Source: Wall Street See
Authors: Fang Jiayao, Du Yu, Zhu Xueying, Long Yue, Bu Shuqing.

Data from the New York Federal Reserve Bank in August showed that the one-year and five-year inflation expectations remained stable at 3% and 2.8% respectively. The three-year inflation expectation slightly increased from 2.3% in July to 2.5%. At the same time, the employment trend index for August rose slightly from the revised 108.71 to 109.04.

The market is closely watching Tuesday's US presidential debate, as well as the release of the US CPI on Wednesday and the PPI on Thursday. In particular, the CPI data may have a significant impact on interest rate decisions before the FOMC meeting, because although the market generally expects a 25 basis point rate cut, the exact rate cut has not yet been determined.

After heavy selling last week, investors bought US stocks on dips, with all three major indices rising by more than 1.1%. Except for the communications services sector, all other sectors rose. Boosted by a 3.36% rise in Boeing and a 2.63% rise in Tesla, the industrial and non-essential consumer sectors were the top gainers. The US dollar strengthened and short-term US Treasury yields declined. Later this week, there will be auctions for 3-year, 10-year, and 30-year Treasury bonds, with longer-term bonds expected to attract more buying interest. Oil prices rose as the market worried that tropical storms could disrupt production and refining along the US Gulf Coast.

All three major US stock indices rebounded by more than 1%, with strong performances from technology stocks. Nvidia rose 3.54%, while Apple initially fell 1.8% during the announcement and ended up rising by 0.04%. NIO surged nearly 11%, reaching its highest level in four months after five consecutive days of gains.

• All three major US stock indices declined: the S&P 500 Index rose by 62.63 points, or 1.16%, to close at 5471.05 points. The Dow, closely related to the economic cycle, increased by 484.18 points, or 1.20%, to 40,829.59 points. The Nasdaq, which is dominated by technology stocks, increased by 193.77 points, or 1.16%, to 16,884.60 points. The Nasdaq 100 rose by 1.3%. The Nasdaq Techweight Index (NDXTMC), which measures the performance of the Nasdaq 100 technology sector, rose by 1.11%. The Russell 2000 Index, which is more sensitive to the economic cycle, increased by 0.30%. The VIX fear index fell by 13.09% to 19.45.

• USA industry ETFs all rose. Global aviation industry ETF closed up 2.64%, semiconductor ETF rose 2.26%, technology industry ETF, global technology stocks index ETF, financial industry ETF, consumer discretionary ETF, biotech index ETF, and utilities ETF all rose more than 1%, while banking industry ETF rose 0.65% and performed the worst.

• All 11 sectors of the S&P 500 index closed higher. The S&P consumer discretionary sector rose 1.63%, with industrial, information technology/technology, financial, and real estate sectors all rising at least 1.15%. The energy sector rose 0.77%, while the telecom sector rose 0.04% and performed the worst.

• On the news front, HSBC analysts stated that, due to labor market data showing more cooling than recession, and the resilient profit prospects for Q3, they are more bullish on US stocks. However, Citigroup analysts hold a different view, believing that the large closing of long positions in the S&P 500 index and increased short positions in the Nasdaq 100 indicate a shift in risk preference towards a more direct bearish trend. RBC Capital Markets strategists stated that due to seasonal factors, market sentiment, and risks from the presidential election, there is further downside potential for the US stock market. If concerns about a hard landing intensify, the risk of a 14-20% decline in the stock market due to growth panic will certainly rise.

• Among the 'Tech Seven Sisters,' only Google A dropped. Nvidia closed up 3.54%, Tesla rose 2.63%, Amazon rose 2.34%, Microsoft rose 1%, and Meta rose 0.9%. Apple edged up 0.04%, and during the day while Apple held a product launch for the iPhone 16 Pro and iPhone 16 Pro Max, the stock price temporarily expanded its drop to 1.8%. Google A fell by 1.33%.

• Chip stocks saw more gains than losses. The Philadelphia Semiconductor Index closed up 2.15%. The SOXX industry ETF rose 1.98%; the Nvidia 2x leveraged long ETF rose 6.95%. Arm Holdings rose 7.03%, Marvell Technology rose 4.12%. TSMC's US stock rose 3.8%, and reports stated that Samsung is collaborating with TSMC to develop HBM4. Nvidia rose 3.54%, AMD rose 2.83%, Broadcom rose 2.79%, ON Semiconductor rose 2.16%, Qualcomm rose 1.63%, KLA Corp rose 1.01%. Intel rose 0.95%, and reports stated that Intel plans to entrust TSMC with all process nodes of 3nm and below and plans to globally reduce its workforce by 15%. Micron Technology dropped 0.13%, and ASML Holding dropped 0.39%.

• Most AI concept stocks rose. Palantir rose 14.08%, marking its largest single-day increase since February, after the company was included in the S&P 500 index. BigBear.ai rose 10.85%, and Dell's US stocks rose 3.81%, with the company set to join the S&P 500 index. SoundHound AI, an AI language company, held by Nvidia, rose 6.21%, and Super Micro Computer rose 6.06%. Snowflake rose 1.29%, BullFrog AI rose 1.24%, C3.ai rose 0.42%, CrowdStrike remained flat, while Oracle fell 1.35%, with post-market earnings reports showing cloud business driving profits exceeding expectations, resulting in a post-market increase of over 9%.

• China concept stocks rose together. The Nasdaq Golden Dragon China Index closed up 0.69%. Among the ETFs, the China Technology Index ETF (CQQQ) rose 0.26%. The China Internet Index ETF (KWEB) rose 0.36%.

• Among popular China concept stocks, Nio rose 10.96%, Xpeng rose 3.66%, Li Auto rose 3.06%, Vipshop rose 2.08%, Meituan ADR rose 1.4%, New Oriental rose 1.11%, Baidu rose 0.77%, Tencent ADR rose 0.68%, Alibaba rose 0.32%, while Netease fell 0.03%, Bilibili fell 0.07%, Xpeng fell 0.23%, Trip.com fell 0.63%, JD.com fell 0.69%, Pinduoduo fell 0.9%, and Mengniu Dairy ADR fell 0.93%.

• Among other key stocks: (1) Boeing rose 3.36% in US stocks due to reaching a preliminary labor agreement with the union, avoiding the threat of costly strikes. (2) Eli Lilly rose 0.62% in US stocks, appointing a new CFO. (3) HSBC rose 2.03% in US stocks, considering merging its commercial and investment banking units to reduce costs. (4) Applied Digital, a cryptocurrency concept stock invested by Nvidia, rose over 40%.

European stock markets rebounded, with the pan-European Stoxx 600 index ending a five-day decline.

• The pan-European Stoxx 600 index rose more than 1% at one point during the day and ultimately closed up 0.82% at 510.70 points. Travel and leisure stocks led the gains, up 2.18%, while bank stocks rose 1.17%. Among the constituent stocks, Ctrip Group fell as much as 4.3% during the day, marking the largest decline in about seven weeks, and ultimately closed down 2.52%. Barclays analysts downgraded the stock's rating from Equal weight to Underweight.

• The German stock index rose 0.77%. The French stock index rose 0.99%. The Italian stock index rose 0.90%. The Spanish stock index rose 0.89%. The British stock index rose 1.09%. The Netherlands AEX index rose 1.03%.

"Non-farm day after day" The two-year US Treasury yield rose by more than 2 basis points, and the 2/10-year Treasury yield curve ended the inverted position for two consecutive days. Short-term bond yields emerged from a low point in a year and a half, and the basic bond yields hovered near their lowest level in over a year.

• US bonds: At the close of the session, the two-year Treasury yield, which is more sensitive to monetary policy, rose by 2.67 basis points to 3.6729%, with trading ranging from 3.6522% to 3.7081% during the day. The yield on the 10-year benchmark US Treasury note fell by 0.57 basis points to 3.7023%, reaching a daily high of 3.7607% at 16:50 Beijing time, followed by a downward fluctuation, and then hitting a daily low of 3.6892% at 01:21.

• Euro bonds: The yield on the 10-year benchmark German bond in the eurozone fell by 0.4 basis points. The yield on the two-year German bond fell by 1.6 basis points. The yield on the 10-year French government bond rose by 0.3 basis points, while the yield on the 10-year Italian government bond fell by 0.4 basis points.

Expectations of a significant interest rate cut by the Federal Reserve have pulled back, causing the US dollar index to rise by more than 0.4% and continue the bottom rebound after the non-farm day. The Japanese yen against the US dollar fell more than 1% at one point, falling to 144, ending its four-day consecutive rise and moving away from the year-to-date high. The offshore renminbi fell 300 pips at one point, and the market expects the European Central Bank to cut interest rates by 25 basis points on Thursday, reaching a three-week low for the euro.

• US dollar: The US dollar index DXY, which measures against six major currencies, rose by 0.44% to 101.627 points, with a trading range of 101.144-101.696 points during the day, continuing the rebound after the non-farm day; it had previously fallen to 100.514 points on August 27th.

• The Bloomberg Dollar Index rose by 0.27% to 1235.13 points, with a trading range of 1231.06-1236.45 points during the day.

• Yen: The yen against the US dollar fell by 0.60%, to 143.16 yen, with an intraday trading range of 141.96-143.80 yen. A former senior official of the Japanese Financial Services Agency stated that market turmoil has subsided and the Bank of Japan may still raise interest rates by the end of the year.

• Offshore Renminbi: Offshore Renminbi (CNH) against the US dollar fell by 254 points at the closing, to 7.1202 yuan, with overall trading ranging from 7.0845-7.1254 yuan during the session.

• Most cryptocurrencies are trading higher. Bitcoin, the largest market capitalization leader, rose 6.65% at the close, to $57,265. Ether, the second-largest cryptocurrency, rose 8.21% at the close, to $2,352.

Due to the strengthening of tropical storm 'Frances', some oil drilling companies have suspended production. US oil fell to its lowest level in over a year but then rebounded over 1.5%. Brent crude fell to its lowest level in nearly three years but then rebounded over 1.1%. Netherlands natural gas futures rose over 111% in early European trading.

• US oil: WTI October crude oil futures closed up $1.04, an increase of over 1.53%, to $68.71 per barrel. During the morning session, US oil briefly fell more than 0.5% and approached the $67 integer level, but then continued to rise. During the midday session, US oil reached a daily high with a gain of over 1.9% and approached the $69 integer level.

• Brent crude: Brent November crude oil futures closed up $0.78, an increase of about 1.10%, to $71.84 per barrel. During the early European session, Brent crude continued its upward momentum, rising more than 1.6% and breaking through the $72 integer level. However, it later turned downward, and during the early US session, it fell nearly 0.6% and approached the $70.60 level before rebounding and turning positive.

• Wells Fargo's view: Daan Struyven, head of oil research at Goldman Sachs, stated that since early July, the financial demand for oil has decreased by 0.4 billion barrels, equivalent to a reduction of 7 million barrels per day. Goldman Sachs predicts a 20% probability of a recession in the US in the next 12 months, so it believes that a recession is unlikely. OPEC+ will begin to increase production in December, and the price of Brent oil is expected to fluctuate between $70 and $85 per barrel.

• On the news front, the intensifying tropical storm 'Francine' moving north in the Gulf of Mexico has prompted oil drilling companies to evacuate personnel and suspend some offshore oil production. 'Francine' is expected to hit some areas along the Gulf of Mexico coast with strong winds and heavy rain, and is forecasted to become a full hurricane by Wednesday. According to Bloomberg's calculations based on data from the US Bureau of Ocean Energy Management and the National Hurricane Center, the daily production of oil fields intersecting with the storm's expected path is approximately 0.125 million barrels of crude oil and 300 million cubic feet of natural gas.

• Natural gas: US October natural gas futures fell more than 4.61%, to $2.17 per million British thermal units. The TTF Netherlands natural gas futures rose by 2.50%, to 37.260 euros per megawatt-hour. ICE UK natural gas futures rose by 2.19%, to 89.750 pence per kilocalorie.

The expectation of a rate cut by the Federal Reserve next week supported a slight increase in the price of gold, with spot gold hovering around $2500.

• Gold: COMEX December gold futures rose 0.43% in the closing session, to $2535.50 per ounce. In the pre-European trading session, spot gold reversed its earlier gains, dropping to a low of nearly 0.5%, falling below $2490, then continuing to rise. In the afternoon session of the US stock market, it rose by nearly 0.4%, surpassing the $2500 mark, and by the end of the session, spot gold rose by 0.36%, to $2506.38 per ounce, reaching a historical high of $2531.60 on August 20.

• Silver: COMEX December silver futures rose 1.59% in the closing session, to $28.690 per ounce. In the Asian market's afternoon session, spot silver reversed its earlier gains, dropping to nearly 0.8% and approaching $27.70, then continuing to rise. In the afternoon session of the US stock market, it rose by over 1.6%, exceeding $28.30, and by the end of the session, spot silver rose by 1.47%, to $28.3459 per ounce.

• The market has already accepted the greater likelihood of a 25-basis-point rate cut by the Fed in September, and has turned its focus to the CPI and PPI data to be released this Wednesday and Thursday. According to De Casa, an analyst at Kinesis Money, if the inflation data is significantly lower than expected, the expectation of a 50-basis-point rate cut will intensify, and the price of gold may reach a new high. However, even if the market generally expects a 25-basis-point rate cut, the price of gold will not fall significantly, because the Fed is sure to cut rates.

• Most industrial base metals in London rose. Dr. Copper, the economic barometer, rose by over 1.12%, to $9097 per ton. LME Zinc rose $14. LME Nickel rose $10. LME Aluminum rose $8. LME Lead fell $10. LME Tin fell by over 0.66%.

• COMEX copper futures rose 1.64%, to $4.1405 per pound. The price of iron ore fell below $90 per ton for the first time since November 2022.

Editor/Jeffy