The decline of US stocks eased, because of two major events

Last night, two key messages:

-The S&P 500 index closed above 4000 points (at 4001 points)

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-The yield of 10-year US bonds fell below 3% (as mentioned in yesterday's article, the condition for the short-term stabilization of the stock market is that the yield needs to return to below 3%)

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Seems to be a good start.

The risk alarm can be lifted in the short term, which stems from three aspects:

First, the Federal Reserve sent several generals to rescue the market

Williams, chairman of the Federal Reserve Bank of New York, talked about "soft landing" to inject confidence into the market. "The Federal Reserve is trying to cope with high inflation while achieving a soft landing. A rate hike would bring inflation down to nearly 4pc, before dropping to about 2.5 pc in 2023 and returning to close to the Fed's 2pc target in 2024. At the same time, the US job market and economy are expected to continue to show strength and resilience. The growth rate this year is about 2%, and the unemployment rate will remain near the current low level. "

Ba Jin, chairman of Richmond Fed, responded optimistically that it will take time for inflation to fall, without causing a deep recession.

Federal Reserve Governor Waller declared that "this is not a shocking and awe-inspiring Volcker moment.

After the Fed officials spoke, the market's probability of raising interest rates by the Fed plummeted.

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Second, Biden's speech

Biden delivered a speech in the South Court Auditorium of Eisenhower Executive Office Building in the White House on May 10, 2022, on the government's plan to deal with inflation and reduce costs.

Biden delivered a speech on fighting inflation at the White House, covering two main points:

First, the solution begins with the Federal Reserve (several Fed directors have been nominated). While I will never interfere with the Fed's judgments or decisions or tell them what they have to do and they are independent, I believe inflation is the number one economic challenge we face right now, and I think they see it as well.

Second, we are weighing whether to deal with high inflation by lowering tariffs. We are discussing this now, we are studying what measures will have the most positive effect, and we have not yet made a decision on how to advance.

Third, great things are about to happen

At 20:30 Beijing time tonight, the CPI data for April will be released in the United States (the market expects 8.0%, and the previous value is 8.5%). Many people have chosen to close their positions before the data is released. In numerical terms, this will be the first fall since inflation has been highly concerned, which gives risky assets a respite. Traders position CPI data in favor of risky assets.

Three things will happen tonight:

If the CPI data is greater than 8.5% (higher than the previous value): US stocks may decline by more than 5% (crash can be expected)

Gatman, a well-known investor, said that US stocks are in and will continue to be in a bear market until one day, when they fall by 5% or 6%, the selling pressure will be exhausted.

If the CPI data is 8.0%-8.5% (lower than the previous value and higher than expected): US stocks may rise slightly

If the CPI is below 8.0% (lower than expected): Stocks will soar. (Stocks will likely bottom out when the Fed signals a pause in tightening and inflation shows signs of slowing.)

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