All markets surged overnight! The Federal Reserve made a major announcement!

Full-scale rebound!

As market trading sentiment gradually stabilizes, U.S. stocks rebounded across the board overnight, with tech stocks surging collectively. The Nasdaq rose over 1%, most popular Chinese concept stocks increased, and European markets also closed higher. Analysts pointed out that recent statements from U.S. President Trump and Treasury Secretary Yellen eased investors’ concerns about the oil market. Overnight, the VIX fear index dropped sharply by over 10%.

Additionally, the Federal Reserve’s interest rate cut path remains a focus of market attention. Early morning on March 5 Beijing time, the latest Federal Reserve Beige Book report showed that overall, the U.S. economy remains optimistic, with most regions expecting slight to moderate growth in the coming months. However, the Beige Book warned that in many districts, increased economic uncertainty, rising price sensitivity, and reduced spending by low-income consumers have suppressed sales performance.

Full-scale rebound

On March 4 Eastern Time, the three major U.S. stock indices all closed higher, led by a rebound in tech stocks. By the close, the Dow rose 0.49%, the Nasdaq gained 1.29%, and the S&P 500 increased 0.78%.

Most large-cap tech stocks in the U.S. closed higher, with Micron Technology and AMD surging over 5%, Amazon and Tesla up over 3%, Meta nearly 2%, Nvidia and Broadcom up over 1%, and Microsoft slightly higher; Apple and Google saw slight declines.

Popular Chinese concept stocks all gained strength, with the Nasdaq Golden Dragon China Index up 0.8%, NIO soaring 5.5%, Xiaopeng and WeRide up over 4%, New Oriental up over 2%, and XPeng and NetEase up over 1%.

European markets also closed higher across the board, with Spain’s IBEX 35 up over 2%, Italy’s FTSE MIB nearly 2%, and the STOXX 50 and Germany’s DAX 30 each up over 1%.

In terms of news, the Trump administration promised to stabilize the oil market, which somewhat eased investors’ worries about Middle East conflicts.

Funds flowed back into the tech sector, pushing the Nasdaq higher and recovering all losses since the U.S.-Israel strikes on Iran, which triggered Middle East tensions. The S&P 500 approached its all-time high closing level set in January.

Jim Awad, Senior Managing Director at Clearstead Advisors, said that the White House’s statement reduced concerns about major supply disruptions in the oil market. This risk mitigation boosted investor confidence, prompting them to buy back tech stocks that had been heavily sold in February and are now more attractive compared to a few weeks ago.

Awad noted that this combination of factors brings a certain degree of optimism to the market, but the coming weeks will still be challenging. Investors should remain rational, avoiding excessive optimism or pessimism.

Additionally, several strong economic data releases on Wednesday boosted investor sentiment. First, the ADP report showed that U.S. February employment data exceeded expectations, with 63,000 new jobs added, higher than the market forecast of 50,000 and a significant rebound from the previous 22,000. The non-manufacturing sector also saw better-than-expected growth last month, with inflation pressures easing.

Richard Bernstein, CEO of Richard Bernstein Advisors, said that if the market believes this conflict will be short-term or has limited impact on the U.S. economy, stocks are likely to continue rebounding. Conversely, if the conflict persists and causes substantial shocks to the U.S. economy, market volatility could further increase.

Federal Reserve’s major report released

Early morning on March 5 Beijing time, the Federal Reserve released the latest Beige Book, which indicated that in recent weeks, economic activity in most U.S. regions has grown at a slight to moderate pace, but an increasing number of districts report flat or declining activity. Overall, economic activity in seven of the twelve Federal Reserve districts grew at a slight to moderate rate, while the number of districts reporting flat or declining activity increased from four to five compared to the previous report.

The Beige Book summarizes findings from 12 regional Federal Reserve banks on the U.S. economic outlook, serving as an important reference for the Fed’s monetary policy meetings. The next interest rate meeting is scheduled for June 17-18.

Compiled by the Cleveland Fed based on data up to February 23, this report predates the U.S.-Israel strike on Iran and the subsequent escalation of Middle East tensions, which pushed oil prices higher.

The Fed noted that although consumer spending has generally increased slightly, two districts reported continued declines. Many districts reported increased economic uncertainty, rising price sensitivity, and reduced spending by low-income consumers, which suppressed sales. The districts affected by winter storms reported a slowdown in retail foot traffic; one district mentioned that immigration enforcement activities negatively impacted customer demand in urban areas.

The Beige Book states that employment levels remain generally stable, even as businesses seek to improve efficiency through artificial intelligence. Some districts and industries have begun adopting AI or other automation to boost productivity, with most companies emphasizing efficiency gains rather than replacing workers.

The report shows that in eight of the twelve districts, inflation remains moderate. Overall, businesses expect recent price increases to slow down. Most districts reported moderate or mild wage growth; some also noted upward pressure on overall compensation due to rising healthcare costs.

The U.S. Labor Department will release the February non-farm payroll report this Friday, and officials will also receive the latest inflation data next week. The Fed’s policy makers will hold their next meeting in Washington on March 17-18.

According to CME’s “FedWatch,” as of this report, the probability of a 25 basis point rate cut by the Fed in March is 2.7%, with a 97.3% chance of holding rates steady. The chance of a 25 basis point cut by April is 12.5%.