Source: Wall Street See

U.S. debt and deficit risks are rising. At the same time, strong economic performance is weakening the expectations of a Fed rate cut. The 'Trumpflation' factor is prompting the market to consider rate cut expectations, especially for next year. The yield on the 10-year U.S. Treasury bond surged to 4.26%, and the U.S. dollar index also approached 104.6, both soaring to three-month highs. European and American stock markets, commodities, cryptocurrencies, and non-U.S. currencies are under pressure.

Although the Fed's Beige Book showed a slight dovish tone on the economic situation during trading hours, the US economy is still slowing down, with inflation remaining modest. This led to a small recovery in US stocks, but failed to rescue the slump. The Nasdaq fell by more than 2% at one point, leading the decline.

The Governor of the Bank of England, Bailey, stated that due to inflation falling faster than expected, the Bank of England may cut interest rates again in November and December. If inflation continues to improve, the rate cut may be 'more aggressive'. The Bank of Canada made a significant 50 basis point rate cut as scheduled. ECB policymakers are divided on whether to make a major rate cut in December, with President Lagarde urging caution.

On Wednesday, October 23, due to the weak performance of Apple and Nvidia stocks, investors sold off tech stocks, chip stocks, and AI concept stocks, dragging down the Nasdaq, which fell nearly 2.3% at one point. The Dow and S&P indices both dropped by about 1% and experienced a three-day decline. The Dow plunged 400 points, the largest drop since early September. Most sectors saw declines, with consumer discretionary and technology sectors leading the losses. Only real estate and utilities sectors, which have 'safe-haven' characteristics, increased. McDonald's fell 5.12% due to a serious E. coli infection incident, dragging the Dow down by nearly 632 points, and Chinese concept stocks also fell, with New Oriental down by 8.42%.

• US stocks dropped across the board. The S&P 500 index fell by 53.78 points, or 0.92%, to 5797.42 points. The Dow, closely related to the economic cycle, fell by 409.94 points, or 0.96%, to 42514.95 points. The Nasdaq, dominated by technology stocks, fell by 296.48 points, or 1.60%, to 18276.65 points. The Nasdaq 100 index fell by 1.55%. The Nasdaq Technology Market Cap-weighted index (NDXTMC) tracking the performance of Nasdaq 100 technology stocks fell by 1.89%. The Russell 2000 small-cap index, more sensitive to the economic cycle, fell by 0.79%. The VIX fear index rose by 5.71% to 19.24.

  
  

• Most US industry ETFs closed lower. Utility ETFs rose by nearly 1%, global aviation ETFs rose by less than 0.5%. However, consumer discretionary ETFs, internet index ETFs, and global technology stock ETFs all fell by over 1.5%, technology industry ETFs, biotechnology index ETFs, and semiconductor ETFs each fell by at least 1%, energy sector ETFs and healthcare ETFs each fell by around 0.5%.

  
  

• The 11 sectors of the S&P 500 index declined more than they rose. The consumer discretionary sector fell by 1.82%, the information technology/technology sector fell by 1.68%, the telecommunications sector fell by 1.37%, the energy sector fell by 0.48%, the healthcare sector fell by 0.46%, the materials sector fell by 0.35%, the industrial sector fell by 0.30%, the consumer staples sector fell by 0.12%, the financial sector fell by 0.12%, the utilities sector rose by 1.01%, and the real estate sector rose by 1.02%.

• The 'Seven Sisters of Technology' all declined. Tesla fell by 1.98%, with third-quarter EPS increasing by 9% instead of decreasing, Cybertruck achieving its first positive gross margin, surging over 10% in after-hours trading. Elon Musk stated that Cybercab will be mass-produced in 2026 with a target of 2 million vehicles per year. He reiterated expectations to deliver more affordable models in the first half of 2025 with a projected 20%-30% growth in vehicle deliveries for 2025. Musk also called on the US federal government to approve the use of autonomous vehicles. Apple initially dropped over 3.4% and closed down at 2.16% later. Reports indicated a significant reduction in Vision Pro headsets production, with analyst Ming-Chi Kuo mentioning a decrease of about 10 million orders for the iPhone 16 over three quarters. Apple is expected to release the first batch of AI features and Mac computers with M4 chips next week. Nvidia dropped by 2.81%, Amazon by 2.63%, Google A by 1.43%, 'Metaverse' Meta by 3.15%, and Microsoft by 0.68%.

• Most chip stocks declined. The Philadelphia Semiconductor Index fell by 1.14% to 5131.37 points. The SOXX industry ETF fell by 0.89%; Nvidia's two times long ETF fell by 5.61%. AMD fell by 0.77%, Intel by 1.88%, Broadcom by 3.27%, Micron Technology by 2.57%, Applied Materials by 0.16%, KLA Corp by 0.81%, Qualcomm by 3.8%, Arm Holdings by 6.67%, ASML holding ADR by 1.7%, while Taiwan Semiconductor ADR rose by 1.2% and ON Semiconductor rose by 2.15%.

• AI concept stocks collectively declined. BullFrog AI closed down 1.77%, SoundHound AI, in which Nvidia is a shareholder, fell by 5.5%, BigBear.ai fell by 6.43%, C3.ai fell by 3.17%, CrowdStrike fell by 2.99%, Dell Technologies fell by 0.76%, Snowflake fell by 1.64%, Super Micro Computer fell by 1.33%, Serve Robotics fell by 6.51%, Oracle fell by 1.26%, and Palantir fell by 0.82%.

• Most Chinese concept stocks fell. The Nasdaq Golden Dragon China Index fell by 1.2%. In ETFs, the China Technology Index ETF (CQQQ) fell by 1.85%, the Chinese internet concept ETF (KWEB) fell by 1.38%, the FTSE China 3x Bull ETF (YINN) fell by 0.98%, the FTSE China 3x Bear ETF (YANG) rose by 0.85%. The 'Chinese Dragon' ETF RONDHL CHINA ETF (DRAG) fell by 0.45%. The FTSE A50 index futures continued to fall by 0.68% in overnight trading, closing at 13565.000 points.

• Other key individual stocks: (1) McDonald's (MCD) closed down by 5.12%, leading the Dow component stocks lower. (2) Lam Research (LRCX) reported first-quarter adjusted EPS, revenue, and performance guidance higher than expected, rising more than 5.7% after hours. (3) Las Vegas Sands reported third-quarter revenue below expectations, announced a $2 billion share buyback, and rose by over 3.6% after declining by 2% in post-market trading. (4) Kaiser Aluminum reported third-quarter revenue of $0.748 billion, lower than analyst expectations, and expressed caution about the short-term outlook, falling by over 1.1% after hours. (5) IBM's third-quarter revenue of $14.97 billion fell short of analysts' expectations, dropping by over 7.6% after hours. (6) Most solar concept stocks fell, with SolarEdge down by 14.99% and photovoltaic inverter supplier Enphase Energy down by 14.92%.

Most European stock indices and sectors experienced declines:

• The STOXX 600 index in Europe fell by 0.30% to 518.84 points. The STOXX 50 index in the Eurozone fell by 0.34%, the FTSE All-World 300 index fell by 0.21%. Most sectors declined, with many companies releasing financial reports on Wednesday, and Deutsche Bank's Q3 quarterly profit recovery exceeding expectations.

• The DAX 30 index in Germany fell by 0.23%, the CAC 40 index in France fell by 0.50%, the AEX index in the Netherlands fell by 0.82%, the FTSE MIB index in Italy fell by 0.10%, and the FTSE 100 index in the UK fell by 0.58%.

• In terms of investment strategies, Barclays analysts believe that if Trump wins the US election, potential trade tariff issues may reduce the earnings per share growth of European companies by a few percentage points. The stock prices of European export companies have already factored in the risk of Trump possibly imposing tariffs.

  
  

Both European and American bonds declined, with US bond yields rising across the board. The 10-year US bond yield once rose above 4.26%, reaching a three-month high, while UK bond yields generally rose by more than 2 basis points, and 2-year German bond yields surged over 7 basis points:

• US Bonds: At the close, the yield on the 10-year US benchmark Treasury rose by 3.80 basis points to 4.2456%. The 2-year US bond yield rose by 4.55 basis points to 4.0779%, trading at a two-month high.

• Eurozone Bonds: At the close, the 10-year German bond yield dropped by 1.4 basis points to 2.304%, reaching a daily high of 2.331% at 22:26 Beijing time. The 10-year UK bond yield rose by 3.4 basis points to 4.200%, and the 2-year yield rose by 2.3 basis points.

• In terms of investment strategies, Goldman Sachs believes that European bonds are more attractive than American bonds, especially the 10-year German government bond. Vanguard analysts state that due to the strong resilience shown by the US labor market and consumers, the Federal Reserve is unlikely to cut interest rates quickly, while the European Central Bank may further lower rates amid slowing economic growth. We are positioning for US government bonds to underperform and European government bonds to outperform.

The U.S. dollar index rose more than 0.3% to near a three-month high, the yen fell more than 1% and for the first time in three months dropped below 153, offshore renminbi fell again below 7.14 yuan before recovering losses. Bitcoin fell over 1% to below 67,000 dollars:

• Dollar: The DXY dollar index rose 0.32% at the close, to 104.407 points, with an intraday trading range of 104.090-104.570 points. Bloomberg's USD index rose 0.20% to 1260.39 points, with an intraday trading range of 1257.41-1263.41 points.

• Non-U.S. currencies: The euro fell 0.14% against the U.S. dollar, to 1.0784; the pound fell 0.45% against the U.S. dollar, the U.S. dollar rose 0.11% against the Swiss franc; among commodity currencies, the Australian dollar fell 0.68% against the U.S. dollar, the New Zealand dollar fell 0.61% against the U.S. dollar, and the U.S. dollar rose 0.12% against the Canadian dollar. The Swedish Krona rose 0.42% against the U.S. dollar, and the Norwegian Krone rose 0.66% against the U.S. dollar.

• Yen: The yen fell 1.07% against the U.S. dollar at the close, to 152.69, with an intraday trading range of 151.03-153.19 yen. The euro rose 0.93% against the yen, to 164.66 yen; the pound rose 0.69% against the yen, to 197.367 yen.

• Haruhiko Kuroda, the Governor of the Bank of Japan, stated that the Bank of Japan will continue to implement a relatively loose monetary policy. The Bank of Japan hopes to raise inflation expectations to a new level, and the tight labor market in Japan has a positive impact on wage growth.

• Offshore Chinese Yuan (CNH): The offshore Chinese Yuan fell 1 point against the US Dollar in the final trading, closing at 7.1358 yuan, with overall trading range between 7.1335-7.1467 yuan during the session.

• Cryptocurrencies: The largest cryptocurrency Bitcoin dropped by 1.29% in the final trading session, reaching $66,620.00. The second largest Ethereum fell by 4.78%, at $2,511.00.

The US Dollar rose to its highest since the end of July, with US EIA crude oil inventories increasing more than expected, putting pressure on oil prices. US crude oil fell more than 1.3%, ending a two-day rally. Investors continue to closely monitor the situation in the Middle East, and US oil is still up more than 2.2% this week.

• US Oil: WTI December crude oil futures closed down $0.97, a 1.35% drop, at $70.77 per barrel. US oil maintained a downward trend throughout the day, with European stocks at their lowest falling by over 2.2%, putting pressure below $70.

• Crude oil: Brent crude oil futures for December fell by $1.08, a decrease of 1.42%, to $74.96 per barrel. Crude oil maintained a downward trend throughout the day, with European stocks falling more than 2.1% to pressure below $74.40.

• On the news front, according to the US Energy Information Administration (EIA) data, US crude oil inventories increased by 5.474 million barrels last week, with Bloomberg users expecting an increase of 1.8 million barrels and analysts expecting an increase of 0.72867 million barrels, compared to a decrease of 2.191 million barrels the previous week. According to CCTV News, sources said that Israel is considering a two-week ceasefire with Hamas. The Israeli security cabinet has discussed this proposal, but has not yet approved it. It is currently unclear whether Hamas is willing to accept the ceasefire proposal. According to Xinhua News Agency, Hezbollah in Lebanon has stated on the 22nd that they will continue to attack Israeli Prime Minister Benjamin Netanyahu. During the ongoing conflict, Hezbollah will not negotiate with Israel and attacks on Israel are increasing, causing 'significant losses' to the Israeli army. IG market strategist Yeap Jun Rong stated that it is expected that the ceasefire agreement may stall and the Middle East conflict could last longer.

• Natural gas: NYMEX November natural gas futures closed up 1.34% at $2.3420 per million British thermal units.

Supported by safe-haven demand triggered by the US election and tensions in the Middle East, spot gold approached $2,760 intraday, hitting a historical high for five consecutive days. Subsequently, the rise in the US dollar and US bond yields led to a reversal in the upward trend of precious metals. Spot gold dropped 1.2% in late trading, struggling to hold above $2,700, while spot silver fell over 3%, bidding farewell to its highest level in twelve years.

• Gold: COMEX December gold futures fell by 1.09% to $2,729.70 per ounce at the close, rising to $2,772.60 per ounce intraday to hit a historical high, then quickly fell to a daily low of $2,722.10. In early European trading, spot gold rose more than 0.3% to $2,758.49, hitting a historical high, then sharply reversed. In early US trading, it fell nearly 1.5% to approach $2,700, ending the session down 1.21% at $2,715.82 per ounce.

• Silver: COMEX December silver futures fell by 3.28% at the close, to $33.890 per ounce. Spot silver maintained a downward trend throughout the day, with early US trading seeing a drop of nearly 4.1% to approach $33.40, ending the session down 3.32% at $33.6990 per ounce.

• Regarding the news, RJO Futures senior market strategist Haberkorn stated that due to some investors taking profits and the trend of rising US bond yields, the increase in the price of gold is limited. However, due to safe-haven demand, gold prices could rise to $2,800 per ounce this weekend. Both the US dollar index and US bond yields hovering near a three-month high have suppressed gold prices. Ole Hansen, head of commodity strategy at Saxo Bank, stated that due to uncertainty in the US election and increased US debt burden, they had to issue billions of dollars in bonds to the market, which is relatively thin and tense towards the election. Kinesis Money report indicates that the current gold/silver ratio is around 80, implying that as gold prices rise, silver tends to benefit as well.

• London industrial metals saw mixed movements: London copper fell by $62, a decrease of over 0.64%, to $9,522 per ton. London aluminum rose by $36, up more than 1.36%, to $2,670 per ton. London zinc rose by $6, to $3,144 per ton. London lead fell by $6, to $2,063 per ton. London nickel fell by $8, to $16,308 per ton. London tin fell by $1, to $30,906 per ton, while London cobalt remained flat at $24,300 per ton.

• COMEX copper futures fell by 1.08%, to $4.3330 per pound.

Editor / jayden