The S&P 500 index fell by 0.18%, the Dow Jones Industrial Average dropped by 0.26%, while the Nasdaq 100 index managed to rise by 0.21% against the trend. The Russell 2000 index was the weakest, declining by 0.35%. The utilities sector led the gains with a rise of 1.20%, whereas the energy sector lagged behind with a decline of 0.90%. Oracle saw a surge of 8.2% at one point during trading, while Apple lost 2.66%. The US dollar continued its rebound, with gold closing up 1.4% at $4,175 per ounce, and Bitcoin remained relatively stable.

U.S. long-term Treasury yields soared to multi-decade highs, coupled with falling oil prices and uncertainty about the Federal Reserve's policy path, leaving the market lost in direction amidst multiple pressures. On that day, the market stabilized briefly under the soothing influence of "dovish" voices, but overall, its fatigue was still evident.

The Philadelphia Semiconductor Index rose by 1.32%. Arm Holdings increased by 3.65%, Qualcomm fell by 1.8%, AMD fell by 0.05%, and Intel fell by 0.09%.

Storage concept stocks mostly rose, with SK Hynix increasing by 2.62%, Micron Technology by 1.05%, Sandisk by 0.98%, and Western Digital by 0.06%.

The optical communication sector as a whole rebounded, with Coherent rising by 3.46%, AAOI rising by 3.98%, Micron Technology rising by 4.51%, Corning rising by 4.70%, and Lumentum rising by 5.66%.

Oracle rose 3.91%, with a temporary increase of about 8% during the session. Driven by news such as its OpenAI annual revenue approaching $70 billion after the opening, the stock price soared straight up. On the same day, it also launched the Fusion Claw intelligent application and announced with NetApp that it will launch a fully managed OCI NetApp cloud storage service.

The chairman of the Federal Reserve's New York branch, John Williams, stated on Tuesday that there may only be one more interest rate hike this year, and there is no need to act hastily. This statement quickly reduced market expectations for a rate hike in October, leading to a slight decline in short-term yields.

At the same time, Qatar's signals of diplomatic mediation and the partial restoration of production capacity on Saudi Arabia's East-West Pipeline system led to a sharp drop in oil prices of over 3% in a single day, with Brent crude falling below $103 per barrel, and the WTI contract from the previous month closing near $89.

However, long-term yields did not fall accordingly. The yield on 30-year U.S. Treasury bonds once reached 5.61%, the highest level since 2002, indicating that market concerns about the persistence of inflation and fiscal pressures have not subsided.

The stock market also faced pressure. The S&P 500 index closed down slightly by 0.17%, the Dow Jones Industrial Average fell by 0.26%, while the Nasdaq 100 index managed to rise slightly by 0.2% against the trend due to the support from the AI sector. The US dollar continued its rebound, gold closed up 1.4% to $4,175 per ounce, and Bitcoin remained relatively stable.

Long-term yield breaks through support, and the steepening of the curve intensifies.

The core contradiction in the short-term interest rate market on that day was that the short end was under pressure due to the dovish stance of Williams, while the long end continued to rise due to supply pressures and concerns about inflation, resulting in a significant steepening of the yield curve.

The yield on 30-year U.S. Treasury bonds hit 5.6206%, a new high since June 2002; the yield on 10-year bonds rose to 5.293%, the highest since June 2007.

Williams's speech in Buffalo provided support for the short term, where he stated:

Based on the policy actions taken at the September meeting, there is no need for urgency at present; we have time to gather more information.

Affected by this, data shows that the market's probability of a 25-basis-point interest rate hike in October has fallen from a previous high of nearly 70% to around 51.5%.

However, the pressure on the long end of the yield curve has not eased. According to Bloomberg, Paramount Pictures has launched an investment-grade bond issuance in pursuit of a deal to acquire Warner Bros., aiming to raise approximately $32 billion, which would make it the fifth-largest investment-grade bond transaction on record, further exacerbating the supply pressure on the long end of the yield curve. SMBC Rate Strategist Monty Gandhi stated:

The trend of the long-term side may be related to this transaction.

CIBC, the head of U.S. interest rate strategy at Michael Cloherty, pointed out that long-term rates currently seem to be on the cheap side by historical standards, but major buyers are still absent. "We have been waiting for over a month, and they still haven't appeared."

Citigroup Strategists have characterized the current state of the government bond market as a "mild buyer's strike." TD Securities Strategist Prashant Newnaha however warns:

As long as the situation in the Middle East remains unresolved, the risk of continued risk aversion in the fixed-income market persists and may spread to the stock market.

Diplomatic signals and a rebound in supplies jointly suppress oil prices

The crude oil market tumbled significantly on that day, but the fundamentals actually showed a divergent pattern: futures prices declined, while the tight supply situation in the physical market did not fundamentally change.

Analysis suggests that there are four key factors driving down oil prices:

• Firstly, a spokesman for Qatar's Foreign Ministry, Majed, al-Ansari, stated that Qatar and other mediators are still continuously conveying messages to both Iran and the United States, and the mediation efforts are ongoing;
• Secondly, after suffering drone attacks, Saudi Arabia's East-West Pipeline has restored about half of its transportation capacity, providing an important alternative route for crude oil exports that bypass the Strait of Hormuz;
• Thirdly, the International Energy Agency (IEA) stated that it is ready to take action to support the oil market, while the U.S. government announced that it will release an additional 40 million barrels of crude oil from its strategic petroleum reserves;
• Fourthly, it is reported that Trump supports relaxing sanctions against Russia on the condition of releasing political prisoners, which, if implemented, would ease restrictions on Russian crude oil exports.

However, the decline in futures prices obscures the fact that the physical market remains tight. The spot price of Brent crude oil is maintained around $120, and the WTI spot premium is also at an extreme level.

CIBC Private Wealth Group Senior Energy Trader Rebecca Babin stated that the increase in traffic through the Strait of Hormuz and the restoration of Saudi pipelines "has brought a certain degree of supply relief to the market," but she also pointed out:

The question is what this means for Iran: a weakened leverage over the Strait of Hormuz could either prompt Iran to sit at the negotiating table or encourage it to escalate its actions in order to regain its bargaining chips.

At the same time, Iran's tough stance has not diminished. The speaker of the Iranian Parliament, Bagher Ghalibaf, reiterated on that day that if Iran's security is not guaranteed, "any infrastructure will be at risk." Media reports also indicated that Iranian drones attacked another passing vessel on that same day.

AI is positive for boosting the Nasdaq, but the overall U.S. stock market remains under pressure.

The stock market was generally weak on that day, but technology sectors and those related to AI showed relatively strong resistance to the decline, becoming rare bright spots in the market.

The Nasdaq 100 index closed up 0.2%, the S&P 500 fell 0.17%, and the Dow Jones Industrial Average declined 0.26%, with small-cap stocks experiencing the largest losses.

Part of the turning point in market sentiment came from reports of a meeting between Trump and AI/tech industry executives. Trump subsequently announced his opposition to the introduction of new federal AI regulatory regulations, which boosted sentiment in the tech sector.

Within the AI sector, Anthropic released its IPO prospectus, with a target valuation of over $2 trillion, and disclosed a significant increase in revenue over the past year, however losses also expanded accordingly. In OpenAI, recurring revenue was reported to be close to $70 billion, and this news drove Oracle's stock price up by more than 8% for a time.

The new model Anthropic and Sonnet have also drawn attention with their 5.5 version. According to Goldman Sachs, this model performs close to the flagship level in various tests, with a speed increase of over 30% and significantly lower costs compared to the previous generation of products. "Cutting-edge intelligence is continuously becoming more affordable."

Meta Platforms's stock price rose by 3.3% on the same day, despite OpenAI releasing a continuous AI proxy product " Dots " aimed at commercial scenarios on the same day, which is seen as a competitor to its Muse proxy; analysts believe that there is a difference in their positioning, and direct competition in the consumer scenario is limited.

In contrast, Apple is under pressure. Banks in the United States warn that the widespread adoption of Meta and other AI proxies may strip high-value scenarios such as shopping, form filling, and checkout from Apple's device and service ecosystem.

However, the performance of the seven tech giants lags behind the S&P 493 index.

So far this week, the AI proxy sector and cloud services sector are still in a downward trend, while the semiconductor and software sectors have performed better than the former.

Gold rebounds 1.60% the day after a plunge; the US dollar reaches its highest level in 17 months

The US dollar continued to strengthen. The US Dollar Index, which measures the dollar against six major currencies, rose 0.17% on the day and closed at 101.372 in New York trading, returning to the top of its trading range over the past 17 months, with a cumulative increase of 1.5% since September. The euro fell to 1.1341 against the dollar, while the dollar was quoted at 157.22 against the Japanese yen.

After a sharp decline on Monday, spot gold rebounded to $4,180.97 at the close of trading in New York on Tuesday, an increase of 1.60%. The intraday low of $4,113.49 was almost on par with Monday's low.

Bitcoin remained relatively stable throughout the day, closing at $83,634.53, an increase of 0.18%.

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Edit / stephen