Weekly News 2022/09/19-2022/09/23

 U.S. stocks closed sharply lower on Friday. The Dow fell 486.27 points, or 1.62%, to 29,590.41 points; the Nasdaq fell 198.88 points, or 1.80%, to 10,867.93 points; the S&P 500 fell 64.75 points, or 1.72%, to 3,693.24 points. This week, the Dow fell 4.06%, the S&P 500 fell 4.64%, and the Nasdaq fell 5.07%. The S&P 500 has largely given up the rebound gains it made this summer, further confirming the bear market. Investors worry that the Federal Reserve's further tightening of monetary policy to fight inflation will tip the U.S. economy into recession. The dollar continued to appreciate sharply against other currencies. Goldman Sachs slashed its year-end target for the S&P index.

Markets are still pricing in the Fed's decision to raise rates for the third time in a row by 75 basis points on Thursday. On the same day, the Federal Reserve also released a dot plot of interest rate paths that suggest continued aggressive interest rate hikes in the future. In addition, many overseas central banks also announced interest rate hikes on Thursday.

Goldman Sachs said that the Federal Reserves federal funds rate will be higher than previously expected, putting pressure on U.S. stock market valuations. The bank lowered its year-end target for the S&P 500 to 3,600 from 4,300. Goldman Sachs strategists David Kostin said that most equity investors have accepted a hard landing in the U.S. economy is inevitable. The higher interest rate scenario used in the firm's valuation model now supports a price-to-earnings ratio of 15 times (versus previous forecasts is 18 times). Goldman Sachs strategists recommend that increased uncertainty will supports defensive stocks, investors should hold stocks with quality attributes such as strong balance sheets, high returns on capital and solid sales growth.

 Salesforce (NYSE: CRM) co-CEO said it would continue to make acquisitions. Salesforce said it has acquired 60 companies and will continue to make acquisitions while focusing more on integrating those it has acquired. Meanwhile, Salesforce is still integrating employees from companies such as recently acquired Tableau. Salesforce aims to improve profit margins as the economic outlook deteriorates.

Boeing (NYSE: BA) paid $200 million to settle SEC charges related to the 737 MAX crash. The U.S. Securities and Exchange Commission (SEC) has previously accused Boeing of misleading investors over remarks made after the crash of its Boeing 737 MAX. Boeing will pay $200 million to settle allegations that it misled investors after two fatal crashes of its 737 MAX jets, the SEC said on Thursday. Two 737 MAX crashes in 2018 and 2019 killed all 346 people on board and sparked a worldwide grounding of the 737 MAX. The 737 MAX made its first return to flight two years ago.

General Motors (NYSE: GM) said on Friday it would invest $760 million at a plant in Ohio to expand production of electric-vehicle drives. GM executive vice president Johnson said the company is now aiming to produce 1 million electric vehicles in North America by 2025 and is looking for ways to increase EV capacity.

Ford (NYSE: F) has delayed deliveries of some models as the company's brand badges and nameplates on select models hit supply constraints. Ford recently pre-announced the impact of parts shortages and inflation-related supplier costs on its quarterly profit forecast. A spokesperson for the company confirmed that the company has suspended shipments of some cars due to the lack of badges. The shortage is affecting Ford's popular F-Series pickups, sources said.

 After modest gains on Thursday, both bitcoin and ether traded lower on Friday. Both digital assets continued to trade sideways as they lacked a substantial momentum to push prices higher.

Bitcoin (BTC) prices fell modestly by 4% on Friday, following a 5% gain on Thursday. The largest cryptocurrency by market cap is now trading below $19,000, down 5% on a weekly basis. Bitcoin prices are down 61% so far this year.

Ether (ETH) was down 3% and also traded moderately compared to its 20-day moving average. Ether prices are down 12% on a weekly basis and 65% so far this year. The price of ETH is down around 20% since the much-anticipated and successful Ethereum merger. The combined ether supply increased by 5,400 ETH, but if that didn't happen, the supply could have increased by more than 105,000 ETH. So, while the merger did not cause deflation by the textbook definition, it significantly slowed ETHs inflation rate.

“Bitcoin is doing just fine as the global bond market selloff heats up. Recently, it seems Bitcoin would be sharply lower if Wall Street sees Treasury yields skyrocket and stocks sell-off, but that is not happening. Bitcoins bottom could be in place if throughout this market volatility it can hold the $18,000 level,” said Edward Moya, a senior market analyst.

The price of gold is expected to fluctuate and fall this week. On Friday, spot gold fell 0.19% to US$1,667.81 per ounce; the main COMEX gold futures contract fell 0.33% to US$1,675.6 per ounce.

The Feds September interest rate dot plot hints that it will raise interest rates violently, pushing The dollar rallied violently before Fed Chairman Jerome Powell tried to temper his hawkish stance. The Fed raised interest rates by 75 basis points to 3%-3.25% as scheduled, but the interest rate dot plot shows that Fed officials believe that the policy rate will rise to 4.40% by the end of this year and peak at 4.60% in 2023, which is higher than the previous market expectation of the terminal rate 4.5%. This also means that the rate hike in the last two meetings this year is likely to reach 125 basis points, while the first rate cut will have to wait until 2024, dispelling the market's idea of a quick turn to easing by the Fed. The Fed's hawkish decision has put heavy pressure on gold prices, which has led to declining investment demand for gold. “Gold's weakness is due to a stronger dollar and slightly higher yields, and the overall Fed outlook is for further rate hikes, which will keep gold capped,” said senior market strategist Bob Haberkorn. However, concerns about the global economic downturn and geopolitical tensions have limited the downside of gold prices.

Looking forward to next week, the market will usher in a series of heavy data. In addition, many Fed officials will also make speeches, investors should keep an eye on it.

 Oil prices showed a further downward trend this week as central banks around the world raised interest rates, although geopolitical tensions slowed the decline. On Friday, NYMEX crude oil futures fell 3.90% to $81.71 a barrel; ICE Brent crude futures fell 2.62% to $87.85 a barrel. The Fed announced a 75 basis point interest rate hike. This rate hike is the third consecutive rate hike by the Fed after June and July. Rate hikes typically translate into a stronger dollar, which continues to trade near levels not seen since 2002. Because crude oil is denominated in dollars, oil will be more expensive for buyers who hold foreign currencies, which in turn dampens demand and drives down crude prices.

As the U.S. federal funds rate continues to rise, the possibility of high interest rates triggering a U.S. recession is increasing. At the same time, central banks in Europe, the UK, Switzerland and Norway and other regions and countries have followed suit with interest rate hikes, and fears of a global recession are growing. Recession is bound to trigger demand destruction, which also puts enormous pressure on crude prices.

Analyst Tina Teng said: “Global recession risks overshadowed oil supply concerns after major central banks accelerated rate hikes, despite the recent escalation of the Russia-Ukraine war. However, a sharp drop in U.S. strategic reserves and inventory drawdowns will likely remain at some point. Supporting oil prices as the spot market remains unavoidably undersupplied and talks to restart the Iran nuclear deal stall,” she said, referring to the U.S. Strategic Petroleum Reserve last week slumping to its lowest level since 1984.

 This week, the U.S. dollar index further expanded its gains, hitting a new high of 112.347 since late May 2002, and is currently up 2.18% to 112.059. The Fed raised interest rates by 75 basis points for the third time in a row as scheduled. Chairman Jerome Powell said lowering inflation was their “priority focus.” “No one knows if this process will lead to a recession, or how severe it will be if it does. The prospect of a soft landing may be reduced to the point that policy needs to be more restrictive, or last longer.”

The Fed also expects policy rates to rise faster than expected, even as the economy slows or unemployment rises. Fed officials updated median forecast is for rates to rise to 4.4% by year-end, 100 basis points higher than their June forecast, and even higher, at 4.6% by the end of 2023.

Other central banks have also raised interest rates sharply. The Swiss National Bank raised interest rates by 75 basis points as scheduled, ending an eight-year negative interest rate policy. The Bank of England raised interest rates by 50 basis points as scheduled, and the pound fell 2.96% to 1.1087 against the dollar, hitting a new low of 1.1073 since the mid-1980s. The global economic recession is expected to strengthen, the dollar's safe-haven status has been consolidated, and non-US currencies generally weakened further.

The Japanese government and the Bank of Japan entered the market to buy Japanese yen in exchange for US dollars, and carried out the first foreign exchange intervention since June 1998. The US dollar against the yen has fallen back from its high of 145.895 since mid-August 1998. , with a cumulative fluctuation of more than 550 points, and is currently down 0.08% to 142.854.

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