1. On Thursday, August 17, before the U.S. stock market, the three major U.S. stock index futures rose together. At press time, Dow futures were up 0.11%, S&P 500 futures were up 0.23%, and Nasdaq futures were up 0.23%.
2. At press time, Germany's DAX was down 0.04%, Britain's FTSE 100 was down 0.20%, France's CAC 40 was down 0.05%, and the Euro Stoxx 50 was down 0.30%.
3. WTI crude was down 1.39% at $80.17 a barrel at press time. Brent crude fell 1.14 percent to $84.25 a barrel.
Market news
The Fed minutes are another big signal: when the rate cut begins, the balance sheet reduction may not need to stop. Minutes from the Fed's most recent policy meeting show that officials are discussing more seriously that they may not have to stop shrinking their massive balance sheet when they start cutting rates. According to the minutes of the Fed's July 25-26 policy meeting, released Wednesday, some participants noted that balance sheet reduction does not need to end when the committee finally begins to lower the target range for the federal funds rate. Some policymakers, including Fed Chairman Jerome Powell, have mentioned that such an approach could create communication challenges for the Fed. That's because reducing bond holdings — a process known as quantitative tightening (QT) — is often interpreted as a strategy to tighten monetary policy. However, the rate cut has the opposite effect, easing policy by reducing borrowing costs.
The yield on the US 30-year Treasury note rose to its highest level since 2011. The yield on the 30-year U.S. Treasury note rose to its highest level since 2011, continuing an upward trend driven by economic resilience and increased supply of U.S. Treasuries. The yield on the US 30-year Treasury note rose as much as 7 basis points to 4.4219%, surpassing its 2022 high of 4.4214%. U.S. economic data dampened investor expectations that the Federal Reserve would start cutting interest rates next year, pushing U.S. Treasury yields higher. As recently as July 31, the yield on the US 30-year Treasury note was below 4%. Investors expect the U.S. to increase bond sales in the coming quarters to cover a larger federal deficit, which also contributed to the decline in U.S. debt.
Economists warn that the stock and housing markets are at risk of collapse, and the United States may fall into deflation. Wermuth Asset Management said U.S. disinflation could also turn into deflation, in part because of the risk of a crash in stock and real estate prices. Commercial property values are already under pressure, and if conditions worsen, potentially overvalued stocks could quickly pull back. Wermuth believes that a collapse in the prices of these assets will play a large role in triggering deflation. The risk of a decline in consumer price levels increases for several reasons. Contrary to what other economists say, many warn that inflation is a lingering problem and that inflation is here to stay. Data showed that the year-on-year increase in the US CPI in July accelerated to 3.2% from 3% in June. But Wermuth warned that deflation could happen soon, given the huge downside risks to equities and real estate assets.
Be careful! Are U.S. stocks really going to crash?" "Stock God" and "Big Short" are both preparing. Buffett's Berkshire Hathaway sold a net $8 billion of stock last quarter and slowed the pace of buybacks. That boosted its cash holdings and total U.S. Treasuries up 13 percent to near a record $147 billion. Buffett didn't explicitly predict a stock market crash, but he has sold a net $33 billion in stocks over the past three quarters, and Berkshire's cash pile has increased by $38 billion. As for Bury, Bury's Scion Asset Management disclosed this week that it held put options on the S&P 500 ETF Trust and Invesco QQQ Trust at the end of June, with purchases of $866 million and $739 million, respectively. The two ETFs track the benchmark S&P 500 and Nasdaq 100, respectively, meaning that if those two indices fall, he will profit.
Wall Street banks have warned! Will this "speculative option" lead to the collapse of US stocks? The S&P 500's sharp drop on Tuesday could well be related to an option linked to the S&P 500. Scott Rubner, managing director of Goldman Sachs, which has been researching money flows for 20 years, said the large number of trading in the "0DTE" contract was the backdrop to a sharp acceleration of the day's decline, with the benchmark stock index down about 0.4% in 20 minutes. Market makers need to keep their positions balanced, which usually means that when options orders flood in, they have to buy and sell stocks in large quantities, and they are forced to act because put trades with a strike price of 4440 are very intense. As hedging costs soared from $0.70 to $9 in a short period of time near closing, this prompted market makers on the other side of the trade to scramble to hedge to remain neutral in the market. In this case, this means a large outflow of money from the stock market.
Tech companies are slowing layoffs but still haven't resumed hiring. Despite the surge in interest in AI among tech companies, they have yet to ramp up hiring after massive layoffs over the past year because AI businesses need employees with special skills. Still, an analysis by research firm Jefferies, citing proprietary data and data from the job market TrueUp, showed that the pace of layoffs in the tech sector appeared to have slowed in June and July, and that layoffs could be even lower this month. With the recession forcing companies to cut costs and eliminate the overstaffing created during the pandemic, layoffs in the tech sector were the earliest and most severe. According to Jefferies and TrueUp, the tech industry has laid off 342671 jobs so far this year, far more than the 243075 in all of last year. Other data on layoffs show a similar trend.
Individual stock news
Walmart (WMT. US) Q2 revenue increased 5.7% year-over-year, raising its full-year guidance. Walmart's Q2 revenue was $161.63 billion, up 5.7% year-on-year, and the market expected $160.271 billion; Net income was US$7,891 million, compared to US$5,149 million in the year-ago quarter; Adjusted earnings per share were $2.92 versus market expectations of $1.706. Walmart raised its guidance for the full year. The company expects full-year adjusted earnings per share of $6.36 to $6.46, compared to its previous forecast of $6.10 to $6.20.
BILIBILI. US) second-quarter gross profit increased 66% year-over-year and average daily active users increased 15% year-over-year to 96.5 million. Bilibili's net revenue in the second quarter of 2023 reached RMB5.3 billion, an increase of 8% year-on-year; gross profit was 1.2 billion yuan, a year-on-year increase of 66%; Gross margin was 23.1%, compared to 15% in the same period last year; net loss of 1.5 billion yuan, down 23% year-on-year; The average number of daily active users was 96.5 million, an increase of 15% year-on-year. In addition, the company now expects net revenue for the full year 2023 to be between $22.5 billion and $23.5 billion. In comparison, the company's previous forecast of net revenue of $24 billion to $26 billion reflects the best available data at the time. The adjustment is primarily due to delays in the launch of certain games and a lower-than-expected revenue contribution from non-core businesses such as IP derivatives and others.
YRD. US) steadily operated service entities in the second quarter, helping the economy to recover. Yiren Jinke achieved revenue of 1.324 billion yuan in the second quarter of 2023, an increase of 65% over the same period last year. In the second quarter, thanks to the promotion of digital construction and the integration of production and life, Hexiang Insurance Brokers led the market in a number of key indicators and surpassed itself, with quarterly premiums reaching RMB1.332 billion, a year-on-year increase of 67%, and contributing revenue of RMB405 million, a year-on-year increase of 114.6%; The growth momentum of the customer base remained abundant, and the cumulative number of customers served reached 1.133 million at the end of the second quarter, an increase of 12.5% from 1.007 million at the end of the previous quarter. In the second quarter, Yiren Jinke Quality Life Platform achieved GMV of 396 million yuan in a single quarter, an increase of 28% month-on-month, and the number of transactions reached 2.435 million, an increase of 56.6% over the end of the previous quarter.
EHang (EH. US) Q2 total revenue was RMB 10 million and gross margin was 60.2%. In the second quarter of 2023, the company's total revenue was RMB10 million (approximately US$1.4 million), and in the first quarter of 2023, total revenue was RMB22.2 million, as the EH216-S Model Conformity Review (TC) is nearing completion, and some orders are required by customers to be delivered after certification. Gross margin of 60.2% continued to maintain a high level of gross margin, a slight decrease of 3.7 percentage points from 63.9% in the first quarter of 2023, mainly due to changes in revenue structure. Operating loss was RMB75.3 million (approximately US$10.4 million), compared to RMB75.7 million in the first quarter of 2023. Net loss was RMB75.7 million (approximately US$10.4 million), compared to a net loss of RMB87.0 million in the first quarter of 2023.
Cisco (CSCO. US) reported decent Q4 quarterly earnings, with gross margins still as high as 65% and $500 million in AI orders. Computer network equipment manufacturer Cisco Q4 revenue reported $15.2 billion, expected to be 15.1 billion, up 16% year-on-year; Net income (GAAP) was $4.0 billion, up 42.8% year-over-year. Excluding certain items, earnings per share were $1.14. Q4 diluted earnings per share were $0.97. Cisco assured investors that the company could respond to the slowdown by increasing market share, as well as generating more stable and repeatable revenue. The company noted that it is committed to increasing share buybacks, as well as the buyback program. Cisco also mentioned that it is already working well with cloud service providers and is actively applying generative AI technology to drive business growth. CEO Chuck Robbins said Cisco has secured about $500 million in AI-related orders to build AI capabilities into existing products.
Another winner of the AI craze! Synopsys (SNPS. US) Q3 results, guidance is better than expected, new CEO is appointed. Synopsys Q3 revenue was $1.49 billion, up 19% year-over-year, better than market expectations of $1.48 billion. Adjusted earnings per share of $2.88 also beat market expectations of $2.74. Design Automation revenue increased approximately 23% to $1 billion. Synopsys announced better-than-expected fourth-quarter guidance as artificial intelligence (AI) innovations drove demand for custom semiconductor designs. Synopsys expects fourth-quarter revenue of $1.57 billion to $1.6 billion, better than analysts' average estimate of $1.57 billion; Adjusted earnings per share are expected to be $3.01 to $3.06, above the average analyst estimate of $2.91. Synopsys also named veteran Sassine Gazi as CEO and president on Wednesday.
BEDU. US) H1 revenue increased 11.9% year-over-year, and net loss narrowed by 83.4% year-on-year. Bossile Education's revenue in the first half of the year was 977.5 million yuan (RMB, the same below), a year-on-year increase of 11.9%; net loss of 8.8 million yuan, down 83.4% year-on-year; Basic and diluted loss per share was $0.10, compared to $0.42 in the year-ago quarter. gross profit was 295.2 million yuan, a year-on-year increase of 14.0%; Gross margin was 30.2%, compared to 29.6% in the year-ago quarter. Operating profit was 25.7 million yuan, compared to an operating loss of 22.9 million yuan in the same period last year. The Company's cash and cash equivalents and restricted cash were $826.3 million (US$119.2 million) as of February 28, 2023, compared to $856.1 million as of August 31, 2022. Bossile Education currently expects revenue of 1.9 billion to 2 billion yuan in fiscal 2023, a year-on-year increase of 10% to 15%.
Due to rising costs, Kaneda (GFI. US) first-half profit fell 12% year-on-year. Profit at Goldfield H1, South Africa's second-largest gold mine producer, fell 12% to US$457.8 million due to rising costs; Overall earnings per share decreased to $0.51 from $0.58 in the year-ago quarter. Goldfield said its Chile-based Salares Norte project is expected to start producing gold in the fourth quarter of this year, and the Johannesburg-based mining company said it is embarking on a plan to improve the efficiency and reduce costs of its mines amid ongoing inflationary pressures. Martin Preece, the company's interim CEO, said: "We are on track to launch our first gold in the fourth quarter. We firmly believe that the best place we can find another mine is within our existing mine. It is understood that Jintian's production in the first half of the year reached 1.154 million ounces, down from 1.201 million ounces in the same period last year.
The AI market is too hot! NVIDIA (NVDA. US) is expected to sell 550,000 H100 chips this year, generating at least $16.5 billion in revenue. Since the AI boom, the NVIDIA H100 artificial intelligence (AI) GPU has gained great traction, with some experts expecting the company to ship 550,000 units in 2023. It is reported that the Saudi Arabian government plans to shift its revenue source from traditional oil resources to the world's booming technology, so it has purchased 3,000 NVIDIA H100 GPUs for development. Starting with a base price of $40,000, excluding regional differences, the cost of 550,000 H100 is roughly estimated to reach $22 billion in revenue, not including the related revenue from the earlier A100 chip. An important factor to note is that in some countries, AI GPUs sell for as much as $70,000, so AI-driven NVIDIA revenue could surpass the $25 billion mark in FY23.
Important economic data and event forecasts
20:30 Beijing time: U.S. jobless claims for the week ended August 12 (million), Philadelphia Fed manufacturing index for August.
22:00 Beijing time: U.S. Chamber of Commerce leading indicator monthly rate for July.
22:30 Beijing time: EIA natural gas inventories in the United States for the week ending August 11.
Performance forecast
Friday morning: Applied Materials (AMAT. US), Ross Department Store (ROST. US)
Friday premarket: EL Lauder US), Xpeng Motors (XPEV. US), Vipshop (VIPS. US), Suntech (STG. US)
![Deflation in financial institutions is not a new phenomenon, but it has shown a trend of full-fledged deflation in the last six months. The phenomenon of deflation in the whole industry is not just the phenomenon of a few financial institutions, but the entire industry[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)