Authors:Bao Yilong, Zhang Yaqi, Li Jia
Geopolitical risks reignited, a surge in oil prices reignited inflation pressure, and U.S. stocks closed lower under pressure, with market focus shifting to Friday's Nonfarm Payrolls report.
Iranian state media disclosed a draft management plan for the Strait of Hormuz, the content of which was more stringent than market expectations. Brent crude rose to $83 per barrel during the session, breaking the previous downtrend formed by optimistic expectations for U.S.-Iran negotiations.
Rising oil prices rekindled inflation concerns, and market expectations for a Fed rate hike within the year subsequently heated up. U.S. Treasury yields rose across the board, the dollar strengthened, and the three major U.S. stock indices all closed lower.
The S&P 500 index fell for a second consecutive session, with the Dow leading the declines, dropping more than 0.8%. Memory chip stocks SanDisk and Western Digital plunged due to disappointing earnings outlooks, becoming one of the biggest drags on the index.
Meanwhile, Google's issuance of $25 billion in corporate bonds created additional pressure on the U.S. Treasury market with its massive new supply, pushing the yield on the 10-year U.S. Treasury note up 5 basis points to 4.66%.
Wall Street News previously mentioned that significant new details emerged about the new navigation agreement for the Strait of Hormuz, which Iran and Oman plan to sign, indicating Iran seeks to control the strait. Moreover, Iran has already taken action to strike "enemy targets" near the strait.
Iran's FARS News Agency reported on Thursday, local time, that Iran's parliament is reviewing the agreement. According to the agreement, U.S. and Israeli vessels would be banned from passing through the Strait of Hormuz, and countries that have "caused damage to Iran" would also be unable to obtain passage permits for the strait.
After the above news emerged, market concerns about global energy transportation risks rapidly escalated. Towards the end of early U.S. trading on Thursday, international crude oil futures expanded their gains significantly. U.S. WTI crude once rose above $78 per barrel, up nearly 4% on the day; Brent crude approached $83 per barrel, up over 4% intraday.
Meanwhile, another FARS report stated that the Iranian navy had struck "hostile targets" at the entrance to the strait. According to CCTV News, around 21:40 local time on the 6th, two explosions were heard on Iran's Qeshm Island.
Iran said the explosions resulted from strikes on enemy targets near the entrance to the Strait of Hormuz, and the results of this operation would be announced to the public within the next few hours. The combination of the above messages caused the market's assessment of strait transit risks to switch rapidly from "a deal in sight" to "an unclear outlook."
After the news of Iran's strike on enemy targets emerged, international crude oil advanced further, hitting new intraday highs. Brent crude approached $83.50, up nearly 5.1% from Wednesday's close, reclaiming ground above its 50-day moving average. WTI crude rose above $78.30, up over 4.1% from Wednesday's close.
According to calculations by Goldman Sachs' energy research team, around $80 per barrel for Brent crude is within a reasonable fair value range, and it expects oil prices to remain between $80 and $90 per barrel until the new U.S.-Iran agreement is confirmed or the situation escalates significantly.
U.S. Stocks Fell for a Second Consecutive Day
All three major U.S. stock indices closed slightly lower, with the S&P 500 down 0.18%, the Nasdaq down 0.06%, and the Dow down 0.83%.
Beyond macro pressures, downward earnings expectations at the micro level further weighed on sentiment. SanDisk and Western Data both plunged due to disappointing earnings guidance, dragging down memory chip stocks. Western Digital fell over 13%, SanDisk dropped 6.8%, and SK Hynix declined about 5%.
The marketing platform AppLovin fell sharply after its quarterly revenue missed Wall Street expectations, while cloud security company Datadog also plunged 19% after its Q3 revenue growth expectations slowed.
However, looking at the overall earnings season, among the 382 S&P 500 companies that have reported, 84.8% exceeded analyst expectations, well above the historical average of 68% since 1994.
In the closely watched SpaceX, its stock erased early session losses and ended higher after its lock-up period expired. Wall Street News previously mentioned, the first batch of 911.5 million restricted shares of SpaceX became unlocked, but the stock price rose 6.14% instead of falling, with trading volume hitting 250 million shares, a one-and-a-half-month high.
Stock prices of leading artificial intelligence companies were mixed, with the S&P Except AI Index falling on the day.
Narrow gains from the "Magnificent Seven" tech giants masked broader weakness today.
Notably, significant divergence emerged in intraday trading behavior: hedge funds turned buyers of tech stocks, while long-term funds sold off heavily in the information technology and healthcare sectors.
Data from Goldman Sachs' trading desk showed overall activity at just 4 out of 10 points, with total volume 12% below the 5-day moving average, indicating the market chose to wait-and-see ahead of tomorrow's Nonfarm Payrolls. Volatility similarly hinted the market was bracing for tomorrow's potential chaos.
Apart from rising oil prices, Google's announcement of a $25 billion bond issuance, with its high-yield subsidy attracting one of the largest subscription orders for AI-related bonds this year, further increased supply pressure on the U.S. Treasury market, pushing yields up 5 to 7 basis points on the day.
Nevertheless, the 10-year yield remained at relatively low levels for the week. The interest rate futures market's pricing for a Fed rate hike subsequently heated up, with the probability of a hike this year rising significantly.
Vail Hartman of BMO Capital Markets said the latest data continues to reflect resilience in the labor market, further reinforcing the market's expectation that inflation will dominate the Fed's September decision.
Uncertainty surrounding the Fed's policy framework also weighed on market sentiment. According to the *Financial Times*, Fed Chair Warsh is expected to clarify the policy thinking behind his shift away from forward guidance at the Jackson Hole conference later this month.
Molly Brooks, U.S. rates strategist at TD Securities, said:
The Fed may indeed need to prove the credibility of its inflation-fighting stance through an actual rate hike.
Bloomberg macro strategist Michael Ball noted that recent policy signals are relatively clear: interest rates remain the primary tool, and the September meeting remains a "live meeting"; balance sheet adjustments are a longer-term issue.
U.S. weekly initial jobless claims released Thursday rose slightly but remained below 200,000 for a third consecutive week. Another report showed second-quarter productivity growth was faster than expected, reflecting businesses' active efforts to hedge against rising costs.
Friday will bring the July Nonfarm Payrolls report. The market expects 80,000 new jobs added for the month, higher than June's below-expectation 57,000. This data will directly influence Fed path pricing.
Clark Bellin of Bellwether Wealth said:
Given the market's considerable gains since last week, Friday's employment report is even more important for the market. For the market to continue moving higher, it needs a report that is neither too hot nor too cold.
Bellin also noted that the labor market remains resilient under the dual pressures of high interest rates and AI-driven productivity gains, with many businesses choosing to retain their existing workforce even as AI investments are gradually implemented.
Ulrike Hoffmann-Burchardi of the UBS Chief Investment Office warned:
Near-term risks persist, particularly if U.S. data remains strong, oil prices continue to fuel inflation concerns, or the market continues to price in a more hawkish Fed rate hike path.
Movements in Other Major Asset Classes
The dollar rebounded, supported by rising yields.
The yen continued to weaken, returning above 158 per dollar, gradually fading the impact of intervention.
Gold briefly broke above $4,300 during the session but subsequently retreated, ultimately closing flat compared to the previous day.
Driven by a week of continuous inflows into U.S. spot Bitcoin ETFs, Bitcoin repeatedly tested near the $65,000 level but failed to break above it today.
On Thursday, the three major U.S. stock indices closed collectively lower, with the Dow down 0.85%, the S&P 500 down 0.18%, and the Nasdaq down 0.06%. Memory chip stocks fell sharply, with Western Digital down over 13%. The Wind U.S. Tech 7 Giants Index rose 0.23%, with Microsoft up over 2%.
Major U.S. Stock Indices:
The S&P 500 closed down 13.59 points, or 0.18%, at 7709.96 points.
The Dow Jones Industrial Average closed down 464.02 points, or 0.85%, at 53885.10 points.
The Nasdaq closed down 15.087 points, or 0.06%, at 26348.352 points. The Nasdaq 100 closed down 114.457 points, or 0.39%, at 29373.334 points.
The Russell 2000 closed down 0.58%, at 3001.547 points.
The VIX volatility index closed down 4.24%, at 15.14. It rose slightly from European open to U.S. open, holding steady near the 16 level, then continued to decline.
U.S. Stock Sector ETFs:
U.S. stock sector ETFs mostly closed lower. The Global Airlines ETF fell 2.65%, the Internet Index ETF, Banking ETF, and Regional Banking ETF fell up to 1.36%, the Global Tech Index ETF fell 0.41%, and the Technology Sector ETF fell 0.31%.
(August 6 - U.S. Stock Sector ETFs)The Magnificent Seven:
The Wind U.S. Tech 7 Giants (Magnificent 7) Index rose 0.23%.
Microsoft up 2.54%, Apple up 0.45%, Meta up 0.19%, Nvidia down 0.10%, Amazon down 0.14%, Tesla down 0.63%, Alphabet (GOOGL) down 1.29%.
Chip Stocks:
The Philadelphia Semiconductor Index closed up 39.81 points, or 0.33%, at 12048.693 points.
TSMC ADR up 0.98%, AMD up 1.50%.
Chinese Concept Stocks:
The Nasdaq Golden Dragon China Index closed up 0.27%, at 6570.30 points, recovering overall after a lower opening.
- Among popular Chinese stocks, Zai Lab closed up 13.7%, Jinko Solar up 2.8%, Daqo New Energy up 2.2%, NetEase up 1.7%, ASE Technology up 1.4%, Canadian Solar up 0.6%, Tencent down 1.3%, Alibaba down 1.4%.
Other Individual Stocks:
Circle slightly down 0.01%.
Europe's STOXX 600 index continued to set a new closing record high, showing an "n"-shaped intraday pattern. Italian stocks hit a new closing record high.
Pan-European Stocks:
Europe's STOXX 600 index closed up 0.16%, at 658.19 points.
The Eurozone STOXX 50 index closed up 0.39%, at 6502.56 points, setting a new closing record high after one session.
National Indices:
Germany's DAX 30 index closed up 0.05%, at 26140.13 points.
France's CAC 40 index closed up 0.35%, at 8699.71 points, setting a new closing record high for a third consecutive session.
The UK's FTSE 100 index closed down 0.19%, at 10867.89 points.
(August 6 - Performance of Major European and U.S. Indices)Sectors and Individual Stocks:
Among Eurozone blue chips, Deutsche Telekom closed up 6.31%, Hermès up 5.17%, ASML Holding up 1.92% (third-best performer), Airbus closed down 1.16% (fourth-worst performer), and Koninklijke Ahold Delhaize down 1.36%.
Among all components of the STOXX 600, WPP closed up 28.62%, SBM Offshore up 11.93%, Hikma Pharmaceuticals up 8.15% (third-best performer), with Deutsche Telekom the sixth-best performer.
