— This is the script of CNBC's news report for China's CCTV on October 30, 2023.
The U.S. stock market experienced a comprehensive pullback last week, with all three major indices falling by more than 2%. The key factors influencing the market included the quarterly earnings reports of tech giants, the 10-year U.S. Treasury yield breaking 5%, and the U.S. economy's growth exceeding expectations in the third quarter. Analysts predict that this week will be crucial in determining whether Wall Street can rebound before the end of the year.
One major focus for the market is the Federal Reserve. This Wednesday, the Fed will announce its interest rate decision. According to the CME Group's FedWatch tool, the market is betting there's over a 97% chance that the Fed will maintain the interest rate in the range of 5.25% to 5.5%.
Since the market consensus on the interest rate decision is quite aligned, attention is now on whether Jerome Powell, in his press conference, will hint at future interest rate policies, including whether rates will continue to rise or when they might start to fall. Some investors believe that the Fed has already completed this round of interest rate hikes.
Tony Pasquariello
Global head of hedge fund client coverage at Goldman Sachs
"We think they're done. The market thinks they're done, done with the cycle."
Since last year, the Fed has raised interest rates 11 times, demonstrating a firm determination to combat inflation with rapid and substantial tightening. Meanwhile, high-interest rates continue to impact American consumers.
Firstly, most credit cards are issued with fluctuating interest rates, which are directly related to the federal funds rate set by the Fed. Under this round of rate hikes, the average interest rate for credit card repayments in the U.S. has now exceeded 20%. Financial services company LendingTree states that credit card rates are at a multi-decade high, and even without further hikes, credit card rates may continue to rise.
Secondly, in terms of mortgages, data from consumer financial services company Bankrate shows that the average rate for the popular 30-year fixed mortgage in the U.S. has reached 8%, a 2-percentage point increase since the beginning of the year, marking a 23-year high. This significantly weakens purchasing power and has led to a slowdown in home sales.
Thirdly, car loans are also rising. Data from Bankrate indicates that the average rate for a five-year new car loan is now 7.62%, the highest in 16 years.
Interest rates not only impact consumers but also put pressure on tech stocks. The tech-heavy Nasdaq, which soared in the first half of the year, fell by more than 4% in the third quarter. Another major focus for the market this week is Apple's quarterly earnings report.
Apple has already hinted at a decline in sales this quarter, and reports from analysts in the past few weeks suggest that demand for the new iPhone 15 series seems relatively weak.
Additionally, the U.S. International Trade Commission ruled last week that Apple's Apple Watch violates patents from medical technology company Masimo. This ruling could lead to certain models of Apple Watch being banned from import into the U.S. The Biden administration now has 60 days to decide whether or not to ban the Apple Watch.
Joe Kiani, CEO of Masimo Medical Company, in an interview with CNBC, said that Apple contacted them in 2013 expressing interest in collaboration but then copied their technology.
Joe Kiani
CEO of Masimo
"We think the best thing for Masimo, consumers, and other smaller companies is this injunction, because, at the end of the day, Apple has thought for a while that it's more efficient to infringe than to work with other companies."
Finally, in terms of economic data, the market is also focusing on the U.S. non-farm payroll to be released on Friday, with an estimated addition of about 172,000 jobs and an unemployment rate maintained at 3.8%.
Under the influence of the Fed's interest rate meeting, Apple's earnings report, and the non-farm payroll, the U.S. stock market this week will be full of volatility and will set the tone for the stock and bond markets for the last two months of the year. We will closely follow these developments.