U.S. stocks closed sharply lower on Thursday local time. Panic selling emerged, with all three major stock indices giving up the gains from the previous trading day, with the Dow Jones Industrial Average (DJIA) plunging nearly 1,400 points at one point. U.S. Treasury yields soared, and the U.S. Dollar Index hit a nearly 20-year high. The rebound in U.S. stocks driven by Federal Reserve Chairman Powell's comments the day before quickly lost momentum. Chinese concept stocks fell across the board, with the SEC adding over 80 Chinese concept stocks to the preliminary delisting list. The DJIA fell 1,063.09 points, a drop of 3.12%, to 32,997.97 points; the Nasdaq Composite fell 647.16 points, a drop of 4.99%, to 12,317.69 points; the S&P 500 index fell 153.30 points, a drop of 3.56%, to 4,146.87 points.

Panic selling re-emerged, causing Thursday's U.S. stocks to be brutally washed out, with all three major stock indices completely giving up the gains from the previous day. The DJIA plunged nearly 1,400 points at one point, falling to a low of 32,685.10 points. The ICE U.S. Dollar Index (DXY) climbed to a nearly 20-year high.

Just the day before, the stock market had recorded a significant increase. The Dow Jones Industrial Average soared 932 points on Wednesday, a gain of 2.81%, and the S&P 500 index rose by 2.99%, both marking the largest gains since 2020. The Nasdaq Composite also jumped by 3.19%. This left us analysts catching our breath and in an awkward situation!

The main reason for the U.S. stock market's plunge is the tightening of monetary policy by the Federal Reserve, with the shadow of interest rate hikes and balance sheet reduction, which will affect the liquidity withdrawal from the stock market in the short, medium, and long term. Even the risk of raising interest rates by 50 basis points in the next two meetings, which would have been considered hawkish in the past, was not enough for market investors who seemed to suffer from "Stockholm Syndrome." They continued to cheer for the Federal Reserve on Wednesday, only to receive a promise that it would not raise interest rates by 75 basis points for the time being.

The联动 effect of the foreign exchange market and the stock market. Although the stock market ignored it on Wednesday, in the foreign exchange market, the ICE U.S. Dollar Index, which measures the U.S. dollar against six major currencies, returned to a nearly 20-year high after falling the previous trading day, rising as much as 1.3% to 103.04. Breaking through the 103 mark, it once again began to challenge the 104 mark. This联动 effect was transmitted to the U.S. stock market, causing panic before the market opened on Thursday.

Treasury yields rose significantly, increasing pressure on technology stocks. The U.S. dollar has gone through a fierce attack, and the 10-year U.S. Treasury yield once again broke through the key 3% mark.

In the bond market, the benchmark 10-year Treasury yield rose to 3.066% at one point during Thursday's trading, the highest level since November 2018. This is the reason for the deep decline in the Nasdaq Composite Index.

At the same time, high inflation in the United States cannot be cured in the short term and has a destructive impact on the stock market; the U.S. is deeply involved in geopolitical conflicts such as the Russia-Ukraine conflict and cannot extricate itself, which will inevitably be reflected in the stock market; the COVID-19 pandemic is rampant, but the United States turns a deaf ear and avoids the issue, making it difficult to restore the economic industry chain and supply chain; the performance of listed companies that are currently releasing earnings reports is generally not up to expectations; data released by the U.S. Department of Labor on Thursday shows that U.S. productivity in the first quarter fell by the largest amount since 1947—down 7.5%—because labor costs soared while the economy shrank, indicating a very tight job market.

"It must be reminded that a one-day rise in U.S. stocks can only indicate that the Federal Reserve's control is perfect and has not caused excessive damage to the stock market. It belongs to a smooth transition in the face of the Federal Reserve's transformation into an 'anti-inflation fighter.' That's all. However, the medium and long-term prospects for the U.S. stock market remain very pessimistic, as the Federal Reserve will withdraw $1 trillion from the financial system every year, which will lead to a slowdown in economic growth."In the United States, the ADP private sector employment increased by 247,000 people in April, marking the smallest increase since February 2021. Moreover, the performance of listed companies currently releasing their financial reports generally falls short of expectations. In a word, the risks in the global stock market will continue!" This statement was the final reminder to investors in my analysis article yesterday morning (Beijing time, May 5th), on the day of the Federal Reserve's interest rate hike when the U.S. stock market rose instead of falling. Unfortunately, it turned out to be a prophetic warning.