US Stock Market Outlook | Three major stock index futures fall together, panic index soaring, global stock markets face "Black Monday"

Pre-Market Market Trends

1. Before the market opened on August 5th (Monday), the futures of the three major U.S. stock indexes fell together. As of the time of publication, Dow Jones futures fell by 2.54%, S&P 500 index futures fell by 3.73%, and Nasdaq futures fell by 5.26%.

1. At the time of publication, the German DAX index fell by 3.25%, the UK FTSE 100 index fell by 3.02%, the French CAC 40 index fell by 2.71%, and the Euro Stoxx 50 index fell by 3.23%.

1. At the time of publication, WTI crude oil fell by 1.73% to $72.25 per barrel. Brent crude oil fell by 1.50% to $75.66 per barrel.

Market News

Global stock markets hit by "Black Monday"! Due to weak U.S. employment and economic data, combined with the surge of the Japanese yen and geopolitical tensions in the Middle East, the global financial markets experienced a huge shock on Monday. Major stock markets in the Asia-Pacific region fell across the board. The Nikkei 225 index closed down by 12.4%, marking the largest drop since 1987 and wiping out all gains so far this year; the Nikkei 225 index fell by 26% from its July high, while the TOPIX index fell by 24% from its record level, both triggering circuit breakers multiple times on Monday. South Korea's main stock index, the KOSPI, closed down by 8.78%; the "Korean version of Nasdaq," the KOSDAQ index, fell by over 11%. At the time of publication, the futures of the three major U.S. stock indexes were all down, and the "fear index" CBOE Volatility Index (VIX) surged by nearly 122%, while major European stock indexes also fell across the board.

Can the turbulent stock market find some relief this week? These key events may be crucial. For months, the market's views on when the Federal Reserve will cut interest rates have been fluctuating, but now the market seems to have reached a consensus - the Fed will cut rates next month. However, a series of weaker-than-expected economic data, especially the July employment report, triggered the "Sam rule," leading to speculation in the market that the Fed's current policy rate may be too tight. With the market's expectation of a Fed rate cut in September fully priced in, the new market debate has shifted to how much the Fed will cut rates by and which data points will drive this change Federal Reserve officials Guersby, Daly, and Barkin plan to make public statements in the coming week. This week's economic data is relatively flat, with service sector activity and initial jobless claims expected to be the main focus for investors. On the corporate side, Airbnb, AMD, Disney, and Eli Lilly will release their latest quarterly earnings reports.

Wall Street's new script for rate cuts: Will the Fed intervene urgently? Market sentiment is rapidly changing, with increasing calls for an "emergency rate cut" by the Federal Reserve. Traders believe there is a 50% chance that the Fed will cut rates by 25 basis points within a week. Wall Street banks are also quickly warming up to the expectation of Fed rate cuts. JPMorgan Chase and Citigroup both expect the Fed to cut rates by 50 basis points in September and November; Morgan Stanley believes the Fed will cut rates by 25 basis points three times this year, with nonfarm payroll additions needing to drop to 100,000 for a 50 basis point cut in September; Barclays expects the Fed to cut rates by 25 basis points in September, November, and December, deeming a 50 basis point cut in September as unreasonable; Bank of America has moved up its expectation for the Fed's first rate cut from December to September by 25 basis points; while Nomura Securities believes that the expectation of a 50 basis point cut by the Fed in September is overblown, citing signs of economic slowdown in the U.S., but not as bad as the market anticipates.

Goldman Sachs raises U.S. economic recession expectations, expects Fed to cut rates by only 25 basis points in September. Goldman Sachs economists led by Jan Hatzius have raised the likelihood of a U.S. economic recession in the next year from 15% to 25%, but also stated that there are several reasons not to worry about a recession even if the unemployment rate rises. The Goldman Sachs economists stated: "We still believe that the risk of an economic recession is limited." They mentioned that the economy continues to be "overall good," with no major financial imbalances, ample room for the Fed to cut rates, and the ability to act swiftly if needed. Hatzius's team expects the Fed to cut rates by 25 basis points in September, November, and December. They said: "Our forecast assumes that job growth will rebound in August, and the FOMC will judge that a 25 basis point rate cut is sufficient to address any downside risks. If we are wrong and the August employment report is as weak as July's, then the likelihood of a 50 basis point rate cut in September is high." They added that they doubt there is a rapid deterioration risk in the labor market, partly because job vacancies indicate continued strong demand and there has been no clear shock to trigger an economic downturn.

"Wall Street Oracle" bullish on U.S. stocks: Downturn is a buying opportunity. Fundstrat's Head of Research, Tom Lee, stated that market pullbacks are good buying opportunities for investors in U.S. stocks, as there are signs indicating there is more room for upside in the market. Lee mentioned that the recent sell-off may be driven by various factors, including uncertainty surrounding the U.S. presidential election, ongoing geopolitical tensions, and persistent concerns about an economic recession. He outlined four reasons to explain why the market may have just experienced a "normal pullback," including: many catalysts on the horizon for the U.S. stock market, such as more Fed guidance on rate cuts, cooling inflation; Technical signals indicate limited downside; the potential rate cut by the Fed will be a turning point for the market; small-cap stocks are sending bullish signals.

Individual Stock News

Apple (AAPL.US) plunges nearly 8% in pre-market trading! Berkshire significantly reduces its holdings. Warren Buffett's Berkshire Hathaway disclosed on August 4th that by the end of the second quarter, the company's holdings of Apple shares had been drastically reduced from 789 million shares to about 400 million shares, a decrease of nearly 50%. Buffett hinted at the May shareholders' meeting that this was for tax reasons, suggesting that selling "a little bit of Apple" stock this year would be beneficial for Berkshire's shareholders in the long run if the U.S. government raises capital gains taxes to cover the growing budget deficit. However, the scale of the sell-off now indicates that this may not just be about tax savings.

Nvidia (NVDA.US) delays the release of its new AI chip due to design flaws. How significant is the impact? Due to design flaws, Nvidia has informed its customers that the new Blackwell B200 chip will be delayed for three months or longer, with mass shipments postponed to Q1 of next year. The Blackwell chip was originally scheduled to begin mass production in October 2024, and if the delay pushes it to April 2025, it will directly impact Nvidia's quarterly revenue. In response, Nvidia told the media that the strong demand for the Hopper chip and the production schedule for the Blackwell chip have not changed. This means that even if the B200 is delayed, the impact on Nvidia's revenue may not be particularly significant, as the market demand for the Hopper chip remains strong. As of the time of writing, Nvidia's pre-market trading on Monday saw a sharp drop of over 13%.

Major U.S. tech stocks fell in pre-market trading on Monday. In addition to the above-mentioned Apple and Nvidia, on Monday pre-market, TSMC (TSM.US) fell nearly 10%, Broadcom (AVGO.US), Tesla (TSLA.US) fell nearly 9%, Amazon (AMZN.US), Micron Technology (MU.US), Meta (META.US) all fell over 7%, Qualcomm (QCOM.US), Google (GOOGL.US), Intel (INTC.US) fell over 6%, Microsoft (MSFT.US) fell over 5%, Netflix (NFLX.US) fell nearly 4%.

Carlyle Group (CG.US) reports a 131% year-on-year increase in Q2 total revenue, with a decline in private equity business profits. The financial report shows that Carlyle's Q2 total revenue was $1.07 billion, a 131% increase from $462 million in the same period last year. Net income attributable to common stockholders was $148 million, compared to a net loss of $98.4 million in the same period last year. Distributable earnings were $343 million, lower than $389 million in the same period last year; earnings per share were $0.78, below the market expectation of $0.83. Carlyle stated that the poor performance was due to a decrease in profits from the private equity division's exits. This business is the largest contributor to Carlyle's distributable earnings and is the most well-known business of the company Sohu (SOHU.US) reported a revenue of $172 million in Q2 2024, a 13% year-on-year increase exceeding expectations. The financial report shows that Sohu's total revenue in the second quarter was $172 million, a 13% increase from the same period in 2023 and a 24% increase from the previous quarter. Among them, brand advertising revenue was $20 million, a 24% increase from the previous quarter; online game revenue was $147 million, a 25% increase from the previous quarter. Sohu's net loss under non-US GAAP attributed to the company was $34 million, as the company increased more forward-looking investments in expanding platform scale and user acquisition.

Important Economic Data and Event Preview

At 20:30 Beijing time, FOMC voter and Chicago Fed President Guersby will be interviewed in 2025.

At 22:00 Beijing time, the US July ISM Non-Manufacturing PMI will be released.

At 05:00 the next day, FOMC voter and San Francisco Fed President Daly will deliver a speech in 2024.

Earnings Preview

Tuesday morning: Palantir (PLTR.US)

Tuesday pre-market: Caterpillar (CAT.US), Uber (UBER.US), Tuniu (TOUR.US)