Author: Tide Research
After barely stemming the decline the previous day with the Treasury's long-term bond repurchase, the US stock market was pushed back overnight by rising long-term yields and oil prices. The Dow Jones Industrial Average plummeted 703.84 points, a drop of 1.32%; the S&P 500 fell 0.87% to 7641.16 points; the Nasdaq Composite fell 1.00% to 26067.17 points, with the Nasdaq 100 marking its fifth consecutive daily decline. The VIX rose 7.51% to 16.38, its biggest one-day gain since the end of July. The market's signal is clear: the Treasury can temporarily ease liquidity in the bond market, but as long as the 30-year Treasury yield edges back towards its highs, high-valuation assets will struggle for a genuine recovery. This correction is not due to a single tech stock drag; surging oil prices have reignited inflation fears, Walmart's earnings exposed pressure on the consumer side, and the "Magnificent Seven" tech giants retreated broadly. Only storage, optical communication, cryptocurrency, and resource sectors retained some relative strength.
Long-Term Bond Pressure Returns; Treasury Intervention Lasts Only a Day
The effect of the US Treasury's expanded long-term bond repurchase lasted only one day. Overnight, the yield on the 10-year Treasury note rose 4.35 basis points to 4.6902%, already above the level before the Treasury announced the intensified repurchases. The yield on the 30-year Treasury note rose about 4 basis points to around 5.26%, almost completely recouping Wednesday's losses and nearing its August 18 peak of 5.3361%, a near 20-year high. The yield on the 2-year Treasury note rose 1.88 basis points to 4.1811%.
This is precisely the market's biggest concern. Repurchases can improve short-term liquidity in the long-term bond market, but they cannot change the structural pressures of US debt scale, fiscal deficits, sticky inflation, and AI capital expenditure competing for funds. The US federal debt has exceeded $40 trillion, more than doubling in a decade. Tech companies are raising substantial funds for AI data centers, while the Treasury needs to continuously issue debt, with both demands pressing on long-term interest rates. Treasury Secretary Besant's statement that "repurchases can still be increased" not only failed to stabilize the market but made investors realize the Treasury itself has no good solution for long-term bonds. If repurchases could solve the problem, there would be no need to repeatedly hint "more can be added."
The US Dollar Index staged a V-shaped reversal, rising as much as 0.38% from its daily low. The Japanese Yen depreciated about 0.6% intraday, and the previous strength of the offshore Renminbi also cooled. The currency performance indicates the market has not fully entered a dollar-selling mode; it's more like demanding renewed risk compensation for long-term debt.
Surging Oil Prices Rekindle Inflation Fears, Pressuring Both Energy and Consumption
The second main theme overnight was oil prices. Trump's threats of stronger sanctions against Iran, coupled with risks to transport through the Strait of Hormuz, sent WTI crude futures up 2.33% to settle at $87.83 a barrel, while Brent crude futures rose 2.36% to $93.78 a barrel, both hitting their highest levels since July 24. The impact of rising oil prices extends far beyond the energy sector itself; more importantly, it undermines market confidence in falling inflation, pushing up the risk premium on long-term interest rates. The Treasury had just suppressed long-term bonds one day, and the next day oil prices brought the inflation trade back.
Rising oil prices erode household disposable income, and pressure on the consumer side is simultaneously emerging. Walmart was the biggest drag on the Dow overnight. While its Q2 revenue of $187.94 billion and adjusted EPS of $0.81 both beat market expectations, its stock price still plunged over 9%. The market's real concern is that US comparable store sales growth slowed to 2.6%, its lowest in over six years, and its full-year profit guidance fell below market expectations. Walmart's significance isn't just about a single company's earnings; as the largest US retailer, it reflects the actual purchasing power of middle- and low-income consumers. Transaction volumes can be maintained, but the average transaction amount is falling, indicating more cautious consumer spending. The retail recovery expectations brought by Target's earnings the previous day were not sustained by Walmart's report, returning the consumer sector to fundamental differentiation.
Moderna Plunges 23% After Soaring, Tech Sector Continues to Diverge
Moderna plunged over 23% on Thursday, just one day after surging nearly 180% due to the success of its mRNA cancer vaccine Phase III trial. Merck & Co. also pulled back about 5%. The 180% surge itself priced in extremely high expectations, with the market directly pricing "Phase III trial success" as "commercialization success." However, the journey from successful trials to approval, market launch, and generating stable cash flow is long. Funds choosing to cash out quickly after Wednesday's surge indicates short-term speculative sentiment is fading faster than expected.
Moderna's plunge was just the tip of the iceberg for tech stock pressure that day; what really dragged down the indices was the collective weakness of the "Magnificent Seven." All seven giants were broadly lower overnight, with Amazon falling over 2%, leading declines among large-cap tech stocks, and Tesla pulling back significantly. The mega-caps did not provide a cushioning force during the broader market decline. However, semiconductors did not fall across the board; storage and optical communication stocks bucked the trend. Marvell rose 5.8%, Lumentum gained 6.2%, and Micron rose 3.97%. Their commonality lies in having specific industry catalysts: Marvell supported by Google's custom AI chip collaboration logic, Micron boosted by a $10 billion R&D investment plan over the next decade. But this does not mean AI hardware pressures have disappeared. OpenAI's recent revenue growth slowdown, Anthropic's IPO sprint, and Broadcom seeking over $60 billion in debt financing are all shifting the pricing narrative for the AI industrial chain from "order growth" to "whether capital expenditure can be sustained." The market is starting to ask more detailed questions: who has real cash flow, and who is just financing-driven? Funds haven't left the entire AI chain; they've just become stricter with their selection criteria.
Bitcoin Breaks $72,000; Gold Trades Around $4,500
Digital currencies surged for a second consecutive day. Bitcoin broke through $72,000 for the first time since early June, gaining about 5% intraday and 15% cumulatively this week. Ethereum gained over 20% over two days. Gold fell below $4,500 at one point before recovering intraday losses, gaining over 2% from its daily low. Spot gold rose 0.08% to settle at $4,519.36 per ounce, while spot silver rose 1.16% to $68.09 per ounce. Gold is seesawing around $4,500, supported by geopolitical risks and a weaker dollar, but gains are capped by the rebound in Treasury yields.
China Concept Stocks Focus Turns Back to Earnings
Alibaba's Q2 revenue grew 9% year-over-year to 268.95 billion yuan ($36.8B), slightly beating expectations. However, investments in AI infrastructure drove up capital expenditures, with free cash flow net outflow widening to 44.7 billion yuan ($6.1B) for the quarter. The earnings call disclosed that AI-related product Annual Recurring Revenue (ARR) exceeded 49.5 billion yuan ($6.8B), and Pingtouge's chips are expected to ramp up in the second half. Alibaba Cloud's external commercial revenue grew 45% year-over-year, with AI-related revenue growing triple-digit for the 12th consecutive quarter, indicating AI cloud revenue is materializing, but the capital expenditure cycle weighs on short-term cash flow. Unitree Robotics fell over 18% on its second trading day. Founder Wang Xingxing mentioned commercialization still requires time, shifting the robotics sector's pricing from scarcity-based to execution capability-based.
Today's Focus
The market's focus on Friday lies in two directions.
First, whether long-term Treasury yields can stabilize. After the Treasury's repurchase effect faded quickly, whether the 30-year yield can stabilize below 5.3% will directly determine the room for tech stock recovery.
Second, Fed Chair Wash's speech at the Jackson Hole Economic Policy Symposium. Wednesday's FOMC minutes already leaned hawkish. Wash's speech will set the tone for the September meeting. If she continues emphasizing inflation risks, rate hike expectations could rise further; if she mentions economic downside risks, market sentiment may find some respite.
The core signal from overnight US stocks is the market confirming the Treasury's bond market rescue can only buy time, not change the trend. Going forward, long-term bonds are the master switch, oil prices are the inflation switch, and a genuine tech stock recovery depends on whether the Philadelphia Semiconductor Index (SOX) and the Magnificent Seven can both rebound.
