- Wall Street stocks showed a volatile trend during Wednesday's trading session, Eastern Time, as investors closely focused on the first interest rate decision under the new Federal Reserve (Fed) Chairman Kevin Warsh. With May's retail data surging 0.9% month-on-month, significantly exceeding market expectations, and the Middle East situation causing fluctuations in oil prices, the market widely expects policymakers to maintain the federal funds rate range at 3.50% to 3.75%.
- There was a clear divergence between tech stocks and traditional sectors. The chip manufacturing sector rebounded after a valuation correction in the previous trading day, with Broadcom (AVGO:US) and Micron Technology (MU:US) recording significant gains. Meanwhile, the banking sector performed impressively, with major banks like Bank of America (BAC:US) reaching all-time highs. SpaceX (SPCX:US), which went public last week, fell 3%, facing its first daily decline since listing.
- There was a slight adjustment in the pricing of macro policy prospects. The CME's (CME:US) FedWatch tool showed that although the mainstream market expectation is that the Fed will maintain the current interest rate for most of the year, the resilience in consumer data has led traders to bet on a 43% probability of a 25 basis point rate hike in December, making marginal policy changes a core variable for market repricing.
Retail Data Exceeding Expectations Fuels Economic Resilience Narrative
The latest macroeconomic data revealed that U.S. retail sales in May increased by 0.9% month-on-month, significantly higher than the previous market expectation of 0.5%. Despite households facing high energy costs, consumption of automobiles and other durable goods remained strong. This robust consumer spending data once again confirmed the resilience of the U.S. economy at the end of the tightening cycle, but it also weakened market expectations for a swift shift in monetary policy. Some institutional analyses suggest that if core inflation fluctuates with the warming of consumer demand, the Fed's subsequent policy observation period may be extended.
Chip Sector Rebound and Bank Stocks Hit Record Highs
Within the equity market, sector rotation and structural market characteristics were significant. The chip manufacturing industry, which had previously faced profit-taking sell-offs, saw buying support, with Broadcom (AVGO:US) rising 5.7% and Micron Technology (MU:US) up 3.7%, effectively offsetting the weakening momentum of large tech stocks. Compared to tech stocks, the traditional financial sector performed more steadily, driven by strong economic data, with the stock prices of Bank of America (BAC:US), Citigroup (C:US), and Goldman Sachs (GS:US) all reaching record highs in late morning trading, indicating a preference for cyclical sectors.
Divergence in Large-Cap Stocks and Executive Changes
Individual stock movements also drew significant market attention. SpaceX (SPCX:US), under Elon Musk, saw its stock price drop 3%, experiencing its first pullback since its IPO, which had previously pushed the company's market value past $2 trillion. In corporate governance, CME (CME:US) announced that its CEO Terry Duffy will step down next year, leading to a 4.3% drop in its stock price. Smartbird (BIRD:US), transitioning from footwear to an AI concept, saw its stock soar 60% after appointing former Amazon (AMZN:US) executive Nadia Carlsten as the new CEO.
Reassessment of Interest Rate Prospects on the Eve of Warsh's Policy Debut
The core focus of global financial markets remains on the Fed's interest rate decision announced at 2:00 PM Eastern Time and the first press conference by the new Chairman Kevin Warsh. Although President Donald Trump's previously announced preliminary peace agreement with Iran temporarily eased inflation concerns, his subsequent statement that the ceasefire agreement is not final led to a slight rise in oil prices due to geopolitical uncertainties. In this complex macro environment, Cresset Capital Management's Chief Investment Officer Jack Ablin stated that the Fed indeed has reasons to continue its wait-and-see approach. If the new chairman expresses concerns about rising inflation in the subsequent press conference, the probability of a rate hike in December may gain further support.
