U.S. Stocks Surge as Tech Leads Rally; Dollar Slides Below 104 Amid Fed's Hawkish Stance

Intelligent Finance APP learned that on Tuesday, the three major U.S. stock indexes rose together, with Nasdaq and S&P 500 both rising more than 2%. Technology stocks and chip stocks led the gains, Micron Technology (MU.US) and NVIDIA (NVDA.US) both surged over 5%, and Amazon (AMZN.US) rose more than 4%. The U.S. dollar index fell below the 104 level, marking a three-day losing streak to its lowest since May 5th. The 10-year yield rebounded towards 3% again, with short-term yields showing larger increases, flattening the U.S. Treasury yield curve. Oil prices retreated, with Brent crude falling more than 2%. Gold futures rebounded for two consecutive days, holding firmly above $1800.

【US Stock Market】By the close, the Dow Jones Industrial Average rose 431.17 points, or 1.34%, to 32,654.59 points; the Nasdaq Composite Index surged 321.73 points, or 2.76%, to 11,984.52 points; and the S&P 500 Index climbed 80.84 points, or 2.02%, to 4,088.85 points. The technology, semiconductor, and airline sectors led the gains, with Micron Technology (MU.US) up 5.69%, NVIDIA (NVDA.US) rising 5.29%, Tesla (TSLA.US) gaining 5.14%, Amazon (AMZN.US) increasing by 4.11%, Apple (AAPL.US) climbing 2.54%, United Airlines (UAL.US) jumping 7.67%, and Delta Air Lines (DAL.US) surging 6.68%. In addition, most popular Chinese stocks also saw gains, with NIO (NIO.US) skyrocketing 14.30%, while Alibaba (BABA.US) and Pinduoduo (PDD.US) both rising over 6%.

【European Stocks】Germany's DAX 30 Index rose by 1.59%, the UK's FTSE 100 Index increased by 0.72%, France's CAC 40 Index climbed by 1.30%, and the Euro Stoxx 50 Index gained 1.52%.

【Asia-Pacific Stock Market】The Nikkei 225 index rose by 0.42%, the Korean KOSPI index increased by 0.92%, the Singapore Strait Times Index went up by 0.34%, the Vietnamese VN30 Index surged by 5.31%, the Indonesian Jakarta Composite Index climbed by 0.70%, the Thai SET Index gained 1.90%, and the Indian Bombay 30 Index advanced by 2.54%.

【Foreign Exchange】The US dollar fell. The US Dollar Index (DXY), which measures the dollar against a basket of six major currencies (euro, Swiss franc, yen, Canadian dollar, pound, and Swedish krona), dropped 0.85% to 103.30, breaking below the 104 level, marking the third consecutive daily decline to its lowest point since May 5.

[Cryptocurrency]Cryptocurrency rises. Bitcoin increases by 1.61%, reaching $30,152.53 per coin; Ethereum rises by 2.33%, reaching $2,061.16 per coin.

【Gold】Thanks to the decline in the US dollar, gold futures priced in dollars rebounded for the second consecutive day, stabilizing above $1810. COMEX June gold futures closed up 0.27% at $1818.90 per ounce.

【Crude Oil】Oil Prices Retreat. WTI June crude oil futures fell by $1.80, a drop of 1.57%, to close at $112.40 per barrel; Brent July crude oil futures dropped by $2.31, a decline of 2.02%, to settle at $111.93 per barrel. This marks the first time since May 2020 that the closing price of the nearest-month WTI contract has exceeded that of Brent. Additionally, the national average retail price of gasoline in the U.S. hit a new record high on Tuesday, with prices in all states collectively surpassing $4 per gallon for the first time in history. In California, the average gasoline price even broke $6 per gallon, setting a new record. Insufficient refining capacity has been the driver behind the counter-seasonal rise in oil prices despite weaker demand.

[Base Metals]LME copper closed up $128 at $9,366 per tonne, hitting the highest level in nearly a week since May 11, rising for the third consecutive day and moving back above the $9,300 integer mark. LME aluminum closed up $58 at $2,890 per tonne. LME zinc closed up $98 at $3,662 per tonne. LME lead closed up $6 at $2,102 per tonne. LME nickel closed down $143 at $26,406 per tonne, falling for the third consecutive day and hitting a two-month low. LME tin closed up $199 at $34,065 per tonne. LME cobalt closed flat at $75,000 per tonne.

[Macroeconomic News]

Powell Reiterates Possible 50-Basis-Point Rate Hike, Stresses Continued Action to Curb Inflation.On Tuesday, Federal Reserve Chairman Powell indicated that a 50-basis-point interest rate hike is possible if the economy meets expectations, while focusing on reducing U.S. inflation to 2% and hoping for a significant decline in inflation. Additionally, Powell stated that U.S. inflation is too high and needs to be lowered, acknowledging that curbing high inflation is a challenging task. He believes that both monetary and fiscal policies have provided substantial stimulus to the U.S. economy, and without supply chain issues, the U.S. would not be experiencing such high inflation. Powell emphasized that the Fed will not hesitate to raise rates above the neutral level if necessary; the neutral rate is neither an endpoint nor a reference point. He noted that the U.S. economy is currently strong and the Fed believes it is in a good position to withstand reduced monetary easing and tightening. Powell also admitted again that interest rate hikes may have been delayed, stating that inflation data had actually started changing as early as October of last year. In hindsight, the Fed might have raised rates earlier.

"Hawk King" Brad: Raising interest rates by 50 basis points is a good plan.The Fed's Most Hawkish Official, St. Louis Fed President Bullard, stated that he supports the Fed's plan to raise interest rates by 50 basis points over the next few meetings, believing it will help reduce inflation that is at a nearly four-decade high. Bullard noted that risks lie ahead for the economic outlook and conditions may shift, "but I think we have a good plan in place now." Moreover, he argued that the Fed is not as behind the curve in combating inflation as some critics suggest, since financial markets have already priced in the possibility of future rate hikes, with some tightening occurring even before the Fed takes action. Previously, Bullard has mentioned more than once the possibility of the Fed considering a 75-basis-point hike, but when asked on Tuesday whether the Fed should consider much larger moves in the near term, he did not bring up the possibility of a 75-basis-point increase.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis: The Federal Reserve has signaled that it will raise interest rates to a neutral level this year.Kashkari said that it is still unclear whether the Federal Reserve needs to do more on interest rates or whether the Fed's actions will lead to a recession in the U.S. economy. Additionally, he expressed confidence that the central bank can reduce demand. Kashkari also hinted that if supply chain tensions ease, the Fed may not need to raise interest rates as aggressively as expected. How high the Fed will ultimately need to raise interest rates will largely depend on how quickly supply chain bottlenecks can be relieved.

Charles Evans, President of the Federal Reserve Bank of Chicago: The Federal Reserve may need to raise interest rates to some extent above the neutral rate.Evans indicated a preference for the FOMC to proactively raise interest rates to a neutral level, noting that policy needs to adapt to strong demand pressures. He stated that he hopes the Federal Reserve can shift to a more cautious approach after proactively raising rates. Evans believes that U.S. inflation is clearly too high (compared to the Fed's 2% inflation target) and must be brought down through policy actions.

US Consumer Spending Remains Strong Under High Inflation Pressure.U.S. retail sales rose for a fourth straight month in April, with overall retail sales increasing 0.9% from the previous month, in line with market expectations. Meanwhile, the growth rate for March was revised up to 1.4%. Excluding autos and gas stations, sales last month grew by 1%, though these figures are not adjusted for inflation. U.S. retail sales in April continued to grow steadily, reflecting broad-based growth in consumer spending and indicating that demand for goods has remained resilient despite rampant inflation. Some economists predict that consumer spending will shift from goods to services such as travel and entertainment in the coming months, primarily due to waning concerns related to the pandemic and an expected rebound in summer recreational activities. Consumer spending is typically the largest contributor to the U.S. economy, accounting for about 70% of GDP.

Fed Officials' Hawkish Stance Pushes U.S. Bond Yields Higher, 10-Year Yield Reaches Near 3% Again.The yield on the US 10-year benchmark treasury bond increased by 10.38 basis points to 2.9860%, trading between 2.8696% and 2.9952% during the session; the yield on the 20-year US treasury bond rose by 7.27 basis points, while the yield on the 30-year US treasury bond climbed by 7.61 basis points. Short-term bond yields saw relatively larger increases, with the 5-year/10-year yield curve flattening again. The yield on the 2-year US treasury bond rose by 12.64 basis points to 2.7003%, trading between 2.5636% and 2.5739% during the session; the yield on the 3-year US treasury bond increased by 14.27 basis points to 2.8927%; the yield on the 5-year US treasury bond rose by 13.69 basis points, and the yield on the 7-year US treasury bond climbed by 12.54 basis points. The spread between the 2-year and 10-year US treasury yields fell by 2.262 basis points to 27.951 basis points, dropping to a daily low of 25.525 basis points after Federal Reserve Chairman Jerome Powell concluded his media interview.

The White House is planning to propose that Europe impose a tax on Russian oil as an alternative to an embargo.U.S. Treasury Officials Suggest Tariffs on Russian Oil Instead of Full Import Ban, Says Tuesday Statement

【Individual Stock News】

Walmart (WMT.US) Q1 Net Profit Down 25% YoY, Full-Year Guidance Weak.Earnings Report Shows Walmart's Q1 Revenue at $141.57 Billion, Up 2.4% Year-over-Year, Exceeding Market Expectations of $138.94 Billion; Net Profit at $2.05 Billion, Down 25% Year-over-Year; Diluted Earnings Per Share at $0.74, Falling Short of Last Year’s $0.97. Excluding Special Items, Walmart’s Adjusted Earnings Per Share Were $1.30, Missing Expectations of $1.48. Cost of Sales Was $106.8 Billion, Up 3.5% Year-over-Year; Operating, Selling, General and Administrative Expenses Were $29.4 Billion, Increasing by 4.5%. Operating Profit Was $5.3 Billion, Down 23% Year-over-Year. Walmart CFO Brett Biggs Stated That Soaring Fuel Prices, Rising Labor Costs, and Aggressive Inventory Levels Pressured the Company’s Profits. Walmart Said It Expects Fiscal 2023 Net Sales to Grow Approximately 4% on a Constant Currency Basis (Previously Projected Growth Was 3%). Additionally, The Company Said It Anticipates Fiscal 2023 Earnings Per Share to Decline About 1%, Compared to Prior Expectations of Mid-Single Digit Growth. Walmart’s U.S.-Listed Shares Closed Down 11.38% on Tuesday.

Home Depot (HD.US) Q1 Net Sales Increased by 3.8% Year-over-Year, Raises Full-Year Guidance.Data shows that the company's Q1 net sales were $38.908 billion, a year-on-year increase of 3.8%, with market expectations at $36.647 billion; net profit was $4.231 billion, a year-on-year increase of 2.1%, with market expectations at $3.797 billion; diluted earnings per share were $4.09, compared to $3.86 in the same period last year, with market expectations at $3.67. Same-store sales grew by 2.2%, including a 1.7% increase in same-store sales in the U.S. Gross profit was $13.145 billion, a year-on-year increase of 3.2%. In addition, Home Depot raised its 2022 performance guidance, expecting total sales and same-store sales growth to be approximately 3.0%, operating margin to be about 15.4%, net interest expenses to be around $1.6 billion, tax rate to be approximately 24.6%, and diluted earnings per share to grow at a mid-single-digit rate. Home Depot closed up 1.68% on Tuesday.

FDA Authorizes Pfizer (PFE.US) to Provide COVID-19 Vaccine Booster for Children Aged 5 to 11.On Tuesday, the U.S. Food and Drug Administration (FDA) expanded the age range for Pfizer's COVID-19 vaccine booster to include children aged 5-11. Following this news, Pfizer's stock price rose by 1.3%, nearly recovering all losses from the past month since April 18.

[Major Ratings]

Goldman Sachs: Reiterates "Buy" Rating on TSMC (TSM.US), Raises Target Price to $163.

Morgan Stanley: Lowers Rivian (RIVN.US) Target Price to $60, Maintains "Overweight" Rating.

BofA: Boeing (BA.US) May Face Numerous Unexpected Challenges in the Short Term, Downgrade Target Price to $150, Maintain "Neutral" Rating.

Piper Sandler: Unaffected by the PC growth slowdown, upgrades AMD (AMD.US) rating to "Overweight" and raises target price from $90 to $140.

BofA: Alibaba (BABA.US) Q1 Results "Unlikely" to Surprise, Reiterates "Buy" Rating with $175 Price Target.