U.S. Stock Market Review
This article provides an overview of the U.S. stock market performance on a specific day, focusing on the Nasdaq 100 index and the impact of CPI data and U.S.-China negotiations. The analysis also considers investment strategies related to critical minerals and future market trends.
Market Overview and Initial Reaction to CPI Data
The market initially experienced a rise, but then gradually declined. The Nasdaq 100 index is used as a reference point. Around 8:00 AM, the market reacted strongly to the release of the CPI data at 8:30 AM. The core CPI month-to-month figure was 0.1%, which was lower than expected, indicating a cooling down of inflation. The overall CPI month-over-month was also 0.1%, lower than both expectations and previous figures. Year-over-year CPI figures also showed a decrease. This positive data caused the stock market to surge initially.
Sell-off and Rebound
Following the initial surge, the market began to sell off, continuing until market open. A rebound occurred after the sell-off, peaking around 11:00 AM before another sell-off began.
Impact of U.S.-China Negotiations
Around 1:00 PM, a significant market drop occurred, coinciding with news regarding U.S.-China negotiations in London. A preliminary agreement seemed to have been reached, with China reportedly setting a six-month time limit on tin exports.
Supply Chain Concerns
This news raised concerns about the supply chain, particularly regarding rare earths and critical minerals. These materials are essential raw materials in various production chains. The market reacted negatively to the news, leading to a further decline.
Critical Minerals and Investment Opportunities
The importance of critical minerals like graphite, copper, nickel, magnesium, cobalt, and lithium for industries like electric vehicles was highlighted. These minerals are crucial for batteries and overall production. The limited and regulated exploration of critical minerals in Western countries (like the US, Canada and Australia), compared to China, was noted as a contributing factor to supply chain concerns.
Investing in Raw Materials
The potential for investing in raw materials due to increasing demand in sectors like electric vehicles and driverless technology was explored. Specific ETFs focused on copper and lithium were mentioned as examples. Tesla's interest in lithium refining was also attributed to these factors.
Market Performance and Future Outlook
Despite intraday volatility, the overall market fluctuation was relatively small, around 1%. The day's events didn't significantly alter the daily chart, indicating a normal adjustment following a period of growth.
Interest Rate Expectations
The probability of the U.S. Federal Reserve cutting interest rates was discussed. Post-CPI data release, fewer people expected two rate cuts in September. However, the overall expectation for two rate cuts within the year remained relatively stable at around 41%.
Big Tech Performance
The performance of major tech companies, particularly the "Magnificent Seven," was also reviewed. Tesla experienced volatility but ultimately saw a slight increase. The influence of Elon Musk's apology to Trump on Tesla's stock was speculated on.
Sector Performance
Most of the market sectors saw slight declines, with materials experiencing the most significant drop. Energy, on the other hand, showed a considerable increase.
Bond and Gold Markets
Bond prices increased as bond yields decreased across various maturities. Gold prices also rose, with gold mining ETFs like GDX showing gains. The technical formation of gold was considered to look promising. However, it was noted that the dollar's performance can influence gold prices, requiring continued monitoring of the gold market.
Investment Strategy: Doing Nothing
The speaker reiterated the importance of not overreacting to market fluctuations. Even when indicators suggest a potential peak or downturn, impulsive actions like selling off entire positions should be avoided. The strategy of "doing nothing" was recommended to avoid making rash decisions based on short-term market movements. The speaker stressed the importance of not projecting one's own expectations onto the market and reacting accordingly. It is important to acknowledge what the market is doing, and to respond accordingly.
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