Written by: Chaoxiang Research

The US stock market staged a typical seesaw performance on Tuesday. Apple briefly touched a market value of $5 trillion during the session, Coca-Cola hit a historic high after its earnings report on the same day, and the Dow was just one step away from its historical closing record. On the other side, storage and optical communication stocks were battered for the second consecutive day, with the Philadelphia Semiconductor Index falling over 4%, and SanDisk's stock price has already halved since July. The earnings season has turned in a pile of contradictory reports, with Seagate and Corning both exceeding expectations but still seeing their stock prices hammered. In the Middle East, oil prices plummeted during the day due to ceasefire news, only to violently rebound after hours due to Iran's attack on a US military base in Jordan.

Three major indices were mixed, with the equal-weighted index hitting a historic high

The S&P 500 rose 0.21%, ending at 7428.78 points. The Dow rose 1.03%, closing at 52747.32 points, just one step away from its historic closing high of 53055.91 points. The Nasdaq fell 0.22%, closing at 24876.91 points. Among the S&P 500 constituents, 357 stocks rose, while 145 stocks fell; the equal-weighted index, however, rose 1.14%, reaching a historic high, indicating that this round of decline has been highly concentrated in a few large technology stocks.

Among the seven giants, Google A performed best, rising 2.19%. Microsoft rose 1.09%, Nvidia climbed 0.25%, while Amazon fell 0.23%, Meta dropped 0.08%, and Tesla declined 0.58%. Chinese concept stocks continued to show strength, with the Nasdaq Golden Dragon China Index rising 1.08%.

Apple's market value surpasses $5 trillion, defensive stocks collectively receive a boost

Apple touched $342.89 during the session, with its market value once surpassing $5 trillion, closing up about 1% for the day. Coca-Cola rose 5% to hit a historic high, exceeding expectations for Q2 earnings and raising its full-year guidance. JPMorgan and 3M also refreshed their historic closing records, with software stocks like Adobe and IBM also strengthening.

Storage and optical communication collapse in succession, Philadelphia Semiconductor declines for two consecutive days

The Philadelphia Semiconductor Index fell 4.49%, declining for the second consecutive trading day. The storage sector was hit hardest, with Micron falling 8.85%, SK Hynix dropping 8.98%, and SanDisk plummeting 14.25%, meaning its stock price has halved since July. The DRAM storage ETF fell 8.89% in a single day.

The optical communication sector was similarly brutal, with Corning dropping over 12% and Coherent falling over 10%. The chip manufacturing and design sector was not spared either, with Dell Technologies falling 8.15%, Intel dropping 5.86%, AMD declining 8.15%, and TSMC falling 1.7%.

This round of selling is driven by a combination of three pressures. First is the ongoing doubt in the market about whether AI capital expenditures can translate into actual returns. Second, Nvidia's $750 billion cycle financing plan has caused unease in the credit market.

The third pressure comes from the rapid catch-up of domestic storage. Changxin Technology's listing in A-shares has not yet cooled down, and the market's re-evaluation of the self-sufficiency pace of China's DRAM industry has directly impacted the original valuation logic of US storage stocks. The combination of these three lines has transmitted this sell-off from US stocks all the way to the Asia-Pacific market.

Seagate and Corning deliver perfect reports, but stock prices do not respond

Seagate Technology's revenue and earnings per share for Q4 far exceeded analyst expectations, with the guidance for the next quarter much higher than market estimates. Even so, Seagate's stock closed down 8.5% on the day, only rebounding over 10% in after-hours trading once the earnings report was officially released, which led to other storage stocks warming up as well.

Corning's situation is even more extreme. The company exceeded expectations for both revenue and profit in Q2, with optical communication business revenue growing 32% year-on-year. However, the implied sequential growth rate in the revenue guidance for Q3 dropped sharply from 9% to 3% to 6%, indicating that the market clearly wanted a bigger surprise, leading to a 12.1% plunge for Corning's stock at the close.

NXP's Q2 revenue and Q3 guidance also exceeded expectations, yet its stock still fell over 4% in after-hours trading. Analyzing these earnings reports together reveals that the current market has become extremely stringent in its pricing standards for semiconductor and storage companies; meeting or exceeding performance is no longer a safety net, and the only thing that can stabilize stock prices is signals of acceleration in their guidance.

This major test has just begun this week, with earnings reports for storage, software, and MAG7 set to be revealed in succession. The latest statements from these companies regarding AI spending and output will directly determine whether this round of sell-off, which started in storage, can find its bottom.

Ceasefire rumors push down oil prices, attack in Jordan pushes oil prices back up

The crude oil market experienced its largest single-day volatility in nearly three years. During the day, reports citing Middle Eastern mediation sources indicated that the US and Iran were close to resuming the ceasefire agreement reached in June, leading to a drop of over 5% in WTI crude oil, settling around $78; Brent crude fell over 6%, breaking below $84.

COMEX gold fell 1.11%, closing at $4090.4 per ounce. COMEX silver dropped 2.5%, closing at $57.335 per ounce. Cryptocurrencies weakened in tandem, with Bitcoin opening at $63706.66 on Tuesday, down 2.5% from Monday, dipping to $63327.39 during the session; Ethereum opened at $1890.67, down 3.2%, similarly dropping to $1877.71 during the session.

Iran simultaneously laid out conditions for the reopening of the Strait of Hormuz, requiring all vessels to change to the Iranian side of the waterway, abolish the current international traffic separation system, and stating that mine-clearing work could only be done by Iran itself, which is much tougher than previously speculated.

Immediately after the US stock market closed, the situation flipped again. Reports emerged that Iran attacked a US military base in Jordan, causing WTI crude oil to surge 4.5% in after-hours trading, regaining some of the losses incurred during the day. This drastic switch between bullish and bearish sentiment within the day suggests that the market's judgment on the true direction of the conflict remains speculative, with any news potentially causing the pricing direction to suddenly reverse.

The suspense of the Federal Reserve's resolution, can Waller stick to the "no guidance" route

The Federal Reserve will announce its interest rate decision during US stock market hours on Wednesday, with the market currently pricing the probability of a rate hike at about one-third. However, some institutions have provided completely different assessments. The yield on the 10-year US Treasury bond fell about 5 basis points on the day, closing around 4.60%, while the 2-year yield dropped 5.17 basis points to 4.2706%. The dollar index slightly fell 0.03%, closing at 101.49.

Frank Flight, head of macro strategy at Citadel Securities, is singing a different tune; he believes the market has underestimated the likelihood of a real rate hike, reasoning that Waller needs a concrete action to prove that his anti-inflation stance is more than just talk.

Waller's "not clarifying in advance" style has attracted internal criticism. Waller's former competitor for the chairman position, Governor Waller, publicly stated this month that he has never seen a theory that proves that not saying things can make the market operate more smoothly. The resolution on Wednesday and the subsequent press conference will be the first window to observe whether Waller will adjust his communication style.