Chip manufacturers' selling pressure continued for a second consecutive trading day, putting pressure on global stock markets. Meanwhile, traders are preparing for the upcoming release of financial reports by major Wall Street banks, marking the official entry of the U.S. earnings season into a period of intensive disclosure. As Asian and U.S. tech stocks, which are heavily traded, faced significant selling, investors turned to government bonds as a safe-haven.
As of press time, the Dow Jones futures are up 0.39%, the S&P 500 index futures are down 0.08%, and the Nasdaq futures are down 0.70%. An exchange-traded fund (ETF) that tracks chip stocks performance ( ETF ) is expected to experience its sixth consecutive day of decline.
The MSCI Mingsheng Global Stock Index fell by 0.14%, while the MSCI Asia-Pacific region (excluding Japan) stock index tumbled by more than 2%, dropping to its lowest level since late July, with Asian AI chip manufacturers leading the decline. Storage chip giants Samsung Electronics and SK Hyundai Electronics faced heavy selling pressure, dragging down the Asian stock market benchmark index to its lowest level since August. Since June, the stock prices of both SK Hyundai Electronics and Samsung Electronics have been on the decline.
Over the past four years, with large-scale investments in the AI sector driving corporate profits and economic growth, investors have continued to chase the AI craze. However, concerns about excessive investment concentration in the market and whether such substantial capital expenditures can generate sufficient returns in a timely manner have also persisted. As one of the core markets for global AI prosperity, South Korea's composite stock price index (KOSPI) tumbled by more than 5%, recording the largest single-day decline since mid-August.
The decline in oil prices and bond yields alleviated market pressures, driving the European Stoxx 600 index up by 0.7% to reach a one-week high.
AI The trading pressure is increasing.
A key area of artificial intelligence ( AI ) trading is facing increasing pressure. As concerns over AI security issues continue to rise, and signs of tightening financing become apparent, traders are re-evaluating whether the current pace of expansion in AI investments can be sustained. However, the market's optimistic expectations that strong corporate profits will support the overall stock market have, to some extent, offset the negative impact of the sell-off in technology stocks.
UBS Group’s Wolf von Rotberg indicates that ‘storage chip stocks are under increasing competitive pressure, and at the same time, more and more industry insiders are beginning to warn about the risk of a AI bubble.’ He added, ‘As trading volatility in technology stocks increases, it has become more important than ever for hyperscalable cloud service providers to confirm their capital expenditure guidance.’
Barclay Private Bank's Chief Market Strategist Julien Lafargue stated: "The market is increasingly realizing that the chip industry, especially in the field of memory chips, is ultimately still a cyclical industry."
He added, "Investors may have previously thought that this industry would not be significantly impacted in the coming years. However, news that emerged overnight suggests that this time frame may need to be shortened, and competition could become more intense as early as next year."
U.S. stock company financial reports are here!
Meanwhile, as Citigroup, Goldman Sachs, JPMorgan Chase, and Wells Fargo released their financial reports before the opening of U.S. stock markets, shares of major U.S. banks have clearly entered a technical correction phase. The bank index has fallen by about 12% from its mid-August high, exceeding the usual 10% threshold considered a technical correction. KBW
Previously, severe fluctuations in the bond market continued to impact bank stocks, with U.S. Treasury yields rising to their highest levels in decades. At the same time, banks also need to deal with the effects of high interest rates on credit card loans, mortgage loans, and auto loan businesses.
UBS's von Rotberg indicates that "the quality of the loan portfolio, capital market business activities, and trading performance will become a focal point of high market attention, as all three areas may show weakness." He pointed out, "The bank must prove that loan growth remains strong and net interest income continues to rise in order to reverse the recent trend of declining stock prices."
Looking at the broader market, data compiled by Bloomberg Industry Research shows that profits of companies comprising the S&P 500 index are expected to grow by 25% year-on-year in the third quarter. However, Linh Tran believes that since market expectations are already at a high level, merely achieving profit growth may not be sufficient to drive stock prices higher further.
Tran indicates: 'Investors will pay more attention to the extent to which a company's actual performance exceeds expectations, as well as whether the company can maintain its growth momentum. All of these factors will be reflected in revenue, profit margins, and the business outlook for the coming quarters.'
Bond yields tend to stabilize.
The global bond market generally saw significant gains. French government bonds performed particularly well, with the yield spread between French 10-year government bonds and German bonds of the same maturity narrowing by about 4 basis points to below 140 basis points.
The yield on the U.S. benchmark 10-year Treasury note has dropped to 5.193%, moving further away from the high of 5.364% reached last week. Previously, this yield had risen to its highest level in 24 years.
In the past few weeks, the inflationary pressures caused by high energy prices, combined with market concerns about the continuous expansion of government debt, have triggered multiple rounds of selling in the bond market, pushing borrowing costs in many global economies to levels not seen in decades.
Shengbao Bank's Chief Investment Strategist Charu Chanana stated that after the recent significant rise in U.S. Treasury yields, investors have begun to repurchase U.S. Treasuries again. However, she believes that this is more of a "tactical rebound."
She stated, "Inflation stickiness, high oil prices, and the government's large-scale borrowing remain the main obstacles to a sustained recovery in the bond market."
Follow CPI in the United States
Traders are awaiting the U.S. inflation data to be released on Wednesday in search of clues regarding the future monetary policy path of the Federal Reserve. Tools from the CME Group ( CME ) FedWatch indicate that the market currently expects a 80.6% probability that the Fed will keep interest rates unchanged at a meeting later this month, up from 51% a month ago.
In terms of oil prices, Brent crude oil ended its upward trend that lasted for three consecutive trading days. Traders were assessing the energy supply risks brought about by the attack on Saudi Arabia while weighing the possibility of Russia increasing diesel supplies, which led to a decline in international oil prices. Brent crude oil futures fell by 1.7% to $104.78 per barrel, slightly below the two-week high reached on the previous trading day.
As the yields on U.S. Treasury bonds and oil prices both fell, the U.S. dollar saw its first decline in a week.
Wall Street giants such as Goldman Sachs and Morgan Stanley are optimistic about the prospects for a rebound in U.S. Treasury bonds.
After weeks of selling that pushed U.S. Treasury yields to multi-year highs, Wall Street strategists have begun to re-evaluate the investment value of U.S. bonds.
Institutions such as Goldman Sachs, Morgan Stanley, and Citibank believe that as the yield on U.S. Treasury bonds rises significantly, the attractiveness of bond valuations is increasing. However, there are still clear disagreements among these institutions regarding the future interest rate path of the Federal Reserve and the timing of a rebound in U.S. Treasury bonds.
Goldman Sachs believes that signs of pressure are beginning to emerge in the credit market, and coupled with improvements in investors' position structures and technical market risks, these factors could create conditions for a rebound in U.S. Treasury bonds.
Citi, on the other hand, has a greater preference for short-term U.S. Treasury bonds. The bank's strategists stated that with inflation slowing down and wage growth weakening, it is unlikely that the Federal Reserve will raise interest rates to their highs in 2023.
Morgan Stanley also believes that U.S. Treasury yields are now attractive, but at the same time advises investors to wait until after the Federal Reserve's interest rate meeting this month and the U.S. mid-term elections before considering entering the market.
Is the Fed's interest rate cut signal hidden in Walmart's stock price? This indicator sounds the recession alarm once again.
Analysis by Jim Paulson, the former Leuthold Group Chief Investment Strategist, shows that Walmart's stock performance lagged from May to August 2026. However, since August, Walmart's stock has outperformed the S&P Global Luxury Goods Index by about 21%, and it has also risen by approximately 8% from its low point in late August.
Paulson believes that this relative change in performance indicates that consumers may once again tighten their budgets, which means that the U.S. economy is losing momentum. A weak economy in the future could force the Federal Reserve to revert to loose policies. However, if rising energy prices continue to drive up overall inflation, or if corporate investment and consumer demand remain strong, policymakers may continue to maintain a tight stance.
In addition, the historical performance of this indicator has also attracted market attention. According to Paulson's analysis, the "Wal-Mart decline signal" has risen significantly before each of the past four economic recessions, and similar changes have occurred before the start of each Federal Reserve easing cycle since 1990.
Focus on Individual Stocks
Dragged down by the decline in the South Korean stock market, coupled with Micron's plan to launch a new generation of more powerful chips by the end of 2026, concerns about the valuation of memory chips have risen, leading to an overall decline in the memory chip sector. SK Samsung Electronics, SKHY Western Digital, and STX Seagate Technology, which are listed on the US stock market, all saw declines of over 5%; MU Micron Technology fell by 3.7%; and SNDK Sandisk fell by 4.6%.
JPMorgan Chase raised its forecast for annual net interest income, and its stock price rose by nearly 1%. However, the company's third-quarter earnings and revenue fell short of analysts' expectations, which limited the increase in the stock price.
Bank of America's third-quarter performance was mixed, with the stock price falling by 1.1%. Earnings per share were $1.87, higher than the $1.85 forecast given by Reuters ( LSEG ); revenue was $21.87 billion, lower than the market expectation of $22.3 billion.
Goldman Sachs reported revenue of $18.68 billion for the third quarter, exceeding Refinitiv's forecast of $16.71 billion, and its stock price rose by 2.8%.
Johnson & Johnson's third-quarter performance exceeded expectations. Adjusted earnings per share were $2.59, with revenue at $25.4 billion; analysts from Reuters Research expected earnings per share of $2.54 and revenue of $25.28 billion. Despite the positive results, the stock still fell by more than 2%.
Domino's third-quarter performance failed to impress investors, with the stock price falling by nearly 3%. Although earnings per share and revenue both exceeded analysts' expectations, same-store sales in the United States only increased by 0.3%, in line with the market expectations of FactSet.
Syndax Pharmaceutical announced that the phase II clinical trial of its antibody drug axatilimab for the treatment of idiopathic pulmonary fibrosis did not meet the primary endpoint, causing the stock price to plummet by 14%. Syndax Research and development director Nick Botwood stated in a statement: "The clinical trial did not achieve the primary endpoint. Given the very optimistic preliminary scientific evidence for this drug in treating idiopathic pulmonary fibrosis ( IPF ), we are disappointed with this result."
According to a report from Cobb County Police, a roller coaster safety incident occurred at a park in Georgia, resulting in a 7% decline in attendance at Six Flags amusement park.
UnitedHealth Group announced financial results that exceeded analysts' expectations, with its stock price soaring by 2%. After adjustment, earnings per share were $4.69, and revenue amounted to $112.69 billion; according to Reuters, analysts expected earnings per share to be $4.14 and revenue to be $111.4 billion.
Responsible Editor: Guo Mingyu
