Breakfast | As credit concerns hit the US stock market: bank stocks plummet, chip stocks rise

Market Overview Concerns over silver loans impact US stocks, with all three major indices closing down for the first time this week, among which the S&P and Nasdaq fell over 1% during the day; the financial sector dropped nearly 3%, leading the S&P, with two regional banks Zions and Western Alliance disclosing bad loan issues, both closing down over 10%, and the regional bank index fell over 6%; the chip index rose for two consecutive days, with Micron up over 5% and Nvidia up over 1%, but TSMC turned down after initially rising over 2% in US trading; after confirming a cloud agreement with Meta and disclosing better-than-expected performance guidance, Oracle rose over 3%. US Treasury prices rose during the day, with the yield on the ten-year Treasury bond falling below 4.0% again, reaching a six-month low, while the yield on the two-year Treasury bond hit a three-year low. The US dollar index fell for three consecutive days, hitting a new weekly low, while the offshore yuan approached the 7.12 mark, reaching a new high for the month; Bitcoin fell nearly 4% during the day, dropping below $108,000, while Ethereum once fell over 5%. Gold and silver both hit historical highs. Gold reached a new high for four consecutive days, breaking $4,300 during the day for the first time, with futures gold rising over 3% and futures silver rising over 4% at one point. Crude oil hit a new five-month low for three consecutive days, with US EIA crude oil inventories increasing instead of decreasing, and crude oil fell nearly 2% during the day. Copper fell for three consecutive days. During the Asian session, the Shanghai Composite Index fluctuated and closed up, with total market turnover below 2 trillion, rebound in dividend assets, the Hang Seng Tech Index fell over 1%, new energy vehicle stocks plummeted, government bonds showed divergence, and commodities rose. Key News The Ministry of Commerce of China responded to whether there will be recent talks between China and the US: China has always maintained an open attitude towards equal consultations based on mutual respect; the Ministry of Foreign Affairs responded to the US intention to extend the suspension of tariffs on China in exchange for China delaying the implementation of rare earth export controls; is China's purchase of Russian oil part of the China-US trade negotiations? The Ministry of Foreign Affairs: strongly opposes the US casually using China as a topic. Two US banks disclosed loan fraud and bad debt issues, triggering a credit crisis and a sell-off, with the US regional bank index plummeting nearly 7% during the day, and Jefferies falling 11%. The Federal Reserve shows divergence in interest rate cuts: Waller advocates for cautious rate cuts, while Milan calls for a more aggressive 50 basis point cut; "New Federal Reserve News Agency": government shutdown leads to data disruption, making it harder to bridge the divide within the Federal Reserve. Oracle disclosed that orders have exceeded $500 billion, expecting AI infrastructure project gross margins to reach 35%, with fiscal year 2030 revenue of $225 billion exceeding analyst expectations, and the stock price rose over 5% at one point. OpenAI's computing power ambitions continue to expand, reportedly capital expenditures on Oracle servers in the coming years will exceed investments in Microsoft. Demand for AI chips remains strong, with TSMC's Q3 net profit hitting a historical high, growing 39% above expectations, and capital expenditures reaching $9.7 billion; during the earnings call: confidence in the AI trend is "increasing," raising the annual sales forecast and the lower limit of capital expenditures Apple's touch version of the MacBook Pro may debut next year, attracting attention with its OLED screen and notchless design. Silver is running low, investors are frantically buying tax-exempt gold and silver coins, and the Royal Mint's production capacity is under pressure, leading the London precious metals market into a "perfect storm." The U.S. government shutdown continues, with the Senate rejecting the temporary funding bill for the tenth time. Initiated by Russia, lasting 2.5 hours, the U.S. and Russian presidents have spoken for the first time in nearly two months, with Trump set to meet Putin in Budapest. The crypto market has witnessed the largest "fat finger" error in history, with stablecoin issuer Paxos destroying $300 trillion worth of tokens. Market Report U.S. and European Stock Markets: The S&P 500 fell 0.63%, closing at 6629.07 points. The Dow Jones dropped 0.65%, closing at 45952.24 points. The Nasdaq decreased by 0.47%, closing at 22562.537 points. The European STOXX 600 index rose 0.69%, closing at 571.66 points. A-shares: The Shanghai Composite Index rose 0.1%, closing at 3916.23 points, the Shenzhen Component Index fell 0.25%, closing at 13086.41 points, and the ChiNext Index rose 0.38%, closing at 3037.44 points. Bond Market: By the end of the bond market, the yield on the U.S. 10-year benchmark Treasury bond was about 3.97%, down about 6 basis points during the day; the yield on the 2-year U.S. Treasury bond was about 3.42%, down about 8 basis points during the day. Commodities: WTI November crude oil futures fell 1.39%, closing at $57.46 per barrel. Brent December crude oil futures fell 1.37%, closing at $61.06 per barrel. COMEX December gold futures rose 2.45%, closing at $4304.6 per ounce. COMEX December silver futures rose 3.73%, closing at $53.296 per ounce. COMEX December copper futures fell 0.31%, closing at $4.999 per pound. News Details Global Highlights The Chinese Ministry of Commerce responds intensively regarding U.S.-China talks, rare earth export controls, and stable foreign trade policies. Regarding whether the two sides will hold a new round of economic and trade talks soon, Ministry of Commerce spokesperson He Yongqian stated that China has always maintained an open attitude towards equal consultations based on mutual respect. In response to the rare earth export control measures, the Ministry of Commerce stated that China will continuously optimize the licensing process and actively consider facilitating measures such as general licenses and license exemptions The U.S. intends to extend the suspension period of tariffs on China in exchange for China delaying the implementation of rare earth export controls, China's Ministry of Foreign Affairs responds. According to The Paper, at a regular press conference of the Chinese Ministry of Foreign Affairs on Thursday, a reporter asked about U.S. Treasury Secretary Mnuchin's hint that the U.S. might extend the suspension period for tariffs on Chinese goods in exchange for China delaying its rare earth export control plan, and mentioned that U.S. President Trump is prepared to meet with Chinese leaders in the near future. Foreign Ministry spokesperson Lin Jian stated, "We have repeatedly clarified our position on rare earth export controls and China-U.S. economic and trade issues." Is China's purchase of Russian oil part of the China-U.S. trade negotiations? Foreign Ministry: Firmly opposes the U.S. using China as a bargaining chip. According to The Paper, at the regular press conference of the Foreign Ministry, a reporter asked whether China's purchase of Russian oil is part of the ongoing China-U.S. trade negotiations, following President Trump's statement that he has received assurances from Indian Prime Minister Modi that India will stop purchasing oil from Russia. Trump added that it is now time for China to take similar action. What is China's position on this? Lin Jian stated that China has repeatedly expressed its position on this issue, emphasizing that China's normal economic and energy cooperation with countries around the world, including Russia, is legitimate and lawful. The U.S. approach is typical unilateral bullying and economic coercion, seriously undermining international economic and trade rules and threatening the security and stability of global industrial and supply chains. Lin Jian emphasized that China has consistently maintained an objective and fair stance on the Ukraine crisis, which is evident to all. "We firmly oppose the U.S. using China as a bargaining chip and firmly oppose the illegal unilateral sanctions and extraterritorial jurisdiction imposed on China. If China's legitimate rights and interests are harmed, China will resolutely retaliate and firmly safeguard its sovereignty, development, and security interests." Credit crisis at two banks triggers sell-off, U.S. regional bank index plunges nearly 7% during trading, Jefferies plummets 11%. Two U.S. regional banks, Zions and Western Alliance, disclosed loan fraud and bad debt issues, raising widespread investor concerns about credit quality. The regional bank index fell 6.2% on Thursday, with financial stocks broadly weakening. Investment bank Jefferies, which has exposure to the previously bankrupt auto parts supplier First Brands, saw its stock price drop by 10.62%. Although some analysts believe the risks are still isolated incidents, market sentiment has clearly turned cautious, with concerns that a broader credit crisis is brewing. Divergence in the pace of Federal Reserve rate cuts: Waller advocates for cautious rate cuts, Milan calls for a more aggressive 50 basis point cut. Waller advocates maintaining a cautious rate cut pace of 25 basis points each time to address the weak labor market, while interim Federal Reserve Governor Milan calls for a more aggressive 50 basis point cut Milan is concerned that overly tight policies under external shocks will amplify negative consequences. The options market bets that the Federal Reserve will "do more," with at least one 50 basis point rate cut among "two cuts" by the end of the year. Recently, the options market linked to the Secured Overnight Financing Rate (SOFR) shows that traders are positioning for a 50 basis point rate cut at the Federal Reserve's meetings in October or December. Open interest in December SOFR options has surged significantly. This bullish sentiment is also reflected in the spot market, where the yield on the U.S. two-year Treasury bond recently fell to around 3.5%, a year-to-date low. “New Federal Reserve News Agency”: Government shutdown leads to data flow interruption, disagreements within the Federal Reserve may be harder to bridge. Nick Timiraos writes that Federal Reserve officials already had disagreements about the economic outlook, and the fiscal impasse caused by the U.S. government shutdown has interrupted the release of key economic data, making it even more complicated to reach consensus on interest rates. The absence of employment and inflation data leaves decision-makers in a "blind flying" state, relying on private data and corporate feedback to piece together the economic picture. Oracle discloses that orders have exceeded $500 billion, expecting AI infrastructure project gross margins to reach 35%, with stock prices rising by 5% at one point. Oracle executives cited an example at the annual investor conference of a six-year AI infrastructure project with total revenue of $60 billion, where gross margins could reach 35%. Oracle expects revenue to reach $225 billion by fiscal year 2030, higher than analysts' expectation of $198 billion. Market confidence in the profitability of AI infrastructure business has increased, with Oracle's stock closing up over 3%. OpenAI's computing power ambitions continue to expand: in the coming years, capital expenditures on Oracle servers will exceed investments in Microsoft. According to media reports citing informed sources, OpenAI has prepared a budget of up to $450 billion for server expenditures through 2030. Among these, the company's planned spending on leasing servers from competitors like Oracle will exceed its investments in Microsoft from now until the end of 2030. Demand for AI chips remains hot, TSMC's Q3 net profit hits a record high, growing 39% above expectations, with capital expenditures reaching $9.7 billion; Earnings call: Confidence in the trend of artificial intelligence is "increasing," raising the annual sales forecast and capital expenditure lower limit TSMC's Q3 net profit was NT$452.3 billion, a year-on-year increase of 39%, exceeding the estimated NT$405.47 billion; the gross margin for the third quarter was 59.5%, continuing to improve from 58.6% in the previous quarter, and higher than the analyst estimate of 57.1%. TSMC stated that sales will grow close to the mid-30% level in 2025, previously expecting revenue growth of about 30%. At the same time, TSMC expects full-year capital expenditures to be between $40 billion and $42 billion, an upward adjustment from the previous expectation of $38 billion to $42 billion. Apple's touchscreen MacBook Pro may debut next year, with OLED screen + no notch design attracting attention. Media reports indicate that Apple plans to launch its first touchscreen MacBook Pro by the end of 2026 or early 2027, marking a complete shift from its resistance to touchscreen laptops since the Jobs era. The new model will be equipped with the M6 chip, feature an OLED screen, and eliminate the notch design, with prices slightly higher than the current version. Apple has not planned more touchscreen Mac products, intending to first observe market reactions before deciding whether to expand the lineup. Silver is running out! Investors are frantically buying tax-exempt silver coins, Royal Mint's production capacity is under pressure, and the London precious metals market is caught in a "perfect storm." The buying frenzy among retail investors has forced the Royal Mint to ramp up production, but it still had to warn customers of possible delays in silver deliveries. Meanwhile, gold and silver traders on the streets of London are busy dealing with the influx of retail investors and have even had to enhance security measures. The U.S. government "shutdown" continues, Senate rejects temporary funding bill for the tenth time. On October 16 local time, the U.S. Senate failed again to advance the Republican temporary funding bill with a vote of 51 to 45. After a 2.5-hour call initiated by Russia, the U.S. and Russian presidents speak for the first time in nearly two months, Trump will meet with Putin in Budapest. According to CCTV news, on the day before Ukrainian President's visit to the White House to discuss "Tomahawk" missiles, Russian President Putin and U.S. President Trump had a phone conversation. Both sides considered the call productive. Trump emphasized the need to end the conflict quickly, while Putin reiterated that the "Tomahawk" missiles would not change the situation. Trump proposed a meeting in Budapest, which Putin supported. Trump told Putin that he would consider the Russian president's concerns during his meeting with Zelensky the next day. The crypto world has witnessed the largest "fat finger" error in history, amounting to $300 trillion. Within just 30 minutes, stablecoin issuer Paxos minted 300 trillion PYUSD stablecoins pegged to the dollar at a 1:1 ratio, and then sent all tokens to an inaccessible wallet address for destruction Based on its dollar-pegged value, the total amount of destroyed tokens reaches approximately $300 trillion, which is more than twice the total GDP of all countries in the world. Domestic Companies Minister Wang Wentao meets with Apple CEO Tim Cook. The two sides exchanged views on Sino-U.S. economic and trade relations and Apple's business development in China. JP Morgan upgrades Pop Mart to "Overweight," new IP "Star People" rapidly rises, Labubu's production capacity increased tenfold but still sold out. JP Morgan believes that Pop Mart has demonstrated its resilience not only through the continued popularity of Labubu and the success of "Star People," but also through its global layout and strong pricing power, showcasing its ability to withstand external risks. The current 20 times expected price-to-earnings ratio for 2026 is quite attractive compared to its high growth prospects. Resigning early as chairman, Cao Dewang responds: I haven't reduced my holdings at all, stepping down is better for the company. This legendary entrepreneur stated to the media that he has no health issues and chose to step down at this age because he believes it is "better for Fuyao" and wants "the new generation to take over." Nio responds quickly to allegations. The Government of Singapore Investment Corporation (GIC) accused Nio of inflating revenue and profits through Wuhan WeNeng Battery Asset Co., Ltd., a joint venture with its partners, misleading investors and causing GIC to suffer investment losses. In response to this allegation, Nio clarified to Wall Street Insight that this case is not a new incident but stems from a short-selling report released by the short-selling firm "Hindenburg Research" in June 2022. Nio emphasized that the report itself is baseless, filled with numerous inaccuracies, unfounded speculation, and misleading conclusions. Overseas Macro Trump "pressures" the U.S. Supreme Court on a key "tariff ruling," personally attending the hearing on November 5! Although the U.S. President has visited the Supreme Court for events such as the swearing-in ceremony of justices, it is extremely rare for him to be present during oral arguments. Analysts believe that this ruling is likely to determine the fate of tariffs, a cornerstone of Trump's economic agenda. If Trump loses, the average effective tariff rate in the U.S. could be reduced by at least half from 16.3%, and he may be forced to refund hundreds of billions of dollars in taxes, potentially overturning preliminary trade agreements Trump reached with some countries. "AI boom" or "AI bubble"? Ten AI unicorns, with valuations increasing by $1 trillion in a year, and VCs investing over $200 billion in a year, with profits at zero. These ten companies include OpenAI, Anthropic, xAI, Perplexity, Scale AI... Since the beginning of this year, they have collectively attracted over $200 billion in venture capital funding Two-thirds of the total annual investment in U.S. VC. However, they are almost all in a state of loss. Song Xuetao: The core of the change in the U.S. stock market is the "AI narrative challenge," and the "left hand AI, right hand gold" strategy has become the most crowded in the market. The key to the current market change is not trade friction, but the hidden worries of the AI narrative and systemic fragility. The increasing debt financing of the giants may push the AI narrative towards a debt bubble. In response to this change, the mainstream market strategy has shifted to a "left hand AI, right hand gold" barbell strategy, placing 50% of bets on both "believers" and "non-believers," which is the best hedge against uncertainty in a stagflation environment. "Subprime crisis" reappearing? Wall Street's "cockroach" debate: PE and banks blame each other. The bankruptcy of two American companies has sparked an intense public debate on Wall Street. JP Morgan's Dimon warned that "when you see one cockroach, there may be more," implying systemic risks in the $1.7 trillion private credit market. This statement triggered a strong backlash from private equity firms, with Apollo, Blackstone, and others arguing that banks chasing high-risk borrowers are the "culprits." French Prime Minister Lecornu survives the no-confidence motion, avoiding another government collapse, market temporarily breathes easier. French Prime Minister Lecornu withstood the test, bringing some relief to the political crisis that nearly triggered early elections this week, allowing France to temporarily maintain its plans to address the massive budget deficit. However, with the strengthening of parliamentary power and clear divisions among various parties, the future direction of budget negotiations and pension reforms remains uncertain. Bessent: As long as the Bank of Japan's measures are appropriate, the yen will be at a reasonable level. Affected by Japan's unstable political situation and the recent cooling of interest rate hike expectations from the Bank of Japan, the yen has significantly depreciated against the dollar this month, once hitting an eight-month low. Bessent stated that if the Bank of Japan's policies are appropriate, the yen will stabilize at an appropriate level. Compared to Bessent's strong tone in August this year, stating that the Bank of Japan is "behind the curve" in dealing with inflation, its current attitude has clearly softened. Overseas Companies In 9 months in office, the Trump family has made $1 billion just from the crypto space. Cryptocurrency has become the core source of wealth for the Trump family: sales and transaction fees from Trump Coin and Melania Coin have generated approximately $427 million in revenue; sales of WLFI tokens issued by Trump's son's company have reached $550 million; the Trump Media Technology Group has established a Bitcoin fund, which has now generated over $3 billion in cash flow HSBC significantly raises NVIDIA's target price, reason: TSMC's capacity allocation far exceeds expectations, OpenAI's "closed-loop transaction". HSBC upgraded NVIDIA's rating to "Buy," with the target price soaring from $200 to $320. The main basis is two signals: first, NVIDIA's advanced packaging capacity quota at TSMC CoWoS jumped from 480,000 units to 700,000 units, a year-on-year increase of 140%; second, the formation of a "closed-loop transaction" with OpenAI and the Stargate project, expected to bring in $251 billion to $400 billion in GPU revenue. The future of the automotive industry chain lies in "3A": autonomous driving, humanoid robots, and AI data centers. Morgan Stanley believes that the era of solely focusing on automotive sales data is coming to an end, and the investment value of the automotive industry chain will be anchored in companies with a "second growth curve." If traditional vehicle sales companies can achieve substantial breakthroughs in the "3A" field, they are expected to unlock a new market value space of up to $2-3 trillion. Mysterious "Indian whale" stirs the commodity market, iron ore trade volume approaches Glencore! Singapore-based Radiant World is expected to reach an iron ore trading volume of 65-70 million tons this year, approaching industry giant Glencore's 75 million tons last year, becoming one of the major players in global commodity trading outside of oil. This trading company, controlled by 45-year-old Indian Pinkesh Nahar, has expanded nearly tenfold in scale over the past decade. Today's News Preview U.S. net long-term capital inflow for August. U.S. new housing starts and building permits for September. Eurozone CPI for September. St. Louis Fed President James Bullard speaks.