Source: Wall Street See
Technology giants' poor financial reports triggered panic selling, with the S&P 500 large cap falling by 2.3%, breaking below the 50-day moving average for the first time since May 3 and ending the longest record of not falling by more than 2% in a single day since 2007. It matched the largest drop since the end of 2022 with the Nasdaq falling by 3.6%, the Dow Jones Industrial Average falling by 500 points, small cap stock index falling by 2.1%, chip stock index falling by 5.4%, and Chinese concept stock index falling by nearly 2%. Tesla fell by 12%, the largest drop since September 2020, and Google fell by 5%, the worst performance in six months. The cooling of AI fever led to a market cap evaporation of 1 trillion dollars for Nasdaq 100. Nvidia and Broadcom fell by about 7%, while the "panic index" VIX hit a 3-month high. The former Fed "three-hand" calls for interest rate cuts next week, and the yield curve of U.S. Treasury bonds is trending steeply, with the two-year yield falling 8 basis points to its lowest level in more than five months. Expectations of rising interest rates have pushed the Japanese yen to its highest level in two months.
Tesla and Google kicked off the tech giant's Q2 earnings season by missing expectations, triggering investors' pessimistic sentiment towards the AI bubble, dragging down the Nasdaq and S&P 500 indexes by 3.64% and 2.31% respectively. It was the largest single-day drop in a year and a half since the end of 2022, causing an across-the-board rout of US stock indexes, with the Dow Jones dropping 500 points, small-cap indexes falling 2.1%, chip indexes dropping 5.4%, and Chinese concept stock indexes falling nearly 2%. Due to investors' disappointment in the prospects of artificial intelligence, the market value of 100 Nasdaq components evaporated by $1 trillion on Wednesday.
As risk-averse sentiment grew, traditional safe-haven US stocks performed well, with the utilities sector being one of only three sectors to rise. Utilities stocks are mainly composed of high-yield stocks, especially benefiting from lower interest rates. The energy sector also rose, while technology, discretionary consumer goods and communications services fell by about 4%.
The preliminary Markit Manufacturing PMI for July unexpectedly shrank to a seven-month low, and US new home sales in June fell for the second consecutive month to their lowest level since November last year, adding signs of a slowdown in the US economy. Richard Clarida, vice chairman of the Federal Reserve, called for a rate cut next week, which further fueled expectations of a rate cut in the market, and the weaker US dollar supported rebounding metals prices and oil prices. However, the US dollar still hovered around its two-week highs, and the preliminary Markit Services PMI for July reached a 28-month high.
Internationally, traditional safe-haven currencies such as the Japanese yen and Swiss franc rose sharply, with the yen also boosted by reports that the Bank of Japan will consider raising interest rates next week. Germany's PMI unexpectedly fell in July, the Eurozone Manufacturing PMI reached a seven-month low, and the UK's business activities rebounded due to strong manufacturing growth. The Bank of Canada cut interest rates by 25 basis points as expected and took a more dovish stance, causing the Canadian dollar to fall and the two-year Canadian bond yield to reach its lowest level since May last year.
Disappointing earnings from tech giants led to the collapse of the US stock market, with tech and chip stocks plummeting. Tesla fell more than 12%, Nvidia fell nearly 7% and Google A fell 5%.
On Wednesday, July 24, poor earnings from tech giants Tesla and Google disappointed investors, who left and led tech stocks lower, dragging down major US stock indexes all the way, accelerating their decline at the close and collectively hitting daily lows.
The Nasdaq and Nasdaq 100 indexes, dominated by tech stocks, fell more than 3.6% at one point, the largest intraday drop since December 2022. The S&P 500 index fell more than 2.4% to a daily low, while blue-chip stocks, as measured by the Dow Jones, fell nearly 1.4%.
The S&P 500 index closed down 128.61 points, or 2.31%, its worst single-day performance since December 2022, at 5,427.13. The Dow Jones closed down 504.22 points, or 1.25%, at 39,853.87, while the Nasdaq closed down 654.94 points, or 3.64%, at 17,342.41.
The Nasdaq 100 plunged 3.65%, its biggest single-day drop since 2022. The Nasdaq technology market value-weighted index (NDXTMC), measuring the performance of the Nasdaq 100 technology component stocks, fell 4.73%. The Russell 2000 Index fell 2.13%, and the VIX fear index rose 22.55% to 18.04, a three-month high.
Although the Dow Jones had the smallest drop, it still fell more than 1.2%.
Most of the eleven sectors in the S&P 500 fell. The information technology/technology sector fell 4.14%, the consumer discretionary sector fell 3.89%, the telecommunications sector fell 3.76%, the industrial sector fell 2.17%, and the real estate, commodity, and financial sectors fell at least 1.19%, with the energy sector rising more than 0.2%, the healthcare sector rising more than 0.8%, and the utilities sector rising more than 1.1%.
Regarding investment strategies:
According to compiled data from the media, the S&P 500 index was once 15% above its 200-day moving average, and the deviation was comparable to historical extremes, greater than the sharp deviation before the major decline in early 2018. In recent history, only after the low point of the global financial crisis in March 2009, the high point in February 2011, and the low point after the epidemic in 2021, have there been larger deviations.
Andrew Thrasher, a technical analyst and portfolio manager at Financial Enhancement Group, said that although this does not necessarily mean that the market is about to collapse, it is a warning signal for investors who are worried about overvalued tech stocks and concentration risks. We are encouraged by the performance of underperforming sectors such as small-cap stocks and so on, but the biggest problem is that six stocks still account for about 30% of the S&P 500 index. If funds rotate quickly from these growth stocks to other areas, it will be difficult for the overall index to maintain an upward trend in the short term.
The market value of the "Tech Seven Sisters" shrank by nearly 1.75 trillion USD compared to its peak ten days ago. Tesla fell 12.33%, the largest single-day drop since September 2020. Nvidia fell 6.8%, Meta fell more than 5.6%, Google A fell 5.04%, the largest drop in six months since the end of January, Microsoft fell about 3.6%, Amazon fell about 3%, and Apple fell about 2.9%.
Chip stocks fell across the board. The Philadelphia Semiconductor Index fell 5.41%; the industry ETF SOXX fell 5.32%; Nvidia's two-times long ETF fell 13.24%.
ASM International ADR fell more than 12.2%, supermicro computer fell more than 9.1%, Arm Holdings fell about 8.2%, ASML Holding ADR fell more than 6.4%, AMD fell about 6.1%, Taiwan Semiconductor ADR fell 5.9%, GigaDevice fell more than 3.8%, Micron Technology fell about 3.5%, and Seagate Technology rose more than 4%. Broadcom fell 7.6%.
AI stocks were hit hard. BullFrog AI fell 11.71%, Serve Robotics, known as the Nvidia concept stock, fell 8.94%, Oracle fell 3.03%, Snowflake fell 5.26%, Palantir fell 7.67%, CrowdStrike fell 3.99%, BigBear.ai fell 0.65%, Nvidia concept stock SoundHound fell 7.89%, and Dell fell 7.73%.
Most Chinese stocks fell. The Nasdaq Golden Dragon China Index (HXC) fell 1.93%. Among ETFs, the China Technology Index ETF (CQQQ) fell 2.13%, and the China Internet Index ETF (KWEB) fell 2.10%.
Among popular Chinese concept stocks, Nio fell 4.02%, Xpeng fell 4.17%, Ke Holdings fell 7.73%, Li Auto fell 4.61%, Bilibili fell 2.56%, JD.com fell 1.64%, Tencent Holdings (ADR) fell 1.49%, Alibaba fell 0.39%, Baidu fell 1.79%, PDD Holdings fell 0.91%, while Netease rose 1.16%.
In addition, for AI stocks, IBM's revenue exceeded expectations, generating more than 2 billion USD, and the stock price rose more than 4% after hours. Among chip stocks, KLA Corp's fourth-quarter revenue and earnings both exceeded expectations, and the stock rose more than 5% after hours. Ford's second-quarter EPS was lower than expected, and Ford Pro's EBIT is still expected to lose at least 5 billion USD for the whole year, and the stock fell more than 10% after hours. Mexican grill chain Chipotle's same-store sales exceeded expectations, with an increase of more than 11%, and the stock rose more than 14% after hours.
Considering the performance of regional banks and US technology companies, European stocks collectively fell and ended their two-day climb:
The pan-European Stoxx 600 index fell 0.61% to 512.30 points. The Euro Stoxx 50 index fell 1.12% to 4861.87 points.
The German DAX 30 index fell 0.92%. The French CAC 40 index fell 1.12%. The Italian FTSE MIB index fell 0.48%. The UK FTSE 100 index fell 0.17%. The Netherlands AEX index fell 1.26%. The Spanish IBEX 35 index fell 0.02%.
Most European semiconductor concept stocks fell, and almost all luxury brands fell:
Among chip stocks, ASM International fell 9.43%, BE Semiconductor Industries fell 8.49%, Asml Holding fell more than 4.6%, Infineon Technologies fell 2.9%, NXP Semiconductors fell more than 1.4%, STMicroelectronics fell 0.43%, and Soitec rose 2.45%.
Among luxury brands, LVMH Group fell 4.66%, Remy Cointreau fell 4.6%, Kering Group fell 4.54%, Hugo Boss, Hermes, Burberry, Richemont Group, and L'Oreal also fell 3.42% -1.54%.
Deutsche Bank's second quarter ended its record of 15 consecutive profitable quarters, reporting its first loss in four years and announcing its abandonment of the second round of share buybacks for the year due to sluggish trading and litigation, increasing provisions for bad loans from corporate and commercial real estate, casting a shadow over the European banking industry's financial reports. Its American stocks fell more than 9% and European stocks fell more than 8%, marking the largest drop in nearly three months.
Expectations of interest rate cuts have warmed up, with the two-year U.S. Treasury yield falling more than 8 basis points and the yield curve steepening.
At the end of the day, the two-year U.S. Treasury yield, which is more sensitive to monetary policy, fell 8.13 basis points to 4.4101%, trading in a range of 4.4934%-4.3750% during the day and falling to its lowest level in more than five months since early February. The 10-year benchmark U.S. Treasury yield rose 2.15 basis points, trading in a range of 4.2076%-4.2877% during the day.
The yield curve on U.S. debt steepened as yields on 10-30-year U.S. bonds widened. The yield spread between five-year and 30-year U.S. Treasuries hit its highest level since May 2023, while the yield spread between 2-year and 30-year U.S. Treasuries hit its highest level since July 2022. This was mainly due to the market's expectation of interest rate cuts, prompting former Fed 'number three' Dudley to call for a rate cut next week.
European bond yields diverged, with short-term yields falling and long-term yields rising. The benchmark 10-year German bond yield in the euro zone rose 0.5 basis points to 2.444%, trading in a range of 2.408%-2.455%. After the release of Eurozone PMI data at 16:00 Beijing time, it hit a daily low and then rebounded. The two-year German bond yield fell 6.4 basis points to a daily low of 2.651% and was down all day in a volatile downward trend.
U.S. EIA crude stocks fell, gasoline demand rose, Canadian wildfires and prospects for a rate cut in September supported a rebound in oil prices of more than 0.8%, ending a four-day losing streak.
The greenback's weakness boosted oil prices. WTI September crude futures rose 63 cents, or about 0.82%, to $77.59 a barrel. Brent September crude futures rose 70 cents, or about 0.86%, to $81.71 a barrel.
U.S. crude oil continued to rise earlier in the day and accelerated its rise during the U.S. stock trading session, rising as much as 1.6% above the $78 mark, while Brent rose as much as 1.5% above the $82 mark.
The U.S. Energy Information Administration (EIA) said that as of July 19, U.S. crude oil inventories fell 3.7 million barrels to a new low since February, while gasoline inventories fell 5.6 million barrels instead of rising. Market gasoline supplies (reflecting demand) increased by 0.673 million barrels per day. Goldman Sachs noted that although Canada's oil production is still steady, the most severe wildfire season is yet to come, which may pose a risk to oil supplies.
U.S. August natural gas futures fell 3.20% to $2.117/million British thermal units. TTF Dutch natural gas futures, the European benchmark, rose 3.16% to €32.621/megawatt-hour, and ICE UK natural gas futures rose 2.21% to 80.76p/therm at the end of trading.
Expectations of rate cuts are heating up, with the U.S. dollar index down about 0.1%, and the yen up more than 1.1% to nearly 153, reaching a two-month high.
The U.S. dollar index DXY, which measures against six major currencies, fell 0.09% to 104.357 points, trading in a range of 104.555-104.122 points during the day.
Bloomberg's dollar index fell 0.02% to 1256.94 points, trading in a range of 1257.92-1254.51 points during the day.
Most non-U.S. currencies fell. The euro fell 0.12% against the dollar, the pound remained unchanged against the dollar, and the dollar fell 0.66% against the Swiss franc.
Offshore renminbi (CNH) rose 228 points against the dollar to 7.2663 yuan, trading in a range of 7.2916-7.2619 yuan overall.
Among Asian currencies, the U.S. dollar fell 1.13% against the yen to 153.83 yen, trading in a range of 155.99-153.11 yen during the day, falling below the 154 mark for the first time since mid-May. The euro fell 1.26% against the yen to 166.75 yen, while the pound fell 1.12% against the yen to 198.557 yen. The media reported that the Bank of Japan plans to halve its bond buying scale in the next few years and is considering whether to raise interest rates.
Following the launch of Etherindex Ether Trust on the previous day, mainstream cryptocurrencies rose and fell. The largest market cap leader, Bitcoin, rose 0.75% to $66,060.00, returning to the $0.066 million level and reaching a high of $67,230.00 during the day. The second-largest, Ethereum, fell 3.21% to $3,378.00, trading in a range of $3,503.00-$3,357.00 during the day.
Traders focus on economic data, fully pricing in the rate cut in September, as well as increased demand for gold in India, supporting the two-day rise in gold prices.
The decline in the US dollar and US bond yields supports metal prices. COMEX August gold futures rose slightly by 0.06% to $2408.7 per ounce at the end of the day, breaking a four-day declining trend. COMEX September silver futures fell by 0.53% to $29.175 per ounce at the end of the day.
Spot gold prices remained on the rise throughout the day, with pre-market trading for US stocks continuing to rise. In early trading, US stocks hit a daily high, rising more than 0.9% and climbing above $2430 per ounce, but then almost gave back most of the gains, falling to just below $2400 per ounce and closing only slightly higher.
Spot silver fluctuated upward before pre-market trading for US stocks, rising more than 0.7% at the daily high. However, it then plunged in a straight line, falling to the daily low at the end of the day, down more than 0.9% and falling below $29 per ounce.
Some analysts point out that the biggest bullish factor for gold prices at present is the prospect of a rate cut. The market is focused on this week's economic data and firmly believes that the Fed will begin cutting rates this year, which supports a rise in gold prices due to a weaker US dollar. In addition, India's reduction of import tariffs on gold and silver from 15% to 6% will also help increase demand for gold and silver.
London industrial metals have mostly declined for several consecutive days. Dr. Copper, the economic barometer, fell $62 to $9104 per tonne, and both the September contract for New York copper and the London copper futures have fallen for eight consecutive trading days, reaching a new three-month low since early April.
London zinc fell $4 to $2685 per tonne. London lead fell $16 to $2044 per tonne. London nickel fell $194, or 1.21%, to $15827 per tonne. London tin, on the other hand, rose $372, or more than 1.26%, to $29790 per tonne. London aluminium rose $6 to $2300 per tonne.
Editor / jayden