Written by: Chao Xiang Research

Last Friday, U.S. stocks ended their four-day losing streak, with the S&P 500 rising 0.86% to 7656.98 points, the Dow Jones up 0.98% to 52573.29 points, and the Nasdaq up 0.96% to 26333.040 points. For the week, the S&P 500 fell a cumulative 0.8%, the Nasdaq fell a cumulative 0.7%, and the Dow fell a cumulative 0.3%. The VIX reported 16.89, down about 2.3%. The yield on the 10-year U.S. Treasury fell back to around 4.82%, while the 2-year yield was around 4.43%. The three core lines driving the rebound are: core CPI rising 0.3% month-on-month, exceeding expectations, with the probability of a Federal Reserve interest rate hike this week rising to nearly 90%; signs of de-escalation in the Middle East, with Brent crude oil retreating from the $107 high; Oracle's earnings report reinforcing expectations for AI computing demand, with Dell rising 12% to a record high. However, on Monday morning in the Asian market, U.S. stock futures dipped, with Nasdaq 100 futures down 1%. The three AI giants collectively called for a slowdown in cutting-edge model development, and OpenAI postponed its IPO. This week's core issue: After the interest rate hike is confirmed, can the market find a balance between the AI narrative and interest rate suppression.

Core CPI month-on-month exceeds expectations, interest rate hike probability rises to nearly 90%

The U.S. August CPI data was the most important macro variable for the market last Friday. Core CPI rose 0.3% month-on-month, surpassing market expectations, while the year-on-year growth remained unchanged at 3.4%. Traders expect a about 90% probability of the Federal Reserve hiking rates this week; Goldman Sachs economists expect the Fed to raise rates by 25 basis points at the end of its two-day meeting on September 16.

In the first 11 months of the current fiscal year, the U.S. federal government budget deficit reached $1.97 trillion, with net interest expenditures amounting to $1 trillion, marking the first time the interest bill has exceeded a trillion. With the deficit nearing $2 trillion and interest expenditures exceeding a trillion, long-term U.S. Treasury bonds are pricing in a debt spiral, and the supply pressure in the U.S. Treasury market has not eased even as expectations for interest rate hikes have intensified.

The head of the White House National Economic Council, Hassett, stated that both he and Trump believe there is no reason to raise rates. The differences between the White House and the Federal Reserve regarding the interest rate path have become more public, but market pricing indicates that a rate hike has become a near certainty.

Outside of macroeconomic factors, a significant shift occurred in the AI field over the weekend.

AI giants jointly call for a slowdown, OpenAI postpones IPO

OpenAI CEO Altman hinted that OpenAI and other leading AI companies might be nearing an agreement to slow the pace of AI development and jointly address safety risks. Anthropic's CEO Dario Amodei also urged AI companies to advance model development more cautiously and suggested that the speed of enhancing AI model capabilities should be slowed. Both Musk and Altman supported Amodei's call for a "global slowdown in AI."

Altman further stated that OpenAI would not IPO this year, and if AI threatens human survival, they would rather destroy the IPO. The three giants simultaneously released signals of a slowdown, and with OpenAI postponing its IPO, market expectations for the short-term rhythm of the AI narrative face recalibration. On Monday morning in the Asian market, Nasdaq 100 futures fell 1%, and AI trading faced a pressure test.

Oracle's earnings report reinforced expectations for AI computing demand, with Dell rising 12% to a record high last Friday. The ordering logic of the AI server chain continues to be validated. The AI narrative is diverging into two lines: the growth of hardware orders and the regulatory pace of cutting-edge model development.

At the same time, the situation in the Middle East showed complex signals over the weekend.

Saudi oil pipeline disruption, oil prices retreat from highs but rise again on Monday

Reports indicate that the stock at Yanbu Port can only maintain exports for 5 to 7 days; if Saudi Arabia's pipeline remains disrupted due to attacks, the world may face a 4% gap in crude oil supply. The situation in Yemen suddenly intensified, with Houthi forces attacking Saudi Arabia and vice versa. Iran stated that it is "not at war" with Saudi Arabia, which provides some space for de-escalation.

International oil prices fell back from more than a four-month high last Friday, with Brent November contracts down 2% to $103.72 per barrel, and WTI October contracts down 2% to $100.26 per barrel, with signs of easing in the Middle East driving this. However, on Monday morning in the Asian market, international oil prices rose again, with WTI crude futures climbing over 2%. The news of Saudi Arabia closing important oil pipelines and the postponement of the Hormuz Strait meeting reignited supply concerns. Oil prices are oscillating between easing expectations and the reality of supply disruptions, and the pricing in the energy sector remains unstable.

Spot gold fell 0.51% to $4399.20 per ounce, Bitcoin was about $78342, rising 0.26% over 24 hours; Ethereum was around $2478, up 0.62%.

This week's focus

Federal Reserve September meeting (September 16 to 17). The probability of a rate hike has risen to nearly 90%, and the market pricing is basically adequate. The real variable lies in the Federal Reserve's guidance on the subsequent path. If the dot plot indicates a second rate hike within the year, long-term interest rates will come under further pressure; if the language is dovish, the market may gain some breathing room. The White House's public opposition to rate hikes also makes the independence narrative of this meeting worth noting.

Follow-up implementation of the AI giants' slowdown call. The three giants rarely joined forces to call for a slowdown in cutting-edge model development, but whether this will translate into actual adjustments in research and development rhythms or regulatory frameworks remains to be seen. If the iteration speed of AI models does indeed slow, the demand expectations for computing hardware may face short-term corrections; if it is only a consensus at the declarative level, the market will quickly revert to ordering logic.

U.S. Treasury supply and debt spiral. With the deficit approaching $2 trillion and interest expenditures exceeding a trillion, the pricing of long-term U.S. Treasuries is shifting from rate hike expectations to debt sustainability. After the rate hike is realized this week, whether long-term interest rates can stabilize will directly determine the valuation anchor for high-valuation assets.