Written by: Chao Xiang Research

On Monday, the three major U.S. stock indexes closed slightly lower, with the S&P 500 and Dow Jones retreating from last Friday's record highs. The reasons for the market decline include the delayed implementation of the Strait of Hormuz reopening agreement, a single-day surge in oil prices of over 5%, and rising U.S. Treasury yields putting pressure on technology stock valuations. After news emerged of Nvidia seeking $500 billion in AI financing, its stock instead fell nearly 3%, and the optical communication sector collectively hit hard, with Coherent dropping by over 14%. Chinese concept stocks performed well against the trend, with the Nasdaq China Golden Dragon Index rising by nearly 2%, becoming a rare highlight on Monday. Oil prices have once again become the pricing center, and market concerns regarding inflation and interest rates are heating up.

Strait of Hormuz Agreement Uncertain, Oil Prices Surge, U.S. Treasury Yields Rise

The most critical variable on Monday was oil prices. Signals released by Iran over the weekend indicated that even if an agreement is reached, it does not mean the Strait of Hormuz will immediately resume navigation. Trump stated on social media on Monday that he noticed Iran is demanding compensation for losses suffered during the military conflicts over the past five months, and he similarly demands compensation from Iran, having instructed that this demand be included in all future negotiations. Trump also stated that the U.S. military has "100% control" of the Strait of Hormuz, claiming that the strait "is now open," but Iran occasionally still lays mines, which the U.S. military will clear.

With the future of the agreement unclear, oil prices surged. WTI September crude oil futures closed up 5.05% at $82.13 per barrel, and Brent October crude oil futures closed up 4.99% at $87.72 per barrel, both hitting new highs for August. Brent crude has risen for four consecutive trading days. The U.S. Strategic Petroleum Reserve has fallen below 300 million barrels for the first time since 1983, further exacerbating expectations of supply tightness.

The surge in oil prices directly pushed up U.S. Treasury yields. The 10-year U.S. Treasury yield closed around 4.71%, rising about 6 basis points during the day; the 2-year U.S. Treasury yield was around 4.24%, rising about 4 basis points during the day. As yields increase, the discount rate for growth stock valuations rises, placing tech stocks under pressure.

Tech Stocks Under Pressure, Nvidia's $500 Billion Financing Turns into Pressure

The performance of the seven tech giants showed significant divergence on Monday. Microsoft and Amazon both rose over 1%, benefiting from safe-haven funds concentrating in cash-flow more stable leaders. Apple fell 1.5%, with multiple agencies downgrading its rating, and six institutions issued sell signals, the most since 2012. Nvidia closed down nearly 3%, with Google A falling about 0.5%, Meta dropping about 0.3%, and Tesla down about 0.8%.

Nvidia's decline was somewhat counterintuitive. On the news front, Nvidia is seeking to partner with Wall Street giants such as Apollo, Blackstone, GIP under BlackRock, Brookfield, Goldman Sachs, and KKR to raise up to $500 billion for AI infrastructure projects, with funds coming entirely from third-party capital. However, the market seems more concerned with the signals behind the expanded financing scale, as the capital expenditure demand for AI infrastructure continues to swell while financing costs are rising. Following this news, Nvidia credit default swap prices recorded the largest single-day increase in two weeks, and the bond market's worries transmitted to the stock price.

Intel announced plans to issue $15 billion in common stock, resulting in a drop of over 4%. With the stock already at a high level, launching a large-scale issuance prompted the market to vote with its feet.

Optical Communication Sector Experiences Heavy Decline, Storage Stocks Mixed

The optical communication sector faced a significant correction on Monday. Coherent dropped over 14%, and Lumentum fell over 8%. The optical communication sector had previously accumulated significant gains, and funds chose to take profits amid a tightening macro environment.

The storage sector exhibited mixed performance. SanDisk rose over 2%, while SK Hynix and Seagate Technology dropped over 1%. SK Hynix announced plans to build new wafer fabs in Yongin and Cheongju, investing a total of around 54 trillion won, approximately $38.4 billion. However, the news of large-scale expansion did not boost the stock price, as market judgments on the supply-demand relationship and capital expenditure efficiency of storage chips remain divided.

The Philadelphia Semiconductor Index closed down about 1.2% on Monday, without a specific value listed in the closing report. Chip stocks overall faced pressure, with the significant drop in optical communication exacerbated by Intel's issuance news, resulting in the semiconductor sector underperforming the market overall.

Chinese Concept Stocks Perform Well Against the Trend, Outperforming the Market for Several Consecutive Trading Days

While U.S. stocks generally faced pressure, Chinese concept stocks became a rare highlight on Monday. The Nasdaq China Golden Dragon Index rose nearly 2%, outperforming the U.S. stock market for several consecutive trading days. Alibaba's stock rose about 3%, leading the Chinese concept stocks.

Global funds seem to be applying a different pricing logic to Chinese concept stocks amid macro uncertainties, with geopolitical risks and the interest rate environment exerting diminishing influence, allowing individual stock fundamentals and valuations to become more dominant factors. Whether the trend of Chinese concept stocks continuing to outperform can be sustained will serve as a window to observe the direction of capital flows in the future.

Gold Rises for Two Consecutive Days, Bitcoin Falls Below $64,000

Gold rose for the second consecutive trading day. Spot gold increased by 1.1% to $4,389.29 per ounce, briefly rising over 1% during trading, reaching a two-month high. Spot silver rose by 3.57% to $65.75 per ounce. The surge in oil prices has pushed up inflation expectations, making gold an attractive hedge for funds.

Bitcoin briefly fell below $64,000 during trading, down over 2% from its daily high; Ethereum was around $1,890, down about 1% over 24 hours. The U.S. dollar index rebounded, moving away from a month-and-a-half low. The yen briefly fell 1% to a low for the month of August. The offshore renminbi moved away from a three-year high. With oil prices surging and interest rate expectations rising, funds are readjusting their positions.

Tuesday Focus: A Calm Window Before CPI

No significant economic data will be released in the U.S. on Tuesday, and the market will continue to digest the impacts of rising oil prices and increasing yields. Oil price trends remain the greatest uncertainty variable, and the mutual compensation demands between Trump and Iran complicate the Hormuz negotiations. The market will closely watch for follow-up news on Nvidia's $500 billion financing plan and whether stocks like Coherent in the optical communication sector can stabilize after the decline.