Pre-market: Nasdaq futures fell 0.93%, TSMC led the decline in chip stocks
It announced strong earnings performance and raised its sales outlook, but it fell 4.6% instead of rising, failing to push the technology sector to continue to rise. Stocks continued a cautious trend across most asset classes as traders assessed whether corporate earnings would be enough to support further gains in artificial intelligence trading, while uncertainty over the situation in the Middle East continued to simmer. As of press time, Dow futures were up 0.17%, S&P 500 futures were down 0.26%, and Nasdaq futures were down 0.93%. Companies reporting results today include The Stoxx Europe 600 index fell 0.4%. Technology sector bulls are still struggling to resist downward pressure as ASML (ASML) gains in Amsterdam. However, this gain was offset by drag from other sectors, with utilities and telecoms falling 0.5% to 1% each. Although Taiwanese chip giant TSMC announced outstanding results, South Korea's KOSPI index still fell 6%. The index once doubled in the first half of this year, but has plummeted by nearly 20% this month. Market concerns about the sustainability of the AI market continue to rise. AI trading faces valuation test The dominant role chipmakers have played in this year's stock market rally is increasingly being challenged, with traders grappling with lofty stock valuations and wondering whether artificial intelligence superscalers are building more capacity than is actually needed. Investors are also looking for investment opportunities within artificial intelligence transactions, hoping to move to areas that can benefit from the construction of global AI infrastructure but at more attractive prices. Richard Flynn, managing director of Charles Schwab UK, said: "Market concentration has been very high, which means there is little room for error. Global geopolitical risks are rising, so from a macro perspective, the overall tone of the market is biased towards caution." While stocks related to chipmaking were broadly lower in U.S. premarket trading, previously lagging technology stocks such as software stocks attracted buying. Among the "Big Seven" large technology companies, Alphabet led the gains. Toni Meadows, investment director at BRI Wealth Management, said: "There has been a lot of rotation within AI trading, and there has been some small-scale rotation in the broader market. A consolidation can be a healthy thing. The further the market goes, the easier it is for valuations to become stretched, and the subsequent market reaction will be more violent." South Korean chip stocks plummet, leveraged ETFs attract regulatory attention The one exception to Thursday's sluggish trading was the Seoul market in South Korea, where the KOSPI index fell sharply again as chip heavyweights saw sharp swings. South Korean regulators have announced a temporary halt to the launch of new single-stock leveraged exchange-traded funds (ETFs). Many market participants had previously argued that such products exacerbated market volatility because they required daily rebalancing transactions in order to maintain the proportion of returns they promised. Conflict in the Middle East escalates, oil prices remain high Brent crude oil prices remained above $84 a barrel, up about 11% so far this week, after the United States attacked Iran for a fifth day and hit a sanctioned oil tanker near Iran's main export terminal. U.S. officials say President Trump is considering further escalating U.S. military action against Iran. "While tanker traffic continues with U.S. assistance, the escalation threatens shipping routes that have previously helped the UAE and other Gulf oil producers keep crude flowing during supply disruptions," said Soojin Kim, an analyst at MUFG. "It's hard not to look at the Iran war, Trump's tweets and oil price movements as these factors could have a significant impact on global interest rates," said Marlborough fund manager James Athey. He added: "There is still a lot of volatility in the stock market. The market is still a little confused, or still trying to find a better way to judge the value of AI trading and whether this upward trend can be sustained." Additionally, SpaceX stock fell below its initial public offering price for the first time on Wednesday. Athey said the situation also further weakened market sentiment.
U.S. Treasury bonds edged lower, with the 10-year U.S. Treasury yield rising 2 basis points to 4.57%, after falling 7 basis points in the previous two trading days. The 2-year U.S. Treasury bond yield rose 2 basis points to 4.1514%, after falling 14 basis points in the previous two trading days. However, European bond markets behaved differently. The yield on Germany's 10-year government bonds, the euro zone's benchmark, rose 1 basis point to 3.13% on Thursday, the highest level since May 20. The yield is up 9 basis points so far this week and has risen 26 basis points since July. The reason is that traders are worried that renewed increases in oil and natural gas prices may force the European Central Bank to adopt more aggressive interest rate hikes and may also drag down long-term economic growth. UK 10-year government bond yields hit 5% again on Tuesday. Felix Vezina-Poirier, strategist at BCA Research, said: "The cooling of U.S. PPI is consistent with the recent trend of lower-than-expected inflation data, which is a positive signal for the Fed. We have passed the peak of hawkish policy." The dollar was little changed after the dollar index fell 0.4% on Wednesday to its lowest level since June 18. U.S. wholesale inflation data, which had been lower than expected, further showed that price pressures are easing. The U.S. producer price index (PPI) fell by 0.3% in June, and the market had expected it to maintain zero growth. The data follows consumer inflation data released on Tuesday, which again showed inflation cooled more than expected in June. Meanwhile, Federal Reserve Chairman Kevin Warsh refuted the idea that AI investments could lead to persistent inflation in his second day of congressional testimony on Wednesday. Sterling retreated from a two-month high hit on Wednesday. There were previous reports that Andy Burnham, who is about to become British Prime Minister, may appoint Shabana Mahmood, who has a conservative fiscal stance, as Chancellor of the Exchequer. Figures released on Thursday highlighted the challenges they will face. Data showed that the British economy only achieved a weak growth of 0.1% in May, in line with the average expectation of economists polled by Reuters. Sanjay Raja, chief UK economist at Deutsche Bank, said the UK economy was likely to remain at the top of the G7 growth rankings between April and June. "In short, the prime minister is handing over the economy to his successor on a significantly improved economic footing," he said. JPY/USD is hovering around 162.16, not far from a 40-year low of 162.84. As the market continues to worry about the Japanese government's possible exchange rate intervention, speculators remain cautious about the trend of the yen. Bitcoin and gold both fell Bitcoin fell 0.4% to $64,667. Bitcoin had previously risen to $65,524 on Wednesday. Zaye Capital Markets analyst Naeem Aslam said: “The $65,000 to $66,000 area remains an important resistance area, which means that Bitcoin still needs continued spot demand and stronger institutional capital inflows to turn the breakthrough into a sustained upward trend rather than a short-term position adjustment market.” Gold is expected to record its first decline in three consecutive days, approaching the 4,000 mark again. Analysts at Mitsubishi UFJ Financial Group said: "The short-term trend of gold will depend on a key factor: whether higher oil prices will be transmitted to U.S. inflation, or whether this is just a temporary geopolitical shock. The market is paying close attention to the Fed's response." After two consecutive days of lower-than-expected inflation data and traders lowering expectations for an interest rate hike by the Federal Reserve this year, June retail sales data will become the focus of the market to judge the economic resilience of U.S. consumers. Extreme optimism turns into a shackles? The perfect "Goldilocks" has arrived, but the U.S. stock market cannot rise. Bullish stock market investors have been intoxicated by the "Goldilocks" scenario, and risk appetite has been pushed to extremely high levels, making it increasingly difficult to judge where the market's next upward momentum will come from.
Richard Privorotsky, a partner at the group, said: "Whether the stock market can continue its rally will ultimately depend on guidance and positioning levels, rather than the headlines themselves. Energy remains a key macro risk, but for now, the inflation environment is improving." Privorotsky pointed out that there is a high probability that this financial reporting season will deliver good results. The banking industry has basically crossed the performance threshold, while ASML (ASML.US)'s financial report shows that demand for semiconductor capital expenditures remains healthy. "As with most AI-related stocks, the question is no longer limited to the data itself, but whether the data is bright enough relative to current positions," he added. Posted this week Fund manager surveys show that the proportion of cash holdings among professional investors has fallen to extremely low levels, while the bank's "bull and bear indicator" has also released warning signals. In addition, data from Deutsche Bank shows that systemic strategies are currently extremely overweight, leaving little room for further incremental buying. The positions of trend-following CTAs in stocks have been pushed to the upper edge of the historical range and are at the 72nd percentile; while the positions of volatility control funds are even more extreme and are already at the 91st percentile. Health insurance giant UnitedHealth Group reported second-quarter results that beat market expectations and rose more than 7% in premarket. The company had adjusted earnings of $6.38 per share on total revenue of $112.03 billion. Analysts surveyed by Refinitiv ( LSEG ) had expected earnings of $4.90 per share and revenue of $110.85 billion. UnitedHealth also raised its full-year profit guidance. Taiwan Semiconductor Manufacturing Co. fell 4%. Although TSMC's second-quarter profit was better than expected, the company raised its full-year capital expenditure range to US$60 billion-64 billion from the previous guidance of US$52 billion-56 billion (the upper end of the range). Businesses also announced an additional $100 billion in investment in Arizona. Atai Beckley's stock price soared 34.5% after the pharmaceutical company announced a $2.8 billion acquisition of psychedelic drug developer Atai Beckley. The cash consideration for the acquisition is $6.75 per share, a 26% premium to the stock's closing price of $5.36 on Wednesday. Eli Lilly will also pay up to an additional $2.50 per share if AtaiBeckley's drug reaches certain development approval milestones. GE Aerospace's second-quarter profit and revenue exceeded expectations, but its stock price still fell 4%. GE Aviation had adjusted earnings of $2.02 a share on revenue of $12.63 billion; analysts at Refinitiv expected earnings of $1.86 a share on revenue of $11.86 billion. The company simultaneously raised its full-year performance guidance. United Airlines shares fell more than 3% despite earnings beating estimates. The company gave weaker-than-expected third-quarter guidance, predicting earnings of $2.50–$3.50 per share, compared with FactSet analysts’ expectations of $3.53. United also said fuel costs would increase by an additional $6 billion. J.B. Hunt Transport Services jumped nearly 7%. Refinitiv data showed that the company earned $1.73 per share, $0.18 higher than analysts' expectations; revenue of $3.5 billion was basically the same as market expectations of $3.25 billion. Management said demand for intermodal transportation business continued to pick up during the quarter. Raymond James Investment Bank upgraded AeroVironment's rating from "neutral" to "outperform," pushing the stock price up nearly 2%. The agency said that order volume in the aviation environment is recovering and the backlog of orders to be delivered is expected to continue to grow. Rocket Companies raised its price target to $19 and maintained a "buy" rating, sending shares of the fintech platform up 2%. The new price target represents room for a 30% upside from the stock's Wednesday closing price. Open a futures account on Sina's cooperative platform, safe, fast and guaranteed
U.S. Treasury bonds edged lower, with the 10-year U.S. Treasury yield rising 2 basis points to 4.57%, after falling 7 basis points in the previous two trading days. The 2-year U.S. Treasury bond yield rose 2 basis points to 4.1514%, after falling 14 basis points in the previous two trading days. However, European bond markets behaved differently. The yield on Germany's 10-year government bonds, the euro zone's benchmark, rose 1 basis point to 3.13% on Thursday, the highest level since May 20. The yield is up 9 basis points so far this week and has risen 26 basis points since July. The reason is that traders are worried that renewed increases in oil and natural gas prices may force the European Central Bank to adopt more aggressive interest rate hikes and may also drag down long-term economic growth. UK 10-year government bond yields hit 5% again on Tuesday. Felix Vezina-Poirier, strategist at BCA Research, said: "The cooling of U.S. PPI is consistent with the recent trend of lower-than-expected inflation data, which is a positive signal for the Fed. We have passed the peak of hawkish policy." The dollar was little changed after the dollar index fell 0.4% on Wednesday to its lowest level since June 18. U.S. wholesale inflation data, which had been lower than expected, further showed that price pressures are easing. The U.S. producer price index (PPI) fell by 0.3% in June, and the market had expected it to maintain zero growth. The data follows consumer inflation data released on Tuesday, which again showed inflation cooled more than expected in June. Meanwhile, Federal Reserve Chairman Kevin Warsh refuted the idea that AI investments could lead to persistent inflation in his second day of congressional testimony on Wednesday. Sterling retreated from a two-month high hit on Wednesday. There were previous reports that Andy Burnham, who is about to become British Prime Minister, may appoint Shabana Mahmood, who has a conservative fiscal stance, as Chancellor of the Exchequer. Figures released on Thursday highlighted the challenges they will face. Data showed that the British economy only achieved a weak growth of 0.1% in May, in line with the average expectation of economists polled by Reuters. Sanjay Raja, chief UK economist at Deutsche Bank, said the UK economy was likely to remain at the top of the G7 growth rankings between April and June. "In short, the prime minister is handing over the economy to his successor on a significantly improved economic footing," he said. JPY/USD is hovering around 162.16, not far from a 40-year low of 162.84. As the market continues to worry about the Japanese government's possible exchange rate intervention, speculators remain cautious about the trend of the yen. Bitcoin and gold both fell Bitcoin fell 0.4% to $64,667. Bitcoin had previously risen to $65,524 on Wednesday. Zaye Capital Markets analyst Naeem Aslam said: “The $65,000 to $66,000 area remains an important resistance area, which means that Bitcoin still needs continued spot demand and stronger institutional capital inflows to turn the breakthrough into a sustained upward trend rather than a short-term position adjustment market.” Gold is expected to record its first decline in three consecutive days, approaching the 4,000 mark again. Analysts at Mitsubishi UFJ Financial Group said: "The short-term trend of gold will depend on a key factor: whether higher oil prices will be transmitted to U.S. inflation, or whether this is just a temporary geopolitical shock. The market is paying close attention to the Fed's response." After two consecutive days of lower-than-expected inflation data and traders lowering expectations for an interest rate hike by the Federal Reserve this year, June retail sales data will become the focus of the market to judge the economic resilience of U.S. consumers. Extreme optimism turns into a shackles? The perfect "Goldilocks" has arrived, but the U.S. stock market cannot rise. Bullish stock market investors have been intoxicated by the "Goldilocks" scenario, and risk appetite has been pushed to extremely high levels, making it increasingly difficult to judge where the market's next upward momentum will come from.
Richard Privorotsky, a partner at the group, said: "Whether the stock market can continue its rally will ultimately depend on guidance and positioning levels, rather than the headlines themselves. Energy remains a key macro risk, but for now, the inflation environment is improving." Privorotsky pointed out that there is a high probability that this financial reporting season will deliver good results. The banking industry has basically crossed the performance threshold, while ASML (ASML.US)'s financial report shows that demand for semiconductor capital expenditures remains healthy. "As with most AI-related stocks, the question is no longer limited to the data itself, but whether the data is bright enough relative to current positions," he added. Posted this week Fund manager surveys show that the proportion of cash holdings among professional investors has fallen to extremely low levels, while the bank's "bull and bear indicator" has also released warning signals. In addition, data from Deutsche Bank shows that systemic strategies are currently extremely overweight, leaving little room for further incremental buying. The positions of trend-following CTAs in stocks have been pushed to the upper edge of the historical range and are at the 72nd percentile; while the positions of volatility control funds are even more extreme and are already at the 91st percentile. Health insurance giant UnitedHealth Group reported second-quarter results that beat market expectations and rose more than 7% in premarket. The company had adjusted earnings of $6.38 per share on total revenue of $112.03 billion. Analysts surveyed by Refinitiv ( LSEG ) had expected earnings of $4.90 per share and revenue of $110.85 billion. UnitedHealth also raised its full-year profit guidance. Taiwan Semiconductor Manufacturing Co. fell 4%. Although TSMC's second-quarter profit was better than expected, the company raised its full-year capital expenditure range to US$60 billion-64 billion from the previous guidance of US$52 billion-56 billion (the upper end of the range). Businesses also announced an additional $100 billion in investment in Arizona. Atai Beckley's stock price soared 34.5% after the pharmaceutical company announced a $2.8 billion acquisition of psychedelic drug developer Atai Beckley. The cash consideration for the acquisition is $6.75 per share, a 26% premium to the stock's closing price of $5.36 on Wednesday. Eli Lilly will also pay up to an additional $2.50 per share if AtaiBeckley's drug reaches certain development approval milestones. GE Aerospace's second-quarter profit and revenue exceeded expectations, but its stock price still fell 4%. GE Aviation had adjusted earnings of $2.02 a share on revenue of $12.63 billion; analysts at Refinitiv expected earnings of $1.86 a share on revenue of $11.86 billion. The company simultaneously raised its full-year performance guidance. United Airlines shares fell more than 3% despite earnings beating estimates. The company gave weaker-than-expected third-quarter guidance, predicting earnings of $2.50–$3.50 per share, compared with FactSet analysts’ expectations of $3.53. United also said fuel costs would increase by an additional $6 billion. J.B. Hunt Transport Services jumped nearly 7%. Refinitiv data showed that the company earned $1.73 per share, $0.18 higher than analysts' expectations; revenue of $3.5 billion was basically the same as market expectations of $3.25 billion. Management said demand for intermodal transportation business continued to pick up during the quarter. Raymond James Investment Bank upgraded AeroVironment's rating from "neutral" to "outperform," pushing the stock price up nearly 2%. The agency said that order volume in the aviation environment is recovering and the backlog of orders to be delivered is expected to continue to grow. Rocket Companies raised its price target to $19 and maintained a "buy" rating, sending shares of the fintech platform up 2%. The new price target represents room for a 30% upside from the stock's Wednesday closing price. Open a futures account on Sina's cooperative platform, safe, fast and guaranteed