Powell hints at rate cut in September, S&P and Nasdaq see largest gains in five months, Nvidia surges nearly 13%, oil prices jump 4%

Multiple rate cuts boost US bond yields across the board. The Federal Reserve's July rate decision suggests a signal for a possible rate cut in September, leading to increases in US stocks, US bonds, crude oil, gold, and the Japanese yen, with market expectations for rate cuts heating up. Analysis from the "New Fed Megaphone" indicates that the Fed's statement emphasizes both aspects of its dual mandate. The statement removed the wording "highly concerned" about inflation risks that policymakers have described in the past two years. This shift is significant because it indicates that inflation may no longer be an obstacle to rate cuts, especially as the labor market continues to cool.

ADP's "mini non-farm" report for July shows an increase of 122,000 jobs, lower than the expected and previous value of 150,000 jobs, marking the lowest level since February. The US second-quarter employment cost index is 0.9%, below the market's expected 1.0%. Wage growth hits a three-year low, with unemployment spreading to more industries in the US, signaling a slowdown in the US labor market and further solidifying expectations for a rate cut in September. In addition, the US Treasury reiterated that there is no need to increase the size of regular bond auctions for at least the next few quarters, leading to a decline in US bond yields.

The CME Group's FedWatch Tool shows that traders expect the Fed to cut rates three times by the end of the year, totaling 70 basis points for the year, up from the previous expected 64 basis points. Calls for rate cuts in the market are growing, with "New Bond King" Gundlach surging, suggesting that the Fed should cut rates today (Wednesday). US Senate Democratic member and "antitrust warrior" Warren urges Powell to cut rates now.

AI demand remains strong, with global chip stocks surging, and the US chip stock index rising by over 7%. Under Zuckerberg's "metaverse" Meta, second-quarter revenue, profit, and third-quarter revenue guidance all exceeded expectations, rising more than 5% after hours. Samsung's second-quarter operating profit surged by 1458%, Arm Holdings' revenue grew by 39% year-on-year, higher than analysts' expectations, and Qualcomm's semiconductor business sales grew by 12%, driving revenue and profit above expectations.

Hamas leader Haniyeh was assassinated, reigniting geopolitical tensions in the Middle East, boosting safe-haven sentiment, with gold rising by over 1.6% achieving the largest monthly gain since March, and oil prices quickly rising by over 4%, erasing this week's losses.

In the Eurozone, core harmonized CPI for July maintained 2.9% for the third consecutive month, slightly higher than the expected 2.8%, with a 0% month-on-month growth ending the uptrend since February 2024. After the data was released, the euro to dollar exchange rate rose slightly. However, the money market still expects the ECB to cut rates by 25 basis points for the second time in September and a total of 57 basis points by the end of the year.

With heightened safe-haven sentiment and the Bank of Japan's rate decision, the Japanese yen broke through the 150 mark. The Bank of Japan announced a 15 basis point rate hike and a reduction of 400 billion yen in bond purchases each quarter. BOJ Governor Kuroda stated that if the economy and inflation support it, rate hikes will continue, and 0.5% is not a specific upper limit for interest rates. The Japanese Ministry of Finance stated that it spent $36.6 billion in the past month to support the yen's exchange rate through forex interventions

US tech stocks rebounded, with the Nasdaq up over 2.6%, Nvidia up nearly 13%, and the chip stock index up over 7%.

As of the close:

The S&P 500 index closed up 85.86 points, a 1.58% increase, at 5522.30 points, with a 1.13% increase in July. The Dow rose 99.46 points, a 0.24% increase, to 40842.79 points, with a 4.41% increase in July. The Nasdaq rose 451.98 points, a 2.64% increase, to 17599.40 points, with a 0.75% decrease in July.

The Nasdaq 100 rose 566.16 points, a 3.01% increase, with a 1.63% decrease in July; the Nasdaq Technology Index (NDXTMC), which measures the performance of Nasdaq 100 technology component stocks, rose 4.11%, with a 3.85% decrease in July; the Russell 2000 index rose 0.51%, with a 10.07% increase in July; the VIX fear index fell 7.52% to 16.36, with a 33.88% increase in July.

Despite the slight increase in the S&P 500 index in July, there is a significant difference between small-cap stocks (up 10% in July) and the Nasdaq (down 0.75% in July).

The Philadelphia Semiconductor Index rose 7.01%, with a 4.37% decrease in July. The Dow Jones KBW Regional Bank Index fell 0.44%, with an 18.60% increase in July. The Nasdaq Biotechnology Index fell 0.15%, with a 6.57% increase in July.

Most US stock industry ETFs closed higher. The Semiconductor ETF rose by over 7%, global technology stock ETFs and technology industry ETFs each rose by over 4%, consumer discretionary ETFs, internet stock index ETFs, and utility ETFs each rose by at least 1%. Global aviation industry ETFs, regional bank ETFs, healthcare industry ETFs, and financial industry ETFs each fell by less than 0.5%.

Most of the 11 sectors of the S&P 500 index closed higher. The S&P Information Technology/Technology sector rose by 3.95%, the consumer discretionary sector rose by 1.79%, the telecommunications sector rose by 1.29%, the energy sector rose by 0.42% with the smallest increase, and the healthcare sector fell by 0.39%.

Except for Microsoft, the "Tech Seven Sisters" generally rose. Nvidia led the way with a 12.81% increase, with a single-day market value increase of $326.934 billion, marking the largest single-day increase in history, while still accumulating a 5.28% decrease in July. It is worth noting that Morgan Stanley has re-evaluated it as a "preferred stock" and maintained a "buy" rating. Morgan Stanley believes that Nvidia's strong delivery in the fourth quarter will set Nvidia's target stock price at $144.00, 38.8% higher than Tuesday's closing price Tesla rose 4.24%, Amazon rose 2.9%, "metaverse" Meta rose 2.51%, Apple rose 1.5%, Google A rose 0.73%. Microsoft, on the other hand, fell by 1.08%. Prior to this, Microsoft announced that second-quarter revenue, EPS earnings, and operating profit all grew at a slower pace compared to the first quarter.

Chip stocks generally rose across the board. The Philadelphia Semiconductor Index rose by 7.01%; the industry ETF SOXX rose by 6.71%; NVIDIA's double long ETF rose by 25.99%.

Broadcom rose by 11.96%, ASML ADR rose by 8.89%, KLA rose by 8.46%, Arm Holdings rose by 8.43%, Qualcomm rose by approximately 8.39%, Applied Materials rose by 7.86%, TSMC's US stocks rose by 7.29%, Micron Technology rose by 7.08%, Marvell Technology rose by 6.66%, ON Semiconductor rose by 5.79%, AMD rose by 4.36%, with the company's second-quarter AI revenue doubling year-on-year and raising its annual sales outlook for MI300. Intel rose by 2.02%.

AI concept stocks rose collectively. Serve Robotics, an AI robot delivery company held by NVIDIA, rose by 16.8%, AMD rose by 5.3%, Dell rose by 4.67%, BigBear.ai rose by 4.14%, SoundHound AI, an AI voice company held by NVIDIA, rose by 2.83%, Oracle rose by 2.79%, Palantir rose by 1.97%, Snowflake rose by 1.16%, BullFrog AI rose by 0.68%, while CrowdStrike fell by 0.72%. CrowdStrike faced collective investor lawsuits due to system failures and selling issues. The CEO of Delta Air Lines stated that the downtime events of CrowdStrike and Microsoft caused the airline to lose $500 million.

Among other stocks with significant changes due to financial reports:

• Starbucks US stocks rose by 2.65%, with the company maintaining its 2024 fiscal year forecast.
• New Oriental fell by 9.29%, with a 32% year-on-year increase in Q4 revenue, a 78% decline in operating profit, and an expected range of 31% to 34% year-on-year increase in total Q1 revenue for the 2025 fiscal year (excluding the self-operated product live e-commerce business of Dongfang Zhenxuan).
• HSBC Holdings rose by 3.72%, benefiting from continuous growth in global banking business and market revenue. HSBC Bank's second-quarter profit significantly exceeded expectations, announcing a buyback of at least $3 billion in shares, and HSBC Hong Kong stocks surged by 4.6%.
• Boeing rose by 2%, previously announcing its performance and appointing a new CEO. The adjusted free cash flow for the second quarter was -$4.33 billion, with market expectations at -$4.34 billion, and second-quarter revenue was $16.9 billion, with market expectations at $17.46 billion

AI drives chip demand, Samsung's second-quarter operating profit surged 1458%.

Arm Holdings rose by 8.43%, as the demand for AI devices drove an increase in demand for the company's chips. Arm Holdings reported higher profits and revenue in the first quarter.

Qualcomm rose by 8.39%, with a 12% increase in revenue from Qualcomm's QCT semiconductor business in the third quarter exceeding the company's revenue and profit expectations. Qualcomm stated that the personal computer (PC) business exceeded internal targets, while the smartphone market is "slightly stabilizing" this year.

American fast-food chain Wendy's fell by 2.87%, as its competitor McDonald's announced that its new $5 combo meal attracted more customers. McDonald's fell by 0.39%, with TD Cowen downgrading McDonald's rating to hold with a target price of $280.

American jewelry company Tiffany & Co. exceeded sales expectations in the second quarter, maintaining its full-year outlook unchanged but lowering its EBITDA outlook, causing the stock price to fall by over 1% after hours.

Unexpected rise in Eurozone inflation on Wednesday, European stock markets collectively rose. Banking sector rose by about 5.6% in July, while the technology sector fell by over 6%:

The pan-European Stoxx 600 index rose by 0.79% to 518.14 points, accumulating a 1.32% increase in July. The Eurozone STOXX 50 index rose by 0.66% to 4872.94 points, with a 0.43% increase in July. Among them, Dutch chip company ASML Holding led the gains, rising by 5.56% at the close, but down by 11.79% in July.

The German DAX 30 index rose by 0.48%, accumulating a 1.50% increase in July. The French CAC 40 index rose by 0.76%, with a 0.70% increase in July. The Italian FTSE MIB index fell by 0.34%, with a 1.84% increase in July. The UK FTSE 100 index rose by 1.13%, with a 2.50% increase in July. The Dutch AEX index rose by 1.39%, but down by 0.35% in July. The Spanish IBEX 35 index fell by 1.23%, with a 1.1% increase in July.

In terms of sectors, the STOXX 600 banking index rose by 5.59% in July, the real estate index rose by 4.02%, the financial services index rose by 2.70%, the retail index rose by 2.41%, the travel and leisure index fell by 1.38%, the automotive and parts index fell by 3.97%, the basic resources index fell by 4.82%, and the technology index fell by 6.05%.

Among other stocks with significant changes due to financial reports:

Sportswear giant Adidas initially rose but ended up falling by 2%. After a long period of sluggish sales, Adidas seems to be showing signs of recovery, with Q2 revenue and net profit exceeding expectations, leading to an upward revision of the full-year performance guidance

Powell hints at rate cut as early as September, US bond yields all decline, 2-year US bond yield drops by about 9 basis points, cumulative drop of over 48 basis points in July

At the close, the more sensitive 2-year US bond yield to monetary policy fell by 8.87 basis points to 4.2698%, rose to a daily high of 4.3894% at 02:00 Beijing time when the FOMC rate decision statement was released, then fell. After Federal Reserve Chairman Powell hinted at a rate cut as early as September, amidst heightened tensions in the Middle East, it fell to a daily low of 4.2554% at 03:59 (just one minute before the US stock market closed), with a cumulative drop of 48.36 basis points in July.

The US 10-year benchmark bond yield fell by 10 basis points, hitting a daily low of 4.0392%, with a cumulative decline of 35.31 basis points in July.

In July, US bond yields fell significantly, with the 2-year short-term bond yield down by 48 basis points, performing significantly better than long-term bond yields.

The 10-year German bund yield in the Eurozone fell by 3.6 basis points to 2.304%, with a cumulative decline of 19.7 basis points in July, showing a overall trend of oscillating decline, trading between 2.642% and 2.3%. The 2-year German bund yield fell by 2.1 basis points to 2.531%, with a cumulative drop of 30.2 basis points in July, trading between 2.962% and 2.513%.

The French 10-year bond yield fell by 4.1 basis points, with a cumulative drop of 28.5 basis points in July. The Italian 10-year bond yield fell by 4.6 basis points, with a cumulative drop of 42.2 basis points in July. The Spanish 10-year bond yield fell by 4.5 basis points, with a cumulative drop of 30.3 basis points in July. The Greek 10-year bond yield fell by 5.1 basis points, with a cumulative drop of 43.1 basis points in July. The UK 10-year bond yield fell by 7.3 basis points, with a cumulative drop of 20.2 basis points in July. The 2-year UK bond yield fell by 5.1 basis points, with a cumulative drop of 39.5 basis points in July.

Middle East geopolitical tensions tighten again, oil prices surge by over 4%, Brent crude oil back above $80 per barrel

WTI September crude oil futures closed up $3.18, a nearly 4.26% increase, at $77.91 per barrel, erasing all declines since last Friday. Cumulative decline in July exceeded 4.45%. Brent October crude oil futures closed up $2.65, a increase of over 3.39%, at $80.72 per barrel, erasing this week's decline, with a cumulative decline of 6.58% in July Both WTI and Brent crude oil continued to rise throughout the day, with WTI hitting a daily high, rising by over 5.1% to nearly $79 per barrel, while Brent crude futures for September rose by nearly 3% to approach $81 per barrel.

Despite the overall poor performance of crude oil prices this month, a sharp rebound was seen on Wednesday as tensions in the Middle East escalated once again.

According to data from the U.S. Energy Information Administration (EIA), U.S. EIA crude oil inventories decreased by 3.44 million barrels last week, while gasoline inventories dropped by 3.7 million barrels. U.S. EIA crude oil inventories have fallen for five consecutive weeks, reaching a new low since February.

On investment research strategies:

Some analysts point out that there is a "misjudgment" in the market's assessment of geopolitical risks in the Middle East, as the market is overly optimistic about the potential oil supply disruptions from the Russia-Ukraine war and the 10-month conflict in the Gaza Strip. We are currently entering a new phase of deteriorating Middle East tensions, which will draw the attention of oil traders and prompt them to reevaluate substantial risk premiums in Brent crude oil prices, with an initial estimate of at least $5 per barrel, even before potential physical supply disruptions occur.

However, some analysts remain cautious about whether the current tense situation can sustainably boost oil prices in the long term, stating that the assassination incident occurred within Iran, which not only increases geopolitical risks but also raises the possibility of oil supply disruptions, leading to the rise in oil prices. Nevertheless, unless the situation further deteriorates and clearly threatens oil output in the region, this supportive effect on oil prices will not be long-lasting.

Analysts at UBS also stated that the escalation of tensions in the Middle East has raised concerns in the market about the rise in crude oil prices. However, if there is no actual supply disruption, geopolitical risk premiums usually do not persistently reflect in oil prices. Currently, due to the absence of supply disruptions, the oil price response is relatively limited.

The OPEC+ committee will assess member countries' compliance with their respective production quotas on Thursday. While the Joint Ministerial Monitoring Committee does not have the authority to directly modify the alliance's formal production strategy, it can propose convening a comprehensive ministerial meeting to make adjustments if market conditions require. Furthermore, these events coincide with the financial reports of major European oil companies. Following BP's announcement on Tuesday of a dividend increase and reporting better-than-expected second-quarter profits, Shell will also release its financial report on Thursday.

U.S. August natural gas futures fell by over 4.2%, to $2.0360 per million British thermal units, with a cumulative decline of over 21.72% in July. However, European natural gas prices continued to rise, with the European benchmark TTF Dutch natural gas futures up by 2.23% to €35.868 per megawatt-hour. ICE UK natural gas futures rose by 2.21% to 80.760 pence per therm

Middle East geopolitical tensions reignite driving risk aversion, coupled with the Fed rate cut boost, jointly boosting gold prices by over 1.6%, achieving the best monthly increase since March.

The weakening of the US dollar and US bond yields supported precious metal prices. COMEX December gold futures rose 1.69% to $2493.4 per ounce at the close, while COMEX September silver futures rose 2.07% to $29.115 per ounce.

Spot gold and spot silver maintained an upward trend throughout the day. Pre-market gold and silver in the US rose rapidly as Hamas leader Haniyeh was assassinated, escalating Middle East geopolitical conflicts and increasing risk aversion. Before the release of the Fed's decision statement (before 2:00 am Beijing time), spot gold rose 0.7% to nearly $2430, and spot silver rose over 0.8%. After the release of the Fed's decision statement, both accelerated their upward movement and hit daily highs, with spot gold rising over 1.6% to surpass $2450 per ounce, and spot silver rising nearly 2.3% to break above $29 per ounce.

Gold soared to its highest monthly closing price ever, rebounding in the past few days

Bob Haberkorn, Senior Analyst at RJO Futures, stated that if the Fed clearly implements more specific rate cut measures, gold prices are expected to climb above $2500. Conversely, if rate cut expectations remain uncertain, gold prices are expected to slightly decline. However, given the current geopolitical tensions and economic concerns, gold prices are expected to bottom around $2400, forming a solid support.

Bank of America stated that although investors are bullish on gold due to Fed rate cut expectations, the market is more optimistic about silver, as silver is a key material in green technologies (such as solar energy and electric vehicles), and the increasing demand for green technologies will drive demand for silver. Silver is more easily affected by manufacturing activities than gold, so silver's performance will be better than gold.

London industrial base metals reversed their consecutive declines and surged across the board on Wednesday. Dr. Copper, an economic indicator, rose nearly 2.82% to $9225 per ton, reclaiming the $9000 integer mark. London aluminum rose nearly 2.97% to $2290 per ton. London zinc rose nearly 1.79% to $2676 per ton. London lead rose nearly 2.41% to $2084 per ton. London nickel rose by about 3.32% to $16604 per ton. London tin rose nearly 4.44% to $30056 per ton