Just as stock markets thought it could ignore the Federal Reserve’s monetary policy, the Fed minutes pulled stocks lower on Wednesday. The Dow, Nasdaq, and S&P 500 (SPY) fell slightly. While declining stocks outpaced advancing ones, there are more stocks at new highs and above the moving average.
On Tuesday, Fed governor Chris Waller said he needed to see several more months of inflation data before the central bank lowered interest rates. In the Federal Reserve minutes, the higher-for-longer rate policy is more likely. Officials are not entirely confident that they did enough to restrain persistently rising inflation.
Investors should watch the iShares 20+ Year Treasury Bond ETF closely. Should TLT fall below $90, it would indicate that the market expects interest rates will stay at over 5.0%.
U.S. Tariffs
The U.S. Trade Representative’s office said that the U.S. tariff increases on many Chinese imports will take effect on Aug. 1, 2024. These taxes increase the cost for consumers, weakening the Fed’s interest rate policy effectiveness.
The share price for solar energy stocks soared. This uptrend is sustainable if China backs down on pushing solar panel and electric vehicle prices lower. Chances are low that China will halt price declines. The country has a glut in supply and an overcapacity in manufacturing. It needs to sustain stronger domestic employment. Otherwise, it faces risks of unrest.
Despite the U.S. tariffs, watch PDD holdings (PDD) today. The firm posted profit doubling (up 200%) in the first quarter.
