Source: Wall Street See
S&P 500 rose more than 2%, while Nasdaq rose more than 3%, both achieving their best daily performance since February. In July, Nasdaq was the only major index to fall but stopped its two-month rise. The small-cap stock index rose by 10% and was the best this year so far. On Wednesday, the chip stock index surged by 7%, but it fell more than 4% monthly, while Nvidia rose by nearly 13% but fell more than 5% monthly. Qualcomm closed up more than 8%, and the financial report exceeded expectations but fell after hours. Arm rose more than 8%, but poor revenue outlook for the year led to a drop of more than 13% after hours. Meta's capital expenditure in the second quarter was lower than expected and did not raise the upper limit of the annual interval again, rose 5% after hours. Japan's central bank raised interest rates, causing the yen to rise by 2%. It is the first time in four months that the yen has risen above 150, and it rose nearly 7% in July, the best in 20 months.
Multiple rate cuts have pushed the yields of US Treasuries down across the board. The signal that the Federal Reserve may cut interest rates in September was disclosed when it announced the interest rate decision in July. US stocks, US bonds, crude oil, gold, and the yen all rose as the market anticipated interest rate cuts. The "new Fed megaphone" analysis said the Fed's statement shows that the committee is concerned about both aspects of its dual mandate and has deleted the phrase "highly concerned" by policy makers in the past two years about inflation risks. This change is significant because it indicates that inflation may no longer be a barrier to interest rate cuts, especially as the labor market continues to cool down.
The ADP new job added 0.122 million people in July, lower than the expected 0.15 million and the previous value, and is also the lowest level since February. The US second-quarter employment cost index was 0.9%, lower than the market's expected 1.0%. The wage growth rate hit a three-year low, and unemployment spread to more industries in the US, indicating that the US labor market is slowing down, which further strengthened the expectation of a rate cut in September. In addition, the US Treasury reiterated that the regular bond auction size is not expected to increase in the next few quarters, and the yield on the US Treasury bond has declined.
According to the CME FedWatch Tool, traders are forecasting three interest rate cuts by the Federal Reserve by the end of the year, and a total of 70 basis points in cuts this year, up from the previously expected 64 basis points. The market's call for a rate cut was repeated continuously. The "new bond king" Gundlach surged and said he believed the Fed should cut rates on Wednesday. US Senate Democratic Party member and "anti-monopoly fighter" Warren urged Powell to cut interest rates now.
The demand for AI has been verified by multiple parties, and global chip stocks have risen sharply. The US chip stock index rose more than 7%. Zuckerberg's "metaverse" Meta's second-quarter revenue, profit, and third-quarter revenue guidance all exceeded expectations, and it rose more than 5% after hours. Samsung's second-quarter operating profit surged by 1458%. Arm Holdings' revenue growth rate was 39%, higher than analysts' expectations, and Qualcomm's QCT semiconductor business sales increased by 12%, pushing the company's revenue and profits beyond expectations.
Hamas leader Haniyah was assassinated, and the reignition of geopolitics in the Middle East has fueled risk aversion. Gold rose by more than 1.6%, achieving the largest monthly increase since March, and oil prices quickly rose more than 4%, offsetting this week's decline.
The core harmonized CPI for the Eurozone in July maintained 2.9% for the third consecutive month, slightly higher than the expected 2.8%, with zero monthly growth ending the growth trend since February 2024. After the data was released, the euro-to-US dollar exchange rate rose slightly. However, the currency market still expects the European Central Bank to cut interest rates 25 basis points for the second time in September and a total of 57 basis points before the end of the year.
Risk aversion has risen, coupled with the interest rate decision of the Bank of Japan, causing the yen to rise above the 150 level. The Bank of Japan announced a 15 basis point interest rate hike and a quarterly reduction of 400 billion yen in bond purchases. BOJ Governor Haruhiko Kuroda said that if the economy and inflation support continue to raise interest rates, 0.5% is not a specific interest rate ceiling. The Japanese Finance Ministry said it spent $36.6 billion in the past month of foreign exchange intervention to support the yen exchange rate.
US tech stocks rebounded strongly, with Nasdaq up more than 2.6% and Nvidia up nearly 13%. The chip stock index rose by more than 7%.
As of the close:
The S&P 500 index rose 85.86 points, or 1.58%, to close at 5522.30, accumulating a 1.13% increase in July. The Dow Jones gained 99.46 points, or 0.24%, to close at 40842.79, accumulating a 4.41% increase in July. The Nasdaq rose 451.98 points, or 2.64%, to close at 17599.40, accumulating a 0.75% decline in July.
The Nasdaq 100 rose 566.16 points, or 3.01%, and fell 1.63% in July. The Nasdaq Technology Market Capitalization-Weighted Index (NDXTMC), which measures the performance of Nasdaq 100 technology components, rose 4.11% and fell 3.85% in July. The Russell 2000 index rose 0.51% and accumulated a 10.07% increase in July. The VIX fell 7.52% to close at 16.36, and accumulated a 33.88% increase in July.
The Philadelphia Semiconductor Index closed up 7.01%, down 4.37% in July. The Dow Jones KBW Regional Banking Index closed down 0.44%, up 18.60% in July. The Nasdaq Biotechnology Index closed down 0.15%, up 6.57% in July.
Most US industry ETFs closed up. Semiconductor ETFs closed up more than 7%, global tech stock ETFs and technology industry ETFs both up more than 4%, optional consumer ETFs, internet stock index ETFs and utilities ETFs all up at least 1%. However, global aviation industry ETFs, regional banking ETFs, medical industry ETFs and financial industry ETFs all fell by less than 0.5%.
Most of the 11 sectors of the S&P 500 index closed up. The S&P Information Technology/Technology sector rose 3.95%, the optional consumer sector rose 1.79%, the telecommunications sector rose 1.29%, the energy sector rose 0.42%, the healthcare sector fell 0.39%.
Besides Microsoft, the "Technology Seven Sisters" all rose generally. Nvidia rose 12.81%, with a market cap gain of $326.934 billion in a single day, the largest single-day gain in history, still down 5.28% for July. It is worth noting that Morgan Stanley has re-evaluated it as a "preferred stock" while maintaining a "shareholding" rating. Morgan Stanley believes that Nvidia's Q4 Blackwell may deliver strong results, setting Nvidia's target stock price at $144.00, up 38.8% from Tuesday's closing price.
Tesla rose 4.24%, Amazon rose 2.9%, "Metaverse" Meta rose 2.51%, Apple rose 1.5%, Google A rose 0.73%. However, Microsoft fell 1.08%. Microsoft's financial report showed that Q2 revenue, EPS profit, and operating profit all grew more slowly than in Q1.
Chip stocks generally rose across the board. The Philadelphia Semiconductor Index rose 7.01%, and the industry ETF SOXX rose 6.71%. Nvidia's double-leveraged ETF rose 25.99%.
Broadcom rose 11.96%, ASML Holding ADR rose 8.89%, KLA Corp rose 8.46%, Arm Holdings rose 8.43%, Qualcomm rose by around 8.39%, Applied Materials rose 7.86%, Taiwan Semiconductor's US stock rose 7.29%, Micron Technology rose 7.08%, Marvell Technology rose 6.66%, on Semiconductor rose 5.79%, and AMD rose 4.36%. The company's Q2 AI revenue doubled year-on-year, and it raised its sales outlook for MI300 for the year. Intel rose 2.02%.
AI concept stocks rose collectively. Serve Robotics, an AI robot delivery company in which Nvidia holds shares, rose 16.8%. Super Micro Computer rose 5.3%, Dell rose 4.67%, BigBear.ai rose 4.14%, SoundHound AI, an AI voice company in which Nvidia holds shares, rose 2.83%, Oracle rose 2.79%, Palantir rose 1.97%, Snowflake rose 1.16%, BullFrog AI rose 0.68%, while CrowdStrike fell 0.72%. CrowdStrike is facing a collective lawsuit by investors due to system failures and sell-off issues. The CEO of Delta Air Lines stated that the shutdowns by CrowdStrike and Microsoft cost the airline $500 million.
Other individual stocks with significant changes due to earnings reports are:
Starbucks US stock rose 2.65%, with the company maintaining its forecast for the fiscal year 2024.
New Oriental fell 9.29%. Q4 revenue increased by 32% year-on-year, and operating profit fell by 78%. It is expected that the total Q1 revenue (excluding the self-operated product live e-commerce business of East Buy) in the fiscal year 2025 will increase between 31% and 34% year-on-year.
HSBC Holdings rose 3.72% benefiting from the continuous growth of global banking business and markets. HSBC Bank's Q2 profit exceeded expectations, announcing a buyback of at least $3 billion in shares, and HSBC Hong Kong rose 4.6%.
Boeing rose 2% after announcing its results and appointing a new CEO. Adjusted free cash flow for the second quarter was negative $4.33 billion, with market expectations of negative $4.34 billion. Second-quarter revenue was $16.9 billion, compared to market expectations of $17.46 billion.
Samsung's second-quarter operating profit surged 1458% as AI drove chip demand.
Arm Holdings rose 8.43% as demand for the company's chips increased due to the demand for AI devices. The company reported higher profits and operating income for the first quarter.
Qualcomm rose 8.39%. The revenue growth of Qualcomm's QCt semiconductor business in the third quarter increased by 12%, driving the company's revenue and profits above expectations. Qualcomm said that the personal computer (PC) business exceeded internal targets. The smartphone market has stabilized somewhat this year.
US fast food chain Wendy's fell 2.87% after its competitor McDonald's claimed that its new $5 bundle attracted more customers. McDonald's fell 0.39%, with Cowen Inc. downgrading its rating to hold and a target price of $280.
Estee Lauder's second-quarter sales beat expectations, with its full-year outlook unchanged despite an EBITDA outlook downgrade, causing the stock price to fall more than 1% after hours.
European stocks collectively rose as eurozone inflation unexpectedly rose on Wednesday. Bank shares rose about 5.6% in July, while the technology sector fell more than 6%.
The pan-European Stoxx 600 index rose 0.79% to 518.14 points, up 1.32% for July. The eurozone STOXX 50 index rose 0.66% to 4872.94 points, up 0.43% for July. Netherlands chip company ASML Holding led the gains, rising as much as 10% during trading and ultimately closing up 5.56%, down 11.79% for July.
The German DAX 30 index rose 0.48%, up 1.50% for July. The French CAC 40 index rose 0.76%, up 0.70% for July. The Italian FTSE MIB index fell 0.34%, up 1.84% for July. The UK’s FTSE 100 index rose 1.13%, up 2.50% for July. The Netherlands’ AEX index rose 1.39%, down 0.35% for July. The Spanish IBEX 35 index fell 1.23%, up 1.1% for July.
In terms of sectors, the STOXX 600 banking index rose 5.59% in July, while the real estate index rose 4.02%, financial services index rose 2.70%, retail index rose 2.41%, leisure index fell 1.38%, automotive and parts index fell 3.97%, basic resources index fell 4.82%, and the technology index fell 6.05%.
Other individual stocks with significant changes due to earnings reports are:
Sportswear giant Adidas initially rose but ultimately fell 2%. After prolonged sluggish sales, Adidas appears to be making a comeback, with Q2 revenue and net income exceeding expectations and full-year performance guidance being raised.
Powell hinted at a rate cut in September at the earliest, and US bond yields fell across the board, with the two-year Treasury yield falling approximately 9 basis points and falling over 48 basis points in July.
At the close, the two-year Treasury yield, which is more sensitive to monetary policy, fell by 8.87 basis points to 4.2698%, rising to a daily high of 4.3894% at 2:00 a.m. Beijing time when the FOMC interest rate decision statement was released, and falling to a daily low of 4.2554% at 3:59 a.m. (only one minute before the US stock market closed), down 48.36 basis points for July. The benchmark 10-year US Treasury yield fell 10 basis points to a new low of 4.0392% for the day and fell 35.31 basis points in July.
US 10-year benchmark bond yields fell 10 basis points to a new daily low of 4.0392%, down 35.31 basis points in July.
The 10-year benchmark debt yield in the euro area fell 3.6 basis points to 2.304%, down 19.7 basis points for July, showing a downward trend during the period of fluctuation in the 2.642%-2.3% range. The two-year German bond yield fell 2.1 basis points to 2.531%, down 30.2 basis points for July, and overall trading took place within the 2.962%-2.513% range.
France's 10-year bond yield fell by 4.1 basis points, a cumulative decline of 28.5 basis points in July. Italy's 10-year bond yield fell by 4.6 basis points, a cumulative decline of 42.2 basis points in July. Spain's 10-year bond yield fell by 4.5 basis points, a cumulative decline of 30.3 basis points in July. Greece's 10-year bond yield fell by 5.1 basis points, a cumulative decline of 43.1 basis points in July. UK's 10-year bond yield fell by 7.3 basis points, a cumulative decline of 20.2 basis points in July. The two-year UK bond yield fell by 5.1 basis points, a cumulative decline of 39.5 basis points in July.
The geopolitical situation in the Middle East has once again tightened, with oil prices rising more than 4% and Brent crude oil re-entering the $80 per barrel mark.
WTI September crude oil futures rose $3.18, or nearly 4.26%, to $77.91 per barrel, wiping out all declines since last Friday. It fell more than 4.45% in July. Brent October crude oil futures rose $2.65, or more than 3.39%, to $80.72 per barrel, wiping out the decline this week, with a cumulative decline of 6.58% in July.
US and Brent crude oil continued to rise throughout the day. When hitting a daily high, US crude oil rose more than 5.1% to approach the $79 per barrel mark, and Brent crude oil futures for September rose nearly 3% to approach the $81 per barrel mark.
According to data from the US Energy Information Administration (EIA), US crude oil inventories decreased by 3.44 million barrels last week, and gasoline inventories decreased by 3.7 million barrels. US EIA crude oil inventories have fallen for five consecutive weeks, reaching new lows since February.
Regarding investment research strategies:
Some analysts pointed out that there was a "misjudgment" in the market's assessment of the geopolitical risks in the Middle East, and that the market was too optimistic about the potential for interruption of oil supply caused by the Russo-Ukrainian war and the 10-month conflict in Gaza. Currently, we are entering a new phase of the worsening of the situation in the Middle East, which will attract the attention of oil traders and prompt them to recalculate the substantial risk premium in Brent crude oil prices, which is estimated to be at least $5 per barrel, before potential physical supply interruptions occur.
However, some analysts remain cautious about whether the current tense situation can support oil prices in the long run. As the assassination took place within Iran, it not only increased geopolitical risks, but also increased the likelihood of oil supply disruptions, which is the reason for the rise in oil prices. However, unless the situation further deteriorates and clearly threatens oil output in the region, the support for oil prices will not be sustainable.
UBS analysts also stated that the escalation of the geopolitical tensions in the Middle East has raised concerns about the rise in oil prices in the market. However, unless there is actual supply interruption, the geopolitical risk premium usually does not continue to be reflected in oil prices. Currently, due to the absence of supply disruptions, the reaction of oil prices is relatively limited.
The OPEC+ committee will evaluate member countries' compliance with their respective production quotas on Thursday. Although the joint ministerial monitoring committee does not have the direct right to modify the alliance's official production strategy, it can propose to convene a comprehensive ministerial meeting to make adjustments if the market situation requires it. In addition, these events coincide with the financial reports of major European oil companies. After BP announced on Tuesday that it would increase dividends and reported better-than-expected second-quarter profits, Shell will also release its financial report on Thursday.
US natural gas futures for August fell by more than 4.2% to $2.0360 per million British thermal units, with a cumulative decline of more than 21.72% in July. However, European natural gas prices continued to rise, with Dutch natural gas futures for TTF rising by 2.23% to 35.868 euros per megawatt-hour. ICE UK natural gas futures rose 2.21% to 80.760 pence/calorie.
The renewed escalation of the Middle East geopolitical conflict has driven up risk aversion, together with the easing of the Fed's interest rate, creating a joint boost in gold prices rising by more than 1.6% to the best monthly gain since March.
The softening of the US dollar and US bond yields supported precious metals prices. COMEX December gold futures rose 1.69% to $2,493.4 per ounce in the aftermarket, while COMEX September silver futures rose 2.07% to $29.115 per ounce.
Spot gold and spot silver maintained their upward momentum throughout the day. Prior to pre-market trading of US stocks, gold and silver quickly surged after Hamas leader Hania was assassinated, and the geopolitical conflict in the Middle East escalated, driving up risk aversion. Before the release of the Fed's statement (before 2:00am Beijing time), spot gold rose 0.7% to approach $2,430, while spot silver rose more than 0.8%. After the Fed's statement was released, both accelerated upwards and hit daily highs, with spot gold rising more than 1.6% to stand at $2,450 per ounce, while spot silver rose nearly 2.3% to break through $29 per ounce.
According to Bob Haberkorn, Senior Analyst at RJO Futures, if the Federal Reserve implements more specific interest rate cuts, the gold price could rise above $2,500. On the other hand, if the interest rate cut expectation continues to be uncertain, the gold price is expected to fall slightly. However, given the current geopolitical tensions and economic concerns, the gold price is expected to bottom out at around $2,400, forming a solid support.
According to Bank of America, investors are bullish on gold due to expected interest rate cuts by the Federal Reserve, but the market is more optimistic about silver because it is a critical material in green technologies such as solar energy and electric cars; the increasing demand for green technologies will drive demand for silver. Silver is more susceptible to manufacturing activities than gold, so its performance will be better than that of gold.
London base metals rebounded on Wednesday after a continuous decline. The economic benchmark, 'Dr. Copper', rose by nearly 2.82%, reaching $9,225 per ton, and returned to the integer level of $9,000. London aluminum rose by nearly 2.97%, reaching $2,290 per ton. London zinc rose by nearly 1.79%, reaching $2,676 per ton. London lead rose by nearly 2.41%, reaching $2,084 per ton. London nickel rose by approximately 3.32%, reaching $16,604 per ton. London tin rose by nearly 4.44%, reaching $30,056 per ton.
Editor/Lambor