Massive Rate Hike, US Stocks Drop Over 1700 Points in 3 Days, Rising Debt Default Risk

The gloom hanging over the U.S. stock market has yet to dissipate. Since last Friday's remarks by Federal Reserve Chairman Powell, U.S. stocks have collectively declined for three consecutive trading days, with the Dow Jones Industrial Average's maximum drop exceeding 1,700 points.

Several officials from the Federal Reserve continue to express a firm stance on interest rate hikes, leading to significant downward pressure on U.S. stocks.

Moreover, continuous interest rate hikes will lead to increased interest costs on Treasury bonds, as well as increased financial pressure on businesses. The risk of defaults in the U.S., from the government to corporations, is on the rise.

The safety of U.S. debt is becoming increasingly questionable.

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Yesterday, the three major indices once again saw a decline of 1%. The Dow Jones Industrial Average fell by 0.96%, the S&P 500 Index dropped by 1.1%, and the Nasdaq Index decreased by 1.12%.

Following Powell's speech, in just three trading days, the Dow Jones Industrial Average plummeted from its highest point of 33,364 three days prior to a low of only 31,647 yesterday, a drop of 1,717 points in three days.

There is one more trading day left in August, but it is anticipated that U.S. stocks will not experience a strong rebound. As a result, the monthly decline for the three major indices could potentially exceed 3%.

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So far this year, the three major indices have also fallen by 12%, 16%, and 24%, respectively.In terms of individual stocks, large technology stocks have fallen, with Apple, Netflix, and META seeing declines of more than 1%, while Amazon, Google, and Microsoft are close to a 1% drop.

Few chip stocks rose, while many fell. Nvidia and Intel saw declines of over 2%, and Qualcomm and AMD also fell by 1%.

In the new energy vehicle sector, Tesla fell by 2.5%, as Musk has announced the complete cancellation of the Twitter acquisition. In addition, Xiaopeng Motors fell by 1.35%, Li Auto fell by 1.06%, and only NIO slightly rose by 0.1%.

Due to the sudden significant drop in oil prices, with the largest intraday decline exceeding 6%, a number of oil and gas stocks also experienced a general decline, with Carron Oil falling by 6%, and Murphy Oil and Occidental Petroleum both falling by 4%.

Most of the popular Chinese concept stocks also fell, with Baidu down by 6.5%, Alibaba down by 2.9%, and JD.com down by 1.3%. Pinduoduo, which released good financial reports the day before yesterday, continued to rise yesterday, but the increase narrowed, rising by only 0.7%.

After Powell's speech, three more regional Federal Reserve presidents expressed their views.

Williams believes that the current overnight rate of only 2.5% is not enough and needs to be increased to at least 3.5%.

Barkin emphasized that due to the possibility of inflation rising again, further rate hikes are needed to ensure that future inflation returns to the 2% level.

However, the continuous increase in U.S. federal interest rates will increase the future borrowing costs and bond issuance difficulties for local governments and businesses in the United States.At present, the US dollar Libor has already exceeded the peak during the 2008 subprime mortgage crisis, with the highest value approaching 4.1%, which is another significant increase since early August. It is becoming increasingly difficult for US companies to obtain low-cost funding, which will inevitably compress corporate profit growth and increase the difficulty of corporate reinvestment.

The United States can no longer issue debt on a large scale, and it is unable to borrow new money to repay old debts. The possibility of US debt default will continue to grow.

Especially for the current US national debt of up to $30.7 trillion, by the middle of next year, the interest expenditure alone will reach $1.5 trillion, and the future security is becoming increasingly questionable.