night, the U.S. stock market began to decline upon hearing the news, and there was almost no rebound afterward. The market continued to probe lower, closing almost at the lowest point of the day at 32,283 points. Compared to the previous high of 33,364 points, it fell by 1,100 index points, with the closing decline slightly exceeding 3%.

The other two indices also fell by more than 3%, with the S&P 500 down by 3.4%, and the Nasdaq Index falling by 3.94% after dropping nearly 500 index points.

On the U.S. stock market yesterday, even the best-performing energy sector also experienced a decline, and in the end, all 11 industry sectors involved in the S&P 500 fell.

Prior to this, the U.S. stock market had been correcting for nearly two weeks. On August 16, the Dow Jones Industrial Average reached its previous rebound high of 34,281 points. Then, starting from August 17, the U.S. stock market entered a downward adjustment. The significant decline last night even erased the gains made in the nearly half-month prior.

The Dow Jones Industrial Average has now returned to its position in late July.What exactly did Powell say that caused such severe damage to the stock market?

In fact, it should be said that the market had already anticipated it, but harbored a fluke mentality, and in the end, Powell's speech only confirmed everyone's expectations.

Before Federal Reserve Chairman Powell attended the annual meeting of the global central banks, several officials of the Federal Reserve had already made statements in different places, supporting the Federal Reserve to further significantly raise interest rates in September.

Powell's speech seemed to confirm this speculation.

He said that it is necessary to learn from the lessons of the past, one of which is a key lesson that monetary policy should not be adjusted prematurely before the inflation target is achieved.

The implication is that further significant interest rate hikes are needed to curb inflation, and it is impossible to change interest rate policies just by seeing the signal that inflation has peaked as the market expected.

Moreover, he said that in order to curb inflation, it is inevitable but necessary to pay an economic cost.

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The US stock market has started a relatively large rebound for the first time this year since mid-June. The nearly 15% rebound at that time was based on the Federal Reserve raising interest rates by a total of 150 basis points in June and July.It is evident that at the time, investors generally believed that even if the Federal Reserve raised interest rates significantly, it had already entered the late stage of the rate-hiking cycle. The market even speculated that starting from September, the Federal Reserve would halt the pace of rate hikes, and by next year, due to unsatisfactory economic data, the Federal Reserve might have to restart its loose monetary policy.

As a result, the U.S. stock market disregarded the substantial rate hikes and surprisingly experienced a significant rebound. Now, this expectation has been completely shattered, and even reversed. It appears that not only is it impossible to stop raising rates in September, but there is also a possibility of a 75 basis point increase. After Powell's speech, the market's prediction for a 75 basis point rate hike in September approached 60%, an increase of more than 10 percentage points from before which was less than half.

It seems that for the upcoming period, the U.S. stock market will once again enter a cycle of continuous decline. In contrast, the performance of Chinese concept stocks has been relatively outstanding during this period, as a considerable amount of capital has flowed out of U.S. stocks and turned towards relatively stable Chinese assets.