Written by: Chaoxiang Research

On Monday, all three major U.S. stock indexes closed lower, with the Dow Jones falling 0.29% to 52421.20 points, the S&P 500 down 0.48% to 7619.98 points, and the Nasdaq down 0.56% to 26186.410 points. The VIX surged nearly 8% to 17.10. The 10-year U.S. Treasury yield momentarily broke above 5% for the first time since 2023, reaching a high of 5.017%. CME data shows that market pricing for a 25 basis point interest rate hike in September has risen to 92.4%. The Philadelphia Semiconductor Index suffered a nearly 6% drop, and the memory chip index fell 6.1%. However, the software and cybersecurity sectors performed strongly against the trend, with Palo Alto Networks rising 13.2% and CrowdStrike up 13.9%. The Federal Reserve's September interest rate meeting is upcoming this week.

10-year U.S. Treasury yield breaks 5%, reaching a three-year high, with interest rate pricing approaching 93%

The U.S. Treasury market was the core source of macro pressure on Monday. The 10-year Treasury yield briefly surpassed the 5% mark, reaching a high of 5.017% for the first time since October 2023 before retreating below 5%, closing at 4.992%. The 30-year Treasury yield peaked at 5.386%. In the past month, the 10-year Treasury yield has cumulatively risen by approximately 25 basis points.

CME's FedWatch tool indicates that the probability of the Federal Reserve keeping rates unchanged in September is only 7.6%, while the probability of a cumulative 25 basis point hike is as high as 92.4%; the probability of a cumulative 50 basis point hike by October has reached 44%. Morgan Stanley economists expect the Fed to raise rates by 25 basis points in September and December. Goldman Sachs abandoned its previous "wait and see" prediction last Friday, now anticipating a 25 basis point hike in September.

The rise in long-term rates is driven by multiple factors. August CPI and PPI data exceeded expectations, with core CPI rising 0.3%, above the expected 0.2%, and communication services prices soaring 5.94% in a single month, setting a record. The scale of government debt continues to expand, with net interest expenses surpassing one trillion dollars, as long-term U.S. Treasuries are pricing in a debt spiral. Geopolitical conflicts in the Middle East have driven up oil prices, further heating inflation expectations.

Beyond macro rates, a notable shift in the AI field over the weekend was sharply priced into Monday's stock market.

AI giants call for "deceleration," chip stocks and optical communications fall sharply

On Monday, the market reacted sharply to the joint call of the three AI giants. The Philadelphia Semiconductor Index plummeted 5.92% to 10689.46 points, with nearly all 30 component stocks declining. Nvidia fell 3.36% to $210.96, Broadcom dropped over 3.6%, AMD fell over 4%, Intel dropped over 5%, and Marvell Technology plummeted 7%. The memory chip sector faced pressure, with SK Hynix down more than 7%, Micron down nearly 6.7%, and SanDisk and Western Digital falling over 5%. The optical communication sector also suffered heavy losses, with Corning down over 12%, Coherent down over 12%, and Lumentum nearly down 10%.

The software sector became one of the few highlights of the day. Software stocks, which had previously worried that AI would disrupt their business, actually gained strength, with ServiceNow up over 5%, Adobe rising nearly 4%, and Workday increasing over 2%. The cybersecurity sector performed particularly well, with Palo Alto Networks up 13.2% and CrowdStrike up 13.9%. Funds within the tech sector shifted from chips and optical communications to software and cybersecurity.

Large tech stocks had mixed performance. Google rose over 3%, Meta increased over 2.7%, Microsoft rose nearly 2%, and Apple rose 0.24% to $333.08. Amazon dropped 1.26%, and Tesla fell 1.77%. The Wind Information U.S. Tech 7 Giants Index slightly rose 0.07%.

Chinese concept stocks strengthened against the trend, with the Nasdaq Golden Dragon China Index increasing 0.36%, iQIYI rising over 4%, and NetEase up 2.06%.

Besides the severe differentiation in the tech sector, geopolitical risks were another mainline on Monday.

Brent crude oil broke $109, Trump claims Iran "very eager to reach an agreement"

The Yemen Houthi movement used dozens of ballistic missiles and drones to attack a Saudi air base in Al-Humais, and market fears regarding interruptions in Middle Eastern oil supply are rising.

International oil prices soared during the session. Brent crude futures surged by 4.96%, breaking above $109 per barrel, peaking at $109.80; WTI crude futures rose by as much as 4.9%, reaching a high of $104.95. By the close, October light crude oil futures in New York settled up 1.34% at $101.39 per barrel; November Brent crude oil futures in London settled up 1.02% at $105.68 per barrel.

However, relief signals appeared after hours. Trump posted on social media that Iran is currently "eager to reach an agreement" and stated that Iran's willingness to reach an agreement is "very urgent." During his visit to Ireland on the 13th, Trump also reiterated that the conflict in Iran will end after the U.S. midterm elections in November, at which point "gasoline prices will drop rapidly." The pricing of geopolitical risk premium remains in a tug-of-war between the reality of supply interruptions and expectations of negotiation easing.

While geopolitical risks are heating up, the financial sector is also under pressure from rising interest rates. Bank of America fell over 5%, with CEO Moynihan indicating that third-quarter investment banking fees will decline year-on-year; Goldman Sachs dropped nearly 4%, and JPMorgan, Citigroup, and Wells Fargo all fell over 1%.

In the precious metals and crypto markets, trends diverged from oil prices.

Gold breaks below $4300, Bitcoin holds above $78,000 against the trend

The soaring U.S. Treasury yields and a stronger dollar exerted double pressure on precious metals. Spot gold fell below $4300 per ounce, continuing to decline, hitting a low of $4281.64, down over 1.5%. Spot silver dropped over 2.4%. The European bond market also came under pressure, with the yield on 10-year British government bonds reaching a new high of 5.4107% since July 2007. The yield on Italian two-year government bonds rose by 10.8 basis points in one day.

Cryptocurrency assets demonstrated a trajectory opposite to that of precious metals. Bitcoin rose above $78096, increasing by 1.7% in 24 hours; Ethereum rose to $2524, increasing by 1.59% in 24 hours. Bitcoin held above the $78,000 mark under the dual pressure of geopolitical risks and rising interest rates.

Today's focus

The sustainability of the plunge in chip stocks. The Philadelphia Semiconductor Index plummeted 5.92% on Monday, the memory chip index fell 6.1%, and multiple stocks in the optical communication sector dropped over 10%. Tuesday's performance will test whether this round of selling pressure is a short-term emotional release or the beginning of a trend correction. Order data for AI infrastructure is still under verification, and the tug-of-war between industrial logic and valuation pressure is a core observation point.

Whether the 10-year U.S. Treasury yield can stay above 5%. After breaking above 5.017% on Monday, the yield retreated to 4.992%. The 5% mark is a key resistance since October 2023. If it continues to rise and effectively breaks through on Tuesday, overvalued assets will face a new round of valuation compression. Position adjustments ahead of the Federal Reserve's interest rate meeting will also affect interest rate trends.