Article by: Tide Research
U.S. stocks closed lower for the third consecutive trading day on Wednesday: the Dow Jones fell 0.77% to 52,380.66, the S&P 500 dropped 0.48% to 7,636.36, and the Nasdaq declined 0.64% to 26,253.34. The VIX stood at 16.41, rising approximately 4.4%. Two factors weighed on the broader market: Brent crude oil surged above $101, fueling inflation concerns, and the U.S. Treasury’s long-term bond buyback program totaled only $6 billion, below market expectations. However, the storage and optical communications sectors strengthened again. Meta’s launch of its AI assistant, Muse, propelled its stock up 6.55%. Apple unveiled its first foldable iPhone, the Duo. Tonight, markets await the U.S. August PPI data and the European Central Bank’s interest rate decision.
U.S. Treasury repurchase volumes fell short of expectations, pushing long-term yields to a three-year high.
The U.S. Treasury announced on Wednesday that it will repurchase up to $6 billion in 10- to 20-year Treasuries on Thursday. The repurchase size is nearly triple the previous amount, but according to a Bloomberg survey, some Wall Street investors had anticipated a range of $7 to $8 billion; the actual $6 billion figure fell at the lower end of expectations. This shortfall directly triggered selling in the bond market.
The 10-year U.S. Treasury yield rose 4.84 basis points to 4.839%, reaching a intraday high of 4.849%, the highest since November 2023; the 2-year U.S. Treasury yield increased 2.54 basis points to 4.419%, hitting a 52-week high; the 30-year U.S. Treasury yield rose 4.35 basis points to 5.291%. U.S. Treasury yields rose across the curve, directly pressuring high-valued assets.
The purpose of Bessent's expanded buyback was to suppress long-term interest rates and alleviate valuation pressure on tech stocks, but the actual scale falling short of expectations intensified market concerns about the Treasury's "limited ammunition." Ultimately, the pricing of long-term rates depends on the inflation trajectory and debt supply; buybacks can only provide short-term liquidity relief.
Brent crude breaks above $101 as Middle East tensions continue to escalate.
Geopolitical risks were another key downward pressure on Wednesday. The Islamic Revolutionary Guard Corps of Iran announced the establishment of a new maritime "sanctions zone." U.S. forces struck an Iranian oil tanker, while Iran attacked U.S. military bases. Escalation in the Middle East pushed Brent crude futures up 3.36% to $101.21 per barrel, marking the first time in over a month that prices surpassed the $100 mark; WTI crude rose 3.25% to $96.05 per barrel, hitting their highest levels since May.
The energy sector was the only gainer among S&P 500 sectors, rising 1.09%. The industrials and consumer discretionary sectors declined 1.51% and 1.39%, respectively, leading the losses.
Trump told media after hours that he expects the conflict with Iran to end after the U.S. midterm elections in November, and that oil prices will take slightly longer than the midterm elections to decline.
Meta releases AI assistant Muse, surging 6.5%; storage and optical communications sectors rally collectively.
Under pressure in the broader market, technology stocks overall declined. NVIDIA fell 0.91%, Apple fell 0.28%, Microsoft fell 0.47%, Amazon fell 1.78%, Google C fell 2.09%, Tesla fell 0.1%, and Broadcom fell 1.13%.
Meta is the only exception, rising 6.55% after officially launching its personal AI agent, Muse, the day before. Muse can autonomously perform tasks on behalf of users, such as sending emails and booking travel. The commercialization of AI applications is gaining financial recognition.
The storage and optical communications sectors surged collectively. SK Hynitz rose 7.05% to a new all-time high, Micron Technology increased 2.75%, SanDisk gained 1.51%, and Western Digital rose 1.04%. In optical communications, MaxLinear climbed 7.53%, Marvell Technology advanced 4.26%, and Corning rose 1.51%. Among components, 18 stocks rose and 12 fell; AMD gained 3.04%, Intel rose 1.69%, and Qualcomm increased 1.33%.
The strength in the storage and optical communications sectors is linked to product developments from companies like SK Hynix and ongoing market focus on AI memory demand. This divergence—where the broader market declines while chip stocks rise—has persisted for three consecutive trading days.
Among Chinese stocks, the Nasdaq China Golden Dragon Index fell 2.09%. Li Auto dropped 4.41%, XPeng fell 3.29%, and Alibaba declined 2.89%.
Apple releases the foldable iPhone Duo, starting at CNY 15,999 in China.
Apple releases its first foldable flagship smartphone, the iPhone Duo. When unfolded, it becomes the thinnest iPhone ever, featuring a dual-camera system and a 7.6-inch Super Retina XDR display that is 50% larger than the iPhone 18 Pro Max. It supports Apple Pencil, and global versions support eSIM only. Starting price is $1,999, with a Chinese mainland price starting at ¥15,999.
Apple's release of a foldable smartphone marks its official entry into the foldable market. Previously dominated by Samsung, Apple's entry will have a structural impact on the global foldable supply chain. Apple's stock dipped slightly by 0.28% on the day, as the market continues to assess the long-term implications of the new foldable product.
Gold reclaimed $4,400, while copper prices on both the London and New York exchanges hit all-time highs.
Spot gold rose 1.06% to $4,401.77 per ounce, reclaiming the $4,400 level; spot silver increased by approximately 2.3%. According to data from the World Gold Council, global gold ETFs attracted $18 billion in August, marking the second-largest monthly inflow on record.
In industrial metals, London copper closed at $14,728 per ton, reaching a intraday high of $14,779 per ton, while New York copper touched $6.894 per pound, both setting new all-time highs. Demand from AI computing infrastructure development and global grid investments continues to drive copper prices higher.
Bitcoin is trading at approximately $79,200, up about 1% in the last 24 hours. Ethereum is trading at approximately $2,500.
Today's Focus
U.S. August PPI data. This is the most important economic data tonight. PPI is a leading indicator for CPI; if PPI exceeds expectations, it will further intensify concerns about rate hikes; if PPI weakens, it may alleviate some inflationary pressures. Oil prices breaking above $100 have added new upward pressure on inflation.
European Central Bank interest rate decision. Markets expect the ECB to raise rates by 25 basis points. Amid a global shift toward hawkish monetary policies by central banks, the ECB’s rate path will significantly influence the euro and dollar movements, which in turn will impact U.S. Treasuries and U.S. stocks.