S&P Nasdaq posts biggest drop in a year and a half, VIX surges 22%, Tesla and chip stocks plummet, short-term US bonds rally

The second-quarter financial reports of tech giants Tesla and Google fell short of expectations, triggering investors' pessimism about the AI bubble. This dragged down the Nasdaq and S&P 500 indices by 3.64% and 2.31% respectively, marking the largest single-day decline since the end of 2022. The sell-off spread across the entire US stock market, with the Dow Jones plummeting by 500 points, small-cap indices dropping by 2.1%, chip indices falling by 5.4%, and Chinese concept stocks declining by nearly 2%. Due to investors' disappointment in the future of artificial intelligence, the market capitalization of the Nasdaq 100 components evaporated by $1 trillion on Wednesday.

Risk aversion intensified, with traditional safe-haven stocks in the US performing well. The utility sector was one of the only three major sectors that saw gains, driven by high dividend stocks, especially benefiting from lower interest rates. The energy sector also rose, while the technology, consumer discretionary, and communication services sectors fell by about 4%.

The preliminary July Markit Manufacturing PMI in the US unexpectedly contracted to a seven-month low, and US new home sales in June declined for the second consecutive month to the lowest annualized total since November last year, adding signs of a slowdown in the US economy. Former Fed "big three" member Dudley called for a rate cut next week, reigniting market expectations for a rate cut. The weakening US dollar supported the rebound of precious metals and oil prices. However, the US dollar remained near a two-week high, while the preliminary July Markit Services PMI in the US hit a 28-month high.

Internationally, traditional safe-haven currencies such as the Japanese yen and Swiss franc surged significantly, with the yen also boosted by reports that the Bank of Japan will consider a rate hike next week. Germany's July PMI unexpectedly fell, the Eurozone Manufacturing PMI hit a seven-month low, and business activity in the UK rebounded due to strong manufacturing growth. The Bank of Canada cut interest rates by 25 basis points as expected and maintained a dovish stance, causing the Canadian dollar to fall, with the two-year Canadian bond yield dropping to the lowest level since May last year.

Market expectations for a rate cut rose again on Wednesday, with the market predicting four comprehensive rate cuts in 2025 (while the possibility of 2 or 3 rate cuts in 2024 is 50%).

Disappointing Tech Stock Performance Drags Down US Stock Market, Tech and Chip Stocks Plummet, Tesla Falls Over 12%, NVIDIA Drops Nearly 7%, Google A Drops 5%

On Wednesday, July 24th, tech giants Tesla and Google reported lower-than-expected earnings, disappointing investors who exited the market, leading to a collective decline in tech stocks and dragging down major US stock indices, which plummeted throughout the day and closed at daily lows.

The tech-heavy Nasdaq and Nasdaq 100 indices fell by over 3.6%, marking the largest decline since December 2022, while the S&P 500 index dropped by over 2.4%, and the Dow Jones, dominated by blue-chip stocks, fell by nearly 1.4%:

The S&P 500 index fell by 128.61 points, or 2.31%, marking its worst single-day performance since December 2022, closing at 5427.13 points. The Dow Jones fell by 504.22 points, or 1.25%, closing at 39853.87 points. The Nasdaq fell by 654.94 points, or 3.64%, closing at 17342.41 points Nasdaq 100 fell by 3.65%, marking the largest single-day decline in 2022; the Nasdaq Technology Market Capitalization Weighted Index (NDXTMC), which measures the performance of Nasdaq 100 technology component stocks, dropped by 4.73%; the Russell 2000 Index fell by 2.13%; theVIX fear index rose by 22.55% to 18.04, hitting a three-month high.**

The Dow Jones Industrial Average had a relatively smaller decline, but still dropped by over 1.2%.

Most of the 11 sectors of the S&P 500 Index closed lower. The Information Technology/Technology sector fell by 4.14%, the Consumer Discretionary sector fell by 3.89%, the Telecommunications sector fell by 3.76%, the Industrial sector fell by 2.17%, while the Real Estate, Materials, and Financial sectors fell by at least 1.19%, with the Energy sector rising by over 0.2%, the Healthcare sector rising by over 0.8%, and the Utilities sector rising by over 1.1%.

Regarding investment research strategies:

According to media compilation data, last week the S&P 500 Index was once 15% above the 200-day moving average, with a deviation comparable to historical extremes, greater than the sharp drop at the beginning of 2018. In recent history, such a large deviation has only occurred after the low point following the global financial crisis in March 2009, the peak in February 2011, and the low point after the pandemic in 2021.

Andrew Thrasher, a technical analyst and portfolio manager at Financial Enhancement Group, stated that while this does not necessarily mean that the market is about to crash, it serves as a warning signal for investors concerned about overvaluation of technology stocks and concentration risk. We are encouraged by the performance of laggard sectors such as small-cap stocks, but the biggest issue is that six stocks still account for around 30% of the S&P 500 Index. If funds quickly rotate from these growth stocks to other areas, it will be difficult for the overall index to maintain an upward trend in the short term.

The "Tech Seven Sisters" suffered a total market value decline of nearly $1.75 trillion from the peak ten days ago. Tesla fell by 12.33%, marking the largest single-day decline since September 2020. NVIDIA dropped by 6.8%, Meta by over 5.6%, Google by 5.04% marking the largest decline in six months since the end of January, Microsoft by approximately 3.6%, Amazon by around 3%, and Apple by around 2.9%.

The Mag7 experienced the largest single-day decline since October 2022 Chip stocks all suffered defeats. The Philadelphia Semiconductor Index fell by 5.41%; the industry ETF SOXX fell by 5.32%; NVIDIA's double long ETF fell by 13.24%.

ASM International ADR fell by over 12.2%, AMD fell by over 9.1%, Arm Holdings fell by around 8.2%, ASML ADR fell by over 6.4%, AMD fell by around 6.1%, TSMC ADR fell by 5.9%, MediaTek fell by over 3.8%, Micron Technology fell by around 3.5%, while Seagate Technology rose by over 4%. Broadcom fell by 7.6%.

AI concept stocks are in a state of mourning. BullFrog AI fell by 11.71%, "NVIDIA concept stock" Serve Robotics fell by 8.94%, Oracle fell by 3.03%, Snowflake fell by 5.26%, Palantir fell by 7.67%, CrowdStrike fell by 3.99%, BigBear.ai fell by 0.65%, NVIDIA concept stock SoundHound fell by 7.89%, Dell fell by 7.73%.

Most Chinese concept stocks are falling. The Nasdaq Golden Dragon China Index (HXC) fell by 1.93%, in ETFs, the China Technology Index ETF (CQQQ) fell by 2.13%, and the China Internet Index ETF (KWEB) fell by 2.10%.

Among popular Chinese concept stocks, Nio fell by 4.02%, XPeng fell by 4.17%, ZEEKR fell by 7.73%, Li Auto fell by 4.61%, Bilibili fell by 2.56%, JD.com fell by 1.64%, Tencent Holdings (ADR) fell by 1.49%, Alibaba fell by 0.39%, Baidu fell by 1.79%, Pinduoduo fell by 0.91%, while NetEase rose by 1.16%.

In addition, in the AI sector, IBM's revenue exceeded expectations, stating that generative AI brought in over $2 billion in revenue, with the stock price rising by over 4% after hours. In the chip sector, KLA's fourth-quarter revenue and profit both exceeded expectations, rising by over 5% after hours. Ford's second-quarter EPS fell short of expectations, still expecting Ford Pro's EBIT to lose at least $5 billion for the full year, falling by over 10% after hours. American fast-food chain Chipotle's same-store sales in the second quarter exceeded 11%, surpassing market expectations, rising by over 14% after hours.

Investors weighing the performance of regional banks and U.S. tech companies saw European stock markets collectively fall, ending a two-day rally:

The pan-European Stoxx 600 index fell by 0.61% to 512.30 points. The Eurozone STOXX 50 index fell by 1.12% to 4861.87 points.

Germany's DAX 30 index fell by 0.92%. France's CAC 40 index fell by 1.12%. Italy's FTSE MIB index fell by 0.48%. The UK's FTSE 100 index fell by 0.17%. The Netherlands' AEX index fell by 1.26%. Spain's IBEX 35 index fell by 0.02%.

European semiconductor concept stocks mostly fell, luxury brands almost all fell:

Among chip stocks, ASM International fell by 9.43%, BE Semiconductor Industries fell by 8.49%, ASML Holding fell by over 4.6%, Infineon Technologies AG fell by 2.9%, Infineon Technologies AG fell by over 1.4%, STMicroelectronics fell by 0.43%, while Soitec rose by 2.45%.

In luxury brands, LVMH Group fell by 4.66%, Richemont fell by 4.6%, Kering fell by 4.54%, Hugo Boss, Hermes, Burberry, Richemont, and L'Oreal all fell by 3.42%-1.54%.

Deutsche Bank stopped its 15-quarter streak of consecutive profits in the second quarter, marking its first loss in four years. It announced abandoning the second round of stock buybacks for the year, impacted by weak trading and litigation, increasing provisions for non-performing loans in corporate and commercial real estate, casting a shadow over the financial reports of the European banking industry. Its US stocks fell by over 9%, while European stocks fell by over 8%, marking the largest decline in nearly three months.

Rate cut expectations heat up, 2-year US Treasury yield drops over 8 basis points, yield curve steepens

At the close, the more sensitive to monetary policy 2-year US Treasury yield dropped by 8.13 basis points to 4.4101%, trading in the range of 4.4934%-4.3750% during the session, hitting the lowest level in over five months since early February. The benchmark 10-year US Treasury yield rose by 2.15 basis points to 4.2720%, trading in the range of 4.2076%-4.2877% during the session.

Yields on 10 to 30-year US Treasuries all widened, steepening the yield curve. The yield spread between 5-year and 30-year US Treasuries hit a new high since May 2023, while the yield spread between 2-year and 30-year US Treasuries hit a new high since July 2022. This is mainly due to the market's heating up of rate cut expectations, with former Fed "number three" Dudley calling for a rate cut next week.

The yield spread between 2-year and 30-year US Treasuries hit a new high since July 2022

European bonds also showed divergent trends, with short-term bond yields falling and long-term bond yields rising. The benchmark 10-year German bond yield in the eurozone rose by 0.5 basis points to 2.444%, trading in the range of 2.408%-2.455% during the session. After the release of the eurozone PMI data at 16:00 Beijing time, it hit a daily low and then rebounded. The 2-year German bond yield dropped by 6.4 basis points, hitting a daily low of 2.651%, remaining in a downtrend throughout the day.

US EIA crude oil inventories decline, gasoline demand rises, Canadian wildfires, and the prospect of a rate cut in September support oil prices rebounding by over 0.8% and ending a four-day decline

The weakening US dollar boosted oil prices. WTI September crude oil futures closed up $0.63, an increase of about 0.82%, at $77.59 per barrel. Brent September crude oil futures closed up $0.70, an increase of about 0.86%, at $81.71 per barrel Crude oil continued its earlier gains during the day and accelerated its rise in the midday trading session of US stocks, reaching a high of nearly 1.6% and breaking through the $78 mark, while Brent crude rose by over 1.5% to surpass the $82 mark.

Oil prices rebounded but remain close to a six-week low.

The US Energy Information Administration (EIA) reported that as of the week ending July 19, US crude oil inventories fell by 3.7 million barrels to a new low since February, while gasoline inventories unexpectedly dropped by 5.6 million barrels. The daily increase in gasoline supply (reflecting demand) was 673,000 barrels. Goldman Sachs pointed out that although Canada's oil production remains stable, the most severe period of wildfires is approaching, which may pose risks to oil supply.

US August natural gas futures fell by 3.20% to $2.117 per million British thermal units. The European benchmark TTF Dutch natural gas futures rose by 3.16% to €32.621 per megawatt-hour; ICE UK natural gas futures rose by 2.21% to 80.76 pence per therm at the close.

Rate cut speculation heats up, US dollar index edges down by about 0.1%, yen rises over 1.1% approaching 153 to hit a two-month high

The DXY, which measures the US dollar against a basket of six major currencies, fell by 0.09% to 104.357 points, with an intraday trading range of 104.555-104.122 points.

The Bloomberg Dollar Spot Index dropped by 0.02% to 1256.94 points, with an intraday trading range of 1257.92-1254.51 points.

The US dollar closed relatively flat, recovering from losses during the European stock trading session.

Most non-US currencies declined. The euro fell by 0.12% against the US dollar, the pound was flat against the US dollar, and the US dollar fell by 0.66% against the Swiss franc.

Offshore Chinese yuan (CNH) rose by 228 points against the US dollar to 7.2663 yuan, trading within a range of 7.2916-7.2619 yuan during the session.

Among Asian currencies, the US dollar fell by 1.13% against the Japanese yen to 153.83 yen, with an intraday trading range of 155.99-153.11 yen, marking the first time it has fallen below the 154 level since mid-May. The euro fell by 1.26% against the Japanese yen to 166.75 yen; the pound fell by 1.12% against the Japanese yen to 198.557 yen. Reports suggest that the Bank of Japan plans to halve its bond purchases in the coming years at the next policy meeting and is considering whether to raise interest rates.

On the day after the launch of the Ethereum spot ETF, mainstream cryptocurrencies saw mixed movements. The largest cryptocurrency by market capitalization, Bitcoin, rose by 0.75% to $66,060.00, returning above the $66,000 mark and reaching a high of $67,230.00 during the session. The second-largest Ethereum fell by 3.21% to $3,378.00, trading in a range of $3,503.00-3,357.00 during the session Ethereum's performance lags behind Bitcoin, reversing yesterday's outstanding performance

Traders focus on economic data, market fully pricing in September rate cut, and increasing gold demand in India supporting gold prices rising for two consecutive days

The decline in the US dollar and US bond yields together support precious metal prices. COMEX August gold futures closed slightly up by 0.06% at $2408.7 per ounce, breaking a four-day downtrend, while COMEX September silver futures closed down by 0.53% at $29.175 per ounce.

Spot gold prices maintained an upward trend throughout the day, with pre-market gains in US stocks pushing gold prices above $2430 per ounce in early trading, but then almost giving back most of the gains, approaching the $2400 per ounce level, with US stocks closing only slightly higher.

Spot silver fluctuated higher in pre-market US trading, with gains of over 0.7% in early trading. However, it then sharply declined, hitting a daily low at the close, dropping over 0.9% and falling below the $29 per ounce level.

Gold was sold off during the US trading session, but ultimately closed basically flat

Some analysts pointed out that the biggest positive factor for gold prices at the moment is the prospect of a rate cut, with the market focusing on this week's economic data and firmly believing that the Fed will start cutting rates this year, with a weaker US dollar supporting higher gold prices. In addition, India's reduction of import tariffs on gold and silver from 15% to 6% is also expected to increase demand for gold and silver.

London industrial base metals have been mostly declining for several consecutive days. The economic barometer "Dr. Copper" fell by $62 to $9104 per ton, marking the eighth consecutive trading day of decline for both the London and New York September copper contracts, hitting a three-month low since early April.

London zinc fell by $4 to $2685 per ton. London lead fell by $16 to $2044 per ton. London nickel fell by $194, a decrease of 1.21%, to $15827 per ton. Meanwhile, London tin rose by $372, with an increase of over 1.26%, to $29790 per ton. London aluminum rose by $6 to $2300 per ton