Source: Wall Street See
Authors: Fang Jiayao, Du Yu, Zhang Yaqi, Long Yue, Li Xiaoyin

The deputy governor of the Bank of Japan appeased the market sentiment with a dovish stance, and the US stock indexes collectively rebounded more than 1% at the beginning of the day. However, optimistic sentiment subsided afterwards. Pressured by the escalation of the Middle East conflict and the weak demand for 10-year US Treasury auctions, US stocks fell and closed at a daily low after noon, with small-cap stocks and technology stocks leading the decline. The chip stock index fell by about 3.1%, and Nvidia fell more than 5% and closed below $100 for the first time in nearly three months. Utilities, energy, and financial sectors of the U.S. stock market rose, while nonessential consumer goods, materials and technology sectors underperformed. Analysts say that the market is still cautious, and investors are waiting for risks to be released and stabilized before entering the market.

Investors are concerned about the new highs for investment-grade corporate bond issuances this year. The weak demand for 10-year US Treasury auctions intensified selling. The yield on 10-year US Treasuries rose more than 9 basis points, erasing all the decline since the release of weak nonfarm payroll data last Friday. At the same time, the market's risk aversion demand for US and European bonds persists, and the prices of US and European bonds have fallen across the board.

Regarding foreign exchange, Bank of Japan Deputy Governor Nishimura Shinichi stated that he will not raise interest rates when the market is unstable, which pushed the yen down for two consecutive days. It fell as much as 2.5% intraday and approached 148, further away from its seven-month high, and subsequently the dollar strengthened. The futures market has slightly retreated its bets on a substantial rate cut by the Federal Reserve this year, and the probability of a 50 basis point rate cut in September has further fallen to 65%.

Claudia Sahm, the advocate of the Sahm rule, believes that changes in the US employment market have rendered the Sahm rule ineffective as a recession indicator. European Central Bank official Olli Rehn believes that the global stock market turmoil is an overreaction, and the US economy remains strong. Economist Nouriel Roubini, known as the "doomsday doctor," does not believe that the economy will experience a rapid hard landing. The market's judgment of the actions of the Federal Reserve is often wrong. JPMorgan CEO Jamie Dimon doubts whether inflation can fall to 2%, while former New York Fed Chairman William Dudley believes that the Fed should cut interest rates as soon as possible to avoid expanding potential economic damage.

Investors remain cautious, and major U.S. stock indexes turned down after noon and closed at a daily low. The Nasdaq, small-cap stock indexes, and Chinese concept stock indexes all fell more than 1%, and the chip stock index fell by more than 3.1%. After rising 4.4%, Nvidia fell more than 5%, and Super Micro Computer fell 20%.

• After initial ups and downs, the major US stock indexes continued to fall. The S&P 500 fell 0.77% to 5,199.50 points. The Dow fell 0.60% or 234 points or 0.76% to 38,763.45 points. The Nasdaq fell 1.05% to 16,195.81 points. The Nasdaq 100 fell 1.16%. The Nasdaq Technology Industry Index (NDXTMC), which measures the performance of Nasdaq 100 technology component stocks, fell 1.28%. The Russell 2000 index fell 1.41%. The fear index VIX rose 0.18% to 27.76. It once refreshed its daily low to 21.97 and fell only 21% at one point.

• At the beginning of the U.S. stock market, the Nasdaq, which is mostly composed of technology stocks, rose more than 2%; the S&P 500 index rose more than 1.7%; and the Dow Jones Industrial Average, which is closely related to the economic cycle, once rose more than 480 points or 1.2%; the Russell 2000 small-cap stock index rose nearly 1.5%. The chip stock index rose 3.8%, and the China concept index rose as much as 1.5%. The "panic index" VIX fell sharply from 65 on Monday to below 22, indicating that investors' panic sentiment is receding, but still higher than the initial level at the beginning of this month.

• Most of the US industry ETFs closed down. The semiconductor ETF fell nearly 3%, and biotech, consumer discretionary, global aviation, and technology industry ETFs each fell nearly 2%, while global tech, medical, and internet index ETFs fell about 1% up and down. Utility ETFs and energy ETFs each rose by about 0.5%.

• Most of the 11 sectors of the S&P 500 index fell. The consumer discretionary sector fell 1.44%, while the materials, information technology/technology sectors fell more than 1.3%, and the health care sector also fell by about 1.1%. The telecommunications sector fell by about 0.4% with the smallest decline, while the energy sector rose more than 0.4%.

• Most of the 'Tech Seven Sisters' fell, with Nvidia and Tesla leading the way, but Apple rose. Nvidia rose more than 4% during the day, and fell 5.12% below the psychological level of $100, reaching the lowest point since May 22, with a market capitalization of 2.43 trillionUS dollars at the close. Tesla fell by 4.43%, while the 'Metaverse' Meta rose more than 3.5% before falling 1.05%, Microsoft fell 0.3%, Google A rose 0.41%, Amazon rose 0.52%, and Apple rose 1.25% after a high of nearly 3.1% during the day.

• Semiconductor concept stocks generally fell, and Super Micro Computer fell more than 20%. The Philadelphia Semiconductor Index fell 3.09%; the industry ETF SOXX fell 2.79%; Nvidia's double long ETF fell 10.21%. Micron Technology fell by 2.47%, and the company said it may resume its stock buyback program. Taiwan Semiconductor's US stocks fell by 0.23%, Arm Holdings fell by 5.56%, Qualcomm fell by 1.64%, Broadcom fell by 5.32%, KLA Corp fell by 2.58%, Applied Materials fell by 2.62%, ASML Holding ADR fell by 0.79%, Intel fell by 3.63%, AMD fell by 1.16%, and ON Semiconductor fell by 3.09%.

• AI concept stocks collectively fell. 'AI Demon Stock' Super Micro Computer fell by 20.14%, and its revenue doubled in the last quarter, with mixed blessings in terms of guidance. Serve Robotics, an AI robot delivery company held by Nvidia, fell 8.68%, BullFrog AI fell 10.8%, Oracle fell 1.8%, CrowdStrike fell 0.44%, C3.ai fell 2.09%, Palantir fell 1.02%, SoundHound AI, an AI voice company held by Nvidia, fell 3.59%, BigBear.ai fell 3.25%, and Dell Technologies fell 7.16%. Snowflake rose 0.24%.

• Most of the China concept stocks fell. The Nasdaq Golden Dragon China Index fell 1.46%. Among ETFs, the China Internet Index ETF (KWEB) fell 0.81%, and the China Technology Index ETF (CQQQ) fell 0.69%. Among popular China concept stocks, New Oriental fell 7%, and Jike and Xiaopeng fell more than 5%. Nio fell 2.65%, Bilibili fell 4.47%, Baidu fell 1.2%, Alibaba fell 0.09%, and JD.com fell 0.47%, while NetEase rose 1.21%, Tencent Holdings (ADR) rose 1.65%, Ideal rose 1.53%, Yum China rose 1.6%, and Pinduoduo rose 0.4%.

• Digital currency concept stocks generally fell. Iris Energy fell by 14.65%, CleanSpark and Hut 8 fell by about 9.6%, Riot Platforms fell by more than 9.1%, 'Bitcoin holder' MSTR fell by more than 8.9%, Marathon Digital fell by about 8.2%, digital currency exchange Coinbase fell by more than 7.8%, double long Bitcoin ETF fell by more than 7.2%, Ethereum ETF ETHA fell by more than 5.7%, and Bitcoin ETF BITO fell by about 3.8%.

• Among the other stocks that had large fluctuations due to financial reports, (1) European pharmaceutical giant Novo Nordisk fell 8.37%, with second-quarter operating profit and net income both lower than expected, and adjusted its full-year operating profit guidance. (2) SoftBank rose 6.31%, with losses in the first quarter significantly narrowing from the previous year but still disappointing Wall Street. To support its stock price, it announced a share buyback plan of up to $3.4 billion. (3) Maersk fell 3.37%, with Q2 revenue and EBITDA lower than expected but full-year performance guidance has been raised. Maersk CEO said there have been no signs of a US freight demand recession yet. (4) Disney fell 4.5%, closing at a new low since November 8, 2023, and its Q3 revenue and profits exceeded expectations, and full-year profit guidance was raised, but its theme park business was weak. (5) Shopify rose 17.83%, with Q2 revenue exceeding expectations. (6) Online car-hailing company Lyft fell 17.23%, with Q2 bookings and Q3 outlook both below expectations. (7) Rivian, known as Tesla's rival, fell 6.86%, but maintained its full-year vehicle production and profit targets. (8) Airbnb fell more than 13%, with weak revenue outlook for the next quarter.

The clouds of recession are gradually dissipating, with European stocks marking the biggest daily gain in nine months:

• The European Stoxx 600 rose 1.54%, marking its highest daily increase since November 2, 2023. The banking sector led the way, rising more than 3%.

• Major regional stock indices rose across the board, with the French stock index up 1.91%, the British stock index up 1.75%, the German stock index up 1.50%, the Italian stock index up 2.33%, and the Spanish stock index up 2.01%.

• Among the other stocks that had large fluctuations due to financial reports, Novo Nordisk, the largest market cap stock, fell 6.71%, marking its worst daily performance in two years. On Wednesday, Deutsche Bank fell 3.72%, with Q2 net income exceeding expectations and plans to buy back 0.6 billion euros of shares.

• On the investment research strategy side, Barclays strategists said that as of Monday, the European STOXX 600 technology index had fallen 16% from its July high, providing investors with an opportunity to buy on the dip, while upgrading the sector's rating from neutral to high. Deutsche Bank strategists have upgraded their rating from underweight to neutral.

The market's safe-haven demand for US and European bonds continued to fade, while results of US bond auctions were weak, with yields on US and European bonds rising across the board:

• US Bonds: late in the session, the two-year US Treasury yield, which is more sensitive to monetary policy, rose 2.83 basis points to 0.04034%, rebounding from its August 5 low of 3.6498%; the US 10-year benchmark Treasury yield rose 9.36 basis points, reaching a high not seen since August 1 at 3.9755%, continuing to rebound from its August 5 bottom of 3.6653%.

• Goldman Sachs' interest rate strategist said that in the absence of "widespread evidence that labor markets or market functions are deteriorating rapidly," US bond yields may be too low. Under more favorable outcomes, the yield curve of US bonds may shift higher than current levels. News-wise, Warren Buffett's Berkshire Hathaway holds more ultra-short-term US bonds than the Fed.

• Eurobonds: The 10-year German benchmark bund yield rose 6.8 basis points, the 30-year German bund yield rose about 9 basis points, the two-year German bund yield rose 2.2 basis points, the French 10-year Treasury yield rose 5.3 basis points, the Italian 10-year Treasury yield rose 5.0 basis points, the Spanish 10-year Treasury yield rose 6.2 basis points, and the Greek 10-year Treasury yield rose 4.9 basis points. The two-year British bond yield fell by more than 2 basis points, while the longer-end British bond yield continued to rise, with the 10-year British bond yield up 2.7 basis points.

The US dollar rose more than 0.2% on Wednesday, the yen fell to 148, and cryptocurrencies followed US stocks lower:

• USD: The DXY, which measures the US dollar against six major currencies, rose 0.22% to 103.194, with an intraday trading range of 102.898-103.368, nearing its recovery from last Friday's poor non-farm employment numbers. The Bloomberg US dollar index rose 0.11% to 1250.61, with an intraday trading range of 1248.63-1252.39.

• Non-US currencies had mixed results, with the euro against the US dollar down 0.07%, the British pound against the US dollar up 0.02%, and the US dollar against the Swiss franc up 1.28%.

• JPY: The USD/JPY rose 1.65% to 146.72 yen, with an intraday trading range of 144.29-147.90 yen, with the yen seeing significant downward pressure in early Asia-Pacific trading. The EUR/JPY rose 1.59% to 160.29 yen; the GBP/JPY rose 1.67% to 186.249 yen.

• On the investment research strategy side, UBS recommended buying the yen and expects it to rise more than 10% by the end of next year.

• Offshore Renminbi: Offshore Renminbi (CNH) fell 143 basis points against the US dollar to 7.1733 yuan, with overall trading between 7.1575-7.1945 yuan.

• Bitcoin collectively fell. The market cap largest leader bitcoin fell 3.33% to $55,240.00 at the end of the day. The second largest ethereum fell 6.12% at the end of the day, reporting $2,355.50.

US economic downturn concern eased, US crude oil stocks hit a six-month low for six consecutive weeks, and Libyan petroleum minister was arrested. The tension in the Middle East remains high, leading to the continuous second-day rebound of oil prices and a more than 3% rise during the day, further saying goodbye to the low point of more than half a year:

• US oil: WTI September crude oil futures rebounded from $73.20/barrel yesterday to $75.23/barrel, rising by more than 2.77% or $2.03 during the day. The Asian market opened weakly, and the US oil fell more than 0.8% to $72.58/barrel at its lowest point. Then the US oil continued to rise. After the announcement of US EIA crude oil inventory data, it rose more than 3.6% to approach $76 per barrel during the US stock market's midday trading, and then reduced slightly by the end of the day.

• Brent crude oil: Brent October crude oil futures rebounded from $76.48/barrel yesterday to $78.33/barrel, rising nearly 2.42% or $1.85 during the day. Brent crude oil fell below $76 at its lowest point during the Asian market, and rose more than 3.1% to nearly $79 during the US stock market's midday trading. And then slightly fell back during the end of the day.

• Natural gas: US September natural gas futures rose 5.07% to $2.1120/million British thermal units. The European benchmark TTF Dutch natural gas futures rose by about 5.00% to 38.650 euros/megawatt-hour. ICE UK natural gas futures rose 5.53% to 95.280 pence/kcal.

• According to the Shanghai Securities News and the Reference News, Ukraine launched a ground attack on Russia. Due to investors' concerns about natural gas transport through Ukraine, European natural gas prices soared to a new high this year. According to CCTV news, the White House stated that a ceasefire agreement in the Gaza Strip is close to being reached.

US economic downturn concerns eased, and safe-haven demand cooled off. The US dollar and US bond yields rose together, putting pressure on gold prices. Spot gold rose and fell, falling below $2,400/ounce:

• Gold: COMEX December gold futures were slightly down 0.07% at $2,429.8/ounce at the end of the day. Spot gold hit a new high during pre-market trading in the US, rising more than 0.7% and breaking through $2,400, and then continued to decline, approaching the lowest point of nearly 0.5% and breaking through $2,380 before the US stock market closed. It only slightly rebounded at the end of the day.

• Silver: COMEX September silver futures fell 1.27% to $26.870/ounce at the end of the day. Spot silver rose more than 1.1% during pre-market trading in Europe and broke through $27/ounce. It then shook and fell, hitting a new low of more than 1.4% and approaching nearly $26.5/ounce before the end of the day, and then rebounded slightly without changing its downward trend.

• According to the statistics from the State Administration of Foreign Exchange, the People's Bank of China suspended its gold shareholding for the third consecutive month.

• London's basic industrial metals rose and fell. The economic indicator 'Copper Doctor' fell 1.78%, reporting $8,770/ton, LME aluminium fell by $8, and LME zinc fell by $20. LME nickel fell by $89, while LME tin rose more than 1.14%, and LME lead rose $14. International copper night trading fell by more than 0.9%, while Shanghai tin rose more than 0.7%. LME copper fell to a five-month new low since March 12, and LME inventory rose to a new high since 2019.

Editor/Jeffy