May 7 Fed rate decision preview — Powell's hawkish stance, market continues mild correction

Hello everyone, I'm Old Wandering Child, a practitioner of the 'five-year tenfold' strategy. In the new five years, let's grow and strive together.
The highlight of this week is the Fed's interest rate decision tonight in May. The market has formed a high consensus on this Fed interest rate decision, with a 97.2% probability of maintaining the current 4.25%-4.5% interest rate range.

Recent contradictory economic data has made the Fed more cautious. From the perspective of inflation, the March PCE price index increased by 2.3% year-on-year, the lowest level since last autumn. The core PCE price index increased by 2.6% year-on-year, with zero month-on-month growth, indicating that inflationary pressures are gradually easing. However, these data do not include the impact of the tariff war, and April prices will have to consider tariff factors. On the other hand, the job market has shown strong resilience, with April non-farm payrolls adding 177,000, higher than the market expectation of 138,000. The unemployment rate remained stable at 4.2%, and the labor participation rate also rose slightly to 62.6%. Given Powell's cautious style, he is likely to choose to wait and see.
Sentiment in the U.S. bond market remains noticeably pessimistic, with yields on bonds maturing in ten years or more staying at very high levels. This suggests that traders' confidence in the bond market is weakening. Bond positions are also clearly bearish, with traders generally expecting yields to rise further. This expectation is closely tied to the market's judgment that the Fed will maintain a hawkish stance.

Powell's speech this time is likely to remain hawkish, with wording emphasizing the need to further observe data and assess the impact of tariffs. This pessimistic sentiment in the bond market may be difficult to reverse in the short term. If the speech is overly hawkish, it could even dampen market optimism about rate cuts in June and July, which would significantly pressure U.S. stocks.
The current rebound in the U.S. stock market is not driven by fundamentals; buybacks play an important role. Institutional investors' buying power is insufficient, and the flow of large funds into tech stocks has noticeably slowed. We should not be overly optimistic about the market's upward momentum. Post-meeting, the market is expected to continue fluctuating, possibly even experiencing a mild pullback.
The start of U.S.-China talks initially lifted the three major indices by nearly 1%, but they have since retreated. Hong Kong and A-shares also showed significant high-open-low-close patterns, so the impact on U.S. stocks today is limited.
$Palantir Tech(PLTR.US) reported strong earnings, but its stock price plummeted 12%. From the earnings details, low gross margins may be the key factor behind the drop. This once again proves that betting on earnings is risky. Strong resistance is expected above $110, with the stock likely sliding toward $100. Blindly buying the dip is not recommended.

$NVIDIA(NVDA.US) has seen minimal price fluctuations recently, mainly oscillating between $110 and $115. In the short term, a drop below $110 is likely, with support levels to watch at $105 and $100.

$AMD(AMD.US) reported better-than-expected earnings but also predicted that U.S. restrictions on chip exports to China would lead to $1.5 billion in revenue losses. Data center revenue surged 57% to $3.7 billion, above the market expectation of $3.62 billion, and Q2 revenue is expected to be $7.4 billion, also exceeding Wall Street's forecast. However, the revenue loss from chip export restrictions and $800 million in expenses negatively impacted margins, leading to a post-earnings sentiment pullback. Watch for potential entry opportunities around $90.

$Unitedhealth(UNH.US) has fallen below $400 again, seeking a bottom in the short term. Downside is likely limited, but the process will be painful. Looking to add a position today.

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