On Wednesday (May 21st), Eastern Time, U.S. Treasury bonds suffered a massive sell-off, and U.S. stocks collectively plunged.
Most large technology stocks fell, with Tesla falling more than 2%, Apple falling more than 2%, Nvidia falling more than 1%, Amazon falling more than 1%, Microsoft falling more than 1%, and Facebook falling 0.25%.
At the same time, long-term U.S. Treasury bonds suffered a sell-off, and Treasury yields soared, with the 10-year U.S. Treasury yield rising to 4.59%. The 30-year Treasury yield rose sharply to 5.08%. The U.S. dollar index, which measures the U.S. dollar against six major currencies, fell 0.56% to close at 99.555 points.
It can be said that stocks, bonds and currencies were killed in a triple blow.
The trigger for this violent market fluctuation was that the international rating agency Moody's officially downgraded the U.S. long-term sovereign credit rating from "Aaa" to "Aa1" on May 16, and adjusted the rating outlook to "stable". So far, the United States has lost its highest "AAA" rating in all three major rating agencies - Standard & Poor's, Fitch and Moody's.
Moody's pointed out in a statement that the scale of the US government's debt and interest burden have long been higher than those of similarly rated countries, and the fiscal deficit continues to expand, which is rapidly eroding its credit foundation. At present, the US federal government debt is as high as 36.2 trillion US dollars, accounting for 124% of GDP, and is expected to rise to 134% by 2035. The deficit in fiscal year 2024 has reached 2.1 trillion US dollars, accounting for more than 6.4% of GDP, showing the intensification of fiscal imbalance.
What is more worrying is that the US government's interest expenditure has become a major expenditure item in the fiscal budget. Moody's believes that the US debt repayment capacity has been seriously affected by political dysfunction. From the congressional budget deadlock to the frequent changes of the speaker, all reflect the governance risks brought about by the intensification of political differences.
Data shows that the US federal government debt ratio has climbed to 97.8%. The Congressional Budget Office (CBO) expects it to exceed 107.2% in 2029, and interest expenditures will account for 74% of the federal deficit in 2055.
The three major U.S. stock indexes posted their biggest drop in a month.
The $S&P 500(.SPX)$ fell 1.61% on Wednesday, closing at 5844.61 points; after breaking the 200-day moving average at 5812.34, the 120-day moving average at 5767.01 also encountered challenges, and the first gap below also needs to be filled healthily. If the 50-day moving average is broken, it is very likely that the gap below 5378 points will also need to be filled.
$NASDAQ(.IXIC)$ There are also two gaps below, and the Fibonacci exponential series fluctuates between 0.618 and 0.786. Continue to observe the support, otherwise there will be great pressure to fill the down gap.
$Dow Jones(.DJI)$may lose the 0.618 interval point of the Fibonacci sequence, and there needs to be support at the 0.5 position. Otherwise, there will be a more declines.
Users can follow inverse ETFs and volatility long ETFs of related indices:
Inverse ETFs of the S&P 500 Index:
$ProShares Short S&P 500(SH)$ provides the inverse return of the S&P 500 Index, that is, when the S&P 500 Index falls, the price of this ETF rises.
$ProShares UltraShort S&P500(SDS)$ : Provides twice the inverse return of the S&P 500 Index.
$ProShares UltraPro Short S&P 500(SPXU)$ : Provides three times the inverse return of the S&P 500 Index.
$Direxion Daily S&P 500 Bear 3X Shares(SPXS)$ : Provides three times the inverse return of the S&P 500 Index.
Inverse ETFs of the Dow Jones Industrial Average:
Inverse ETFs of the Nasdaq 100 Index:
$ProShares Short QQQ(PSQ)$ seeks to deliver daily investment results that correspond to the inverse (-1x) of the daily performance of the Nasdaq-100 Index.
$ProShares UltraShort QQQ(QID)$ aims to provide daily investment results that correspond to -2x the daily performance of the Nasdaq-100 Index.
$ProShares UltraPro Short QQQ(SQQQ)$ is designed to deliver daily investment results that correspond to -3x the daily performance of the Nasdaq-100 Index.
At the same time, when the market falls, the fear index $Cboe Volatility Index(VIX)$ will rise, and related long ETFs can also be paid attention to
1x long VIX ETFs:
$iPath Series B S&P 500 VIX Short-Term Futures ETN(VXX)$ : The tracking target is the S&P 500 VIX Short-Term Futures Index, which mainly invests in indexes related to VIX short-term futures. The price usually rises when market volatility increases, which is suitable for short-term volatility trading.
$ProShares VIX Short-Term Futures ETF(VIXY)$ : Tracks the S&P 500 VIX Short-Term Futures Index and primarily holds VIX Short-Term Futures contracts, designed to provide exposure to short-term volatility associated with the VIX Index.
1.5x long VIX ETF
$ProShares Ultra VIX Short-Term Futures ETF(UVXY)$ : Provides 1.5x long exposure to the VIX Short-Term Index, meaning that for every 1% increase in the VIX Short-Term Index, UVXY will increase by 2%.
2x long VIX ETF
$2X Long VIX Futures ETF(UVIX)$ : Aims to seek daily investment results (net of fees and expenses) equivalent to twice the single-day performance of the Long VIX Futures Index.
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