Written by: Tide Research

On Wednesday, US stocks fell for the third consecutive trading day, with the Dow Jones down 0.77% at 52380.66 points, the S&P 500 down 0.48% at 7636.36 points, and the Nasdaq down 0.64% at 26253.340 points. The VIX reported 16.41, up about 4.4%. Two main forces suppressed the market: Brent crude oil broke $101, raising inflation concerns; the US Treasury's long-term bond buyback scale was only $6 billion, lower than market expectations. However, the storage and optical communication sectors strengthened again. Meta's release of the AI assistant Muse surged 6.55%. Apple launched its first foldable screen iPhone Duo. Tonight, the US August PPI and the European Central Bank interest rate decision.

The US bond buyback scale falls short of expectations, long-term yields hit a nearly three-year high

On Wednesday, the US Treasury announced it would buy back up to $6 billion of 10 to 20-year bonds on Thursday. The buyback size has increased nearly threefold compared to before, but according to a Bloomberg survey, some Wall Street investors originally expected the scale to be between $7 billion and $8 billion, and the actual announcement of $6 billion only reached the lower end of the expected range. This gap directly triggered a sell-off in the bond market.

The 10-year US Treasury yield rose by 4.84 basis points to 4.839%, reaching a session high of 4.849%, the highest since November 2023; the 2-year US Treasury yield rose by 2.54 basis points to 4.419%, a new 52-week high; the 30-year US Treasury yield rose by 4.35 basis points to 5.291%. US Treasury yields rose across the board, directly suppressing high-valuation assets.

The purpose of the Bassett's enlarged buyback is to lower long-term rates and ease valuation pressure on tech stocks, but the actual scale falling short of expectations has instead intensified market concerns about the Treasury's “insufficient ammo.” The pricing power of long-term rates ultimately depends on the inflation path and debt supply; buybacks can only provide a short-term liquidity buffer.

Brent oil breaks $101, the Middle East situation continues to escalate

Geopolitical risk was another pressure line on Wednesday. The Iranian Revolutionary Guard announced the establishment of a new maritime “sanctions zone.” The US military struck Iranian tankers, and Iran retaliated by attacking a US military base. The escalation of the Middle East situation pushed the Brent crude oil settlement price up by 3.36% to $101.21 per barrel, marking the first time in over a month that it topped $100; WTI crude rose 3.25% to $96.05 per barrel, both reaching their highest levels since May.

The energy sector was the only sector in the S&P 500 to close higher, up 1.09%. The industrial sector and consumer discretionary sector fell 1.51% and 1.39%, respectively, leading the declines.

Trump stated in a media interview after hours that he expects the conflict with Iran to end after the US midterm elections in November, and that the drop in oil prices will “take a bit longer than the midterm elections.”

Meta releases AI assistant Muse, rises 6.5%, storage and optical communication collectively surge

Amid market pressure, tech stocks overall declined. Nvidia fell 0.91%, Apple fell 0.28%, Microsoft fell 0.47%, Amazon fell 1.78%, Google C fell 2.09%, Tesla fell 0.1%, Broadcom fell 1.13%.

Meta was the only exception. Meta rose 6.55% after officially launching its personal AI assistant Muse the day before, capable of autonomously representing users in tasks such as sending emails and booking travel. The commercialization of AI application layers is gaining financial recognition.

The storage and optical communication sectors surged collectively. SK Hynix rose 7.05% to reach a record high, Micron Technology rose 2.75%, SanDisk rose 1.51%, and Western Digital rose 1.04%. In the optical communication sector, MaxLinear rose 7.53%, Marvell Technology rose 4.26%, and Corning rose 1.51%. Among the constituent stocks, 18 rose and 12 fell, with AMD up 3.04%, Intel up 1.69%, and Qualcomm up 1.33%.

The strength of the storage and optical communication sectors is related to product developments of individual stocks like SK Hynix and the market's continued focus on AI memory demand. The market is down, but chips are up; this divergent pattern has appeared for three consecutive trading days.

Regarding Chinese concept stocks, the Nasdaq China Golden Dragon Index fell 2.09%. Li Auto fell 4.41%, XPeng fell 3.29%, and Alibaba fell 2.89%.

Apple releases foldable screen iPhone Duo, starting price in China is 15999 yuan

Apple launched its first foldable flagship phone, the iPhone Duo. In an unfolded state, it is the thinnest iPhone ever, equipped with dual cameras, and features a 7.6-inch Super Retina XDR display when opened, 50% larger than the iPhone 18 Pro Max, supporting Apple Pencil, but the global version only supports eSIM. The starting price is $1999, with the Chinese version starting at 15999 yuan.

Apple's release of the foldable phone marks its official entry into the foldable screen market. Previously, Samsung dominated the foldable screen market, and Apple's entry will have a structural impact on the global foldable screen supply chain. Apple’s stock price slightly fell by 0.28% on the same day, as the market is still assessing the long-term impact of the new foldable product.

Gold recaptures $4400, London copper and New York copper both hit historical highs

Spot gold rose 1.06% to $4401.77 per ounce, recapturing the $4400 mark; spot silver rose about 2.3%. According to the World Gold Council, in August, global gold ETFs attracted $18 billion, marking the second largest monthly inflow in history.

In industrial metals, London copper closed at $14728 per ton, with an intraday high of $14779 per ton, while New York copper reached $6.894 per pound, both setting new historical records. The ongoing demand for AI computing infrastructure and global grid investments continues to prop up copper prices.

Bitcoin reported about $79200, rising approximately 1% in 24 hours. Ethereum reported about $2500.

Today's focus

US August PPI data. This is the most important economic data tonight. PPI is a leading indicator of CPI, and if PPI exceeds expectations, it will further strengthen concerns about interest rate hikes; if PPI weakens, it may alleviate some inflation pressures. Oil prices breaking $100 adds new upward pressure on inflation.

European Central Bank interest rate decision. The market expects the ECB to raise rates by 25 basis points. In the context of central banks globally generally turning hawkish, the ECB's interest rate path will have a significant impact on the euro and dollar trends, which will in turn be transmitted to US bonds and US stocks.