On Wednesday, the U.S. stock market paused its upward trend as investors awaited Micron Technology's financial report. Meanwhile, global bond prices rose slightly, but they may still record their worst monthly performance in many years. The deterioration of government fiscal conditions, a surge in bond issuance, and rising inflation have all pressured the market. Additionally, the seven-month-long Israeli-Palestinian conflict has kept energy costs high.
In contrast, the stock market has performed more robustly and has largely not been significantly impacted by the recent surge in bond yields. Strong corporate earnings growth, the resilience of the global economy, and the ongoing enthusiasm for artificial intelligence have all provided support for the stock market. Major stock indices in Asia and Europe have generally seen increases.
As of press time, the Dow Jones futures rose by 0.01%, the S&P 500 index futures rose by 0.03%, and the Nasdaq futures fell by 0.09%.
European stock markets rose by 0.6%. Although the index is expected to fall by 1.4% this month, it has remained relatively flat overall this quarter.
MSCI Excluding Japan, the Asia-Pacific index rose by 0.3%, and is expected to fall by 1.1% this month. Japan's Nikkei 225 index soared by 1.9% and is expected to rise by 0.6% this month, but is expected to fall by 4.7% this quarter. South Korea's KOSPI index is expected to rise by 0.3% this month, but may fall sharply by 19% this quarter.
Wall Street holds its breath: Will Micron's ( MU.US ) financial report bring any surprises?
Driven by the strong momentum of AI, Micron Technology is set to release its highly anticipated latest financial report after the market closes on Wednesday, and the market generally expects it to present a impressive performance.
According to Visible Alpha, Micron Technology's revenue for the fourth fiscal quarter is expected to reach $50.95 billion, a year-on-year increase of 350%. The adjusted earnings per share are expected to be $31.63, which is more than ten times that of the same period last year.
JPMorgan analyst Harlan Sur pointed out that investors should be more attentive to any "surprises" that management might announce, such as a large-scale new capital return plan, which usually implies substantial share repurchases or increased dividend payments. The US stock market rose by 0.3% before the market closed.
AI The big exam is here!
The market is about to conclude a month of intense volatility. Due to ongoing inflationary pressures driven by energy, investors have significantly re-evaluated their expectations for U.S. interest rate hikes, leading to a fierce sell-off in the bond market. The decline in the S&P 500 index was relatively limited, partly because stocks related to AI saw narrow gains, indicating that investors remain optimistic about the prospects of that sector. This view will be put to the test when Micron Technology releases its financial results after the market closes.
The Rory McPherson of Magnus Financial Discretionary Management indicates: 'The market's expectations for performance are already very, very high. Therefore, these companies are likely to achieve good results. However, in the end, all of this will still be reflected in the demand story, and we need to continue to see that demand remains strong.'
He said, "As long as this situation can be maintained, I expect trading in technology stocks to continue."
Inflation in France and Italy both exceeded expectations, further increasing the pressure on the European Central Bank to continue raising interest rates. The yield premium of French 10-year government bonds over German bonds widened by 1 basis point to 120 basis points, reaching the highest level since 2012.
The debt market is under the spotlight of everyone.
Rising borrowing costs have always been one of the issues that investors are most concerned about, as the yield on sovereign bonds serves as an important pricing benchmark in global markets. It is not only a crucial reference for investors when allocating to high-risk stocks but also serves as a benchmark for housing mortgages and corporate financing costs.
In early European trading, the yield on 10-year U.S. Treasury bonds was reported at 5.209%, down 4.6 basis points from the previous trading day, but still close to the highest level since June 2007. So far this month, the yield has risen by more than 45 basis points, setting the stage for the largest single-month increase in nearly two years. There is an inverse relationship between bond yields and prices.
The yield on 2-year U.S. Treasury bonds fell by 1.9 basis points to 4.870%. Previously, the Chairman of the Federal Reserve Bank of New York, John Williams, cooled down market expectations for an overly premature further tightening of policies. However, this yield has still risen by more than 50 basis points this month.
The head of institutional clients at Milan Banca Ifigest, Carlo Franchini, stated: "We have now reached a level of yield that is truly of significant importance. The temptation for investors to shift from stocks to bonds could become a problem."
However, Franchini indicates that he has not yet realized a profit from his stock investments. He believes that if the tensions around the Strait of Hormuz ease, leading to a decline in oil prices and a reduction in bond yield pressures, the stock market could still find support in October. He said, "In my opinion, it's better to continue being bullish."
This week, the yields on 10-year government bonds in Germany and France rose to their highest levels in 17 and 18 years, respectively, with an expected increase of about 70 basis points and 120 basis points this quarter. In Japan, the yield on 10-year government bonds has hovered near its highest level in decades, with an expected cumulative increase of 38 basis points this quarter. Despite the significant rise in the cost of sovereign bond financing this quarter, global stock markets have generally shown strong resilience.
The US dollar strengthens, and the Japanese yen accelerates its rise.
Brent crude oil has risen slightly to above $103 per barrel, with a cumulative increase of about 14% this month, despite the latest signs indicating that crude oil flows from the Middle East are returning to pre-war levels.
In the foreign exchange market, supported by rising yields on U.S. Treasury bonds, the dollar is expected to rise by about 2% this month, although it fell slightly by 0.1% on that day. The euro traded around 1.1346 against the dollar, slightly above its 16-month low. It is expected to fall by 2.3% this month, with global energy shocks and increasing political risks in Europe continuing to put pressure on the euro.
The British pound rose by 0.2% to $1.326, but is expected to fall by a cumulative 2.1% this month.
The Japanese yen rose by 0.2% to 156.95 yen per US dollar, with an expected increase of 1.7% this month. Due to concerns in the market that Tokyo and Washington may intervene jointly again, investors are cautious about further short-selling the yen.
U.S. mortgage loan rates have risen for six consecutive weeks, hitting refinancing and home buying demand hard.
The seasonally adjusted index from the Mortgage Bankers Association of America shows that it led to a 6% decline in weekly mortgage demand. Last week, the average contract rate for 30-year fixed-rate mortgages that met the standard loan balance requirements rose from 7.12% to 7.30%.
In loans with a down payment of 20%, the loan points, including the loan origination fee, have increased from 0.73 to 0.75. Refinancing needs are hit the hardest, as very few borrowers can benefit from the current higher interest rate environment.
Applications for refinancing of housing loans decreased by 9% that week, and were 56% lower than the same period last year. The proportion of refinancing in the total volume of mortgage lending business dropped from 39.3% the previous week to 38.3%.
Economist Joel Kan stated in a statement: "Government-backed refinancing activities have declined by 13%, with loan applications for FHA and VA both experiencing double-digit weekly reductions."
Focus on Individual Stocks
Boeing's stock price rose by 2% after securing a defense contract from the Department of Defense. This $20 billion contract involves Boeing's development of the sixth-generation F/A-XX fighter jet. Northrop Grumman (NOC), which lost the competition, saw its stock price plummet by 3.5%.
Online brokerage platform Robinhood announced the launch of an in-app AI intelligent entity for traders, with its stock price rising by 2%. The company also announced that it will soon offer 24/7 trading services for certain stocks to US users and launch perpetual futures products.
Concentrix released its financial report for the third quarter, with revenue slightly below market expectations, causing the stock price to fall by 9.5%. According to analyst data from FactSet, the company's non-GAAP earnings per share and revenue guidance for this quarter also fell short of expectations; during the financial report conference call, the company stated that its transition towards the AI business model is putting pressure on revenue.
After Citigroup released a research report on Moderna, the stock price fell by more than 6%. The target price given by the bank's analysts is 60% lower than the stock's closing price on Tuesday, and the analysts believe that the current valuation of the stock lacks合理性.
Deutsche Bank has initiated coverage on the semiconductor testing company FormFactor and assigned a buy rating to it. Boosted by this news, the stock price rose by 1%. Analysts stated that the continuous increase in chip testing demand will be beneficial for the company; FormFactor has become "the second supplier of NVIDIA GPU probe cards for TSMC's foundry services," and the company is therefore benefiting from this.
Egg producer Cal – Main Foo releases its first-quarter financial report, with losses exceeding market expectations, causing the stock price to plummet by over 6.5%. The company reported a loss of $1.26 per share, while analysts polled by FactSet expected a loss of $0.77 per share.
