On Thursday, the three major U.S. stock index futures rose sharply before the market opened. Nasdaq futures rose 0.26%, S&P 500 futures rose 0.17%, and Dow futures rose 0.12%. After the opening, the Nasdaq 100 and S&P 500 quickly turned lower and continued to decline. The Nasdaq 100 closed down about 2.2%, and the S&P 500 closed down 0.86%.

(Source: uSMART)

Among them, the US stock technology giant "Seven Sisters", which had performed strongly before, was the largest decliner. As of the close of U.S. stocks on Thursday, Tesla closed down 8.44%, ending the previous 11 consecutive trading days of rising trends, Nvidia closed down more than 5.5%, Meta fell more than 4.1%, Google A fell 2.9%, Microsoft fell 2.5%, and Amazon and Apple fell more than 2.3%.

(Source: uSMART)

Expectations for U.S. interest rate cuts rise againThe June U.S. CPI released on Thursday showed that U.S. domestic inflation has cooled across the board. The growth rates of CPI and core CPI in June both slowed down more than expected. CPI increased by 3% year-on-year and decreased by 0.1% month-on-month. It was the first negative growth since May 2020. Core CPI increased by 3.3% year-on-year and 0.1% month-on-month, the lowest growth rates since April 2021 and August of the same year respectively.The biggest highlight of the inflation report released this time is that stubborn housing inflation has cooled rapidly, falling from 0.40% to 0.17% month-on-month, which is the smallest increase since August 2021. Landlord-equivalent rents rose 0.3% month-on-month, also hitting their lowest level in three years. Housing inflation has remained at a high level for a long time, which is the biggest obstacle to interest rate cuts.Julia Coronado, founder of MacroPolicy Perspectives LLC and a former Fed economist, said: "Probably the most important aspect of the June report is the decline in housing inflation. Many Fed officials have said it looks broad-based and durable, and this decline will strengthen their view." Confidence."The rapid cooling of housing inflation has given the Federal Reserve the additional confidence it needs to cut interest rates, which is widely expected to begin in September. After Thursday's CPI report, traders were all but betting on the Fed to cut interest rates twice in September and December.

Interest rate cut may be brought forward to July?Against the background of slowing CPI growth, market expectations for the Federal Reserve to cut interest rates within the year have increased significantly. The possibility of a first interest rate cut in September has risen to 80%, and even the possibility of a July interest rate cut is also increasing.Many economists said that this inflation data shows that U.S. inflation is steadily falling back to the 2% target level. The apparent slowdown in housing inflation is particularly encouraging, and will bolster the Fed's confidence that inflation will continue to fall.After the June CPI report was released, U.S. Treasury bonds rose, and the market almost fully digested interest rate cut expectations in September and December, while also raising the possibility of a November interest rate cut to more than 50%. Huatai Securities believes that the Federal Reserve's interest rate cut in September is almost a foregone conclusion. With the rapid decline in nominal growth, it is logically smoother to advance the interest rate cut to July, but the timing is relatively hasty.There is a high probability that the Federal Reserve will communicate to the market its intention to cut interest rates in September at the Jackson Hole annual meeting in mid-to-late August, but it cannot be ruled out that the Federal Reserve will hint at the FOMC on July 31.Overall, June inflation data clears the way for the Federal Reserve to begin cutting interest rates in September. Federal Reserve officials are likely to release more policy signals at their meeting at the end of July, and the market will pay close attention to Powell's speech at the Economic Club of Washington next Monday for more policy guidance.

Why did the "Seven Sisters" plummet amid rising interest rate cut expectations?

The sharp decline in technology stocks led by the "Seven Sisters" on Thursday seemed unexpected, but in fact it had already been undercurrent.Goldman Sachs trader Vincent Lin previously pointed out that there have been some significant position adjustments since mid-May. While gains in artificial intelligence infrastructure stocks have fueled an overall rally in U.S. technology stocks and significantly outperformed the broader market, hedge funds appear to be reducing their exposure to the sector.While the weight of information technology stocks in broad U.S. stock indexes has grown and reached its highest level in years, Goldman Sachs Prime data shows that its clients' net allocations to technology stocks peaked in late May and have continued to decline in the weeks since. decline.As a result, hedge funds are now significantly underweighting technology stocks relative to the broader market index, with an underweight position of as much as 13 percentage points, the lowest level in years.

Professionals analyze that since the fundamentals of technology companies are driven by AI and technology, they are relatively less sensitive to economic and inflation fluctuations. Therefore, in the first half of this year, investors will invest in technology stocks as a means of hedging. Whenever U.S. inflation exceeds expectations, , investors tend to hide their funds in technology stocks led by the "Seven Sisters" and reduce their holdings of small-cap stocks. Now that interest rate cut expectations are rising, market funds are beginning to turn to interest rate cut trades, selling technology stocks and buying small-cap stocks.The professional further analyzed that as expectations for interest rate cuts continue to rise, there is a high probability that the Nasdaq index will not outperform small-cap stocks and biotechnology sectors that are more sensitive to interest rates and inflation indexes for a period of time.

On Thursday, the Russell 2000 index, which represents the performance of U.S. small-cap stocks, surged 3.59%.

(Source: uSMART)

Goldman Sachs Asset Management said that U.S. small-cap stocks are expected to rebound in the second half of 2024, and their valuations are attractive for investors who want to invest in assets other than large-cap stocks. Small-cap stocks can provide opportunities to bring higher growth potential to companies that will become leaders in mid-cap and large-cap stocks in the future. Small-cap stocks are expected to get a boost as interest rate cut expectations become clearer.

However, Morgan Stanley disagrees with this view. A team of strategists headed by Michael Wilson said that as the U.S. election season approaches and the market is considering the possibility of a Republican victory, investors should focus on high-quality stocks. These stocks typically have more stable earnings, stronger balance sheets, and higher gross margins, while investing in small-cap cyclical stocks should be avoided.

How to invest in US stocks on uSMART?After logging into uSMART HK APP, click "Search" from the upper right corner of the page, enter the US stock you want to buy, and enter the details page to learn about transaction details and historical trends. Click "Trade" in the lower right corner and select the "Buy/Sell" function. , finally fill in the transaction conditions and send the order; the picture operation instructions are as follows: