Late at night, US tech stocks unexpectedly plummeted!
On Thursday local time, the US stock market unexpectedly experienced a pullback, with popular large tech stocks collectively plummeting and the Nasdaq falling nearly 2%. Among them, the "seven sisters" in the US stock market fell sharply collectively, Tesla fell more than 8%, Nvidia fell more than 5%, Meta fell more than 4%, Google fell nearly 3%, and Apple, Microsoft and Amazon fell more than 2%. These 7 companies have evaporated a total of $598.8 billion in daily market value, equivalent to approximately RMB 4.35 trillion. So, why did US tech stocks suddenly plummet?
At the same time, Chinese concept stocks in the US stock market rose against the trend, with the Nasdaq China Golden Dragon Index rising over 2%. Among them, Xiaopeng Motors rose by over 7%, JD.com rose by nearly 7%, Vipshop rose by over 6%, and Alibaba and Weibo rose by over 3%.
US tech stocks collectively suffer heavy losses
On Thursday (July 11th) local time, the three major stock indexes in the United States fluctuated. As of the close, the Dow Jones Industrial Average rose 0.08%, the S&P 500 index fell 0.88%, and the Nasdaq fell 1.95%.
Large technology stocks fell collectively, and the "Seven sisters" of US stocks suffered the biggest sell-off in nearly a year, with a total market value of $598.8 billion evaporated. Among them, Tesla fell 8.44%, the largest daily decline since January 25th.
Analysis suggests that the slowdown in US inflation has sparked speculation that the Federal Reserve will cut interest rates as early as September, leading to a sharp drop in bond yields. The optimistic sentiment towards lower interest rates has led to a shift of funds towards high-risk sectors, as previously, the market had long believed that large technology companies were the safest area, resulting in a continuous influx of funds into this sector for hedging. Once inflation slows down, market funds begin to shift towards interest rate cutting trades, selling large tech stocks and buying small cap stocks. So it can be seen that while the Nasdaq fell nearly 2% and the S&P 500 index fell nearly 1%, the Russell 2000 index surged 3.57% on that day, achieving its best single day performance since November 2023.
Before investors shifted their focus from large tech stocks to other sectors, the Nasdaq index rose 23% this year as of Wednesday, with a market value increase of over $6 trillion. If the Federal Reserve cuts the highest interest rate level in 15 years, investors will have different choices.
Sosnick from Interactive Brokers warns that the long-term sell-off experienced by some large companies may put pressure on the major indices that investors are concerned about, even if most stocks are not initially affected.
In addition, Goldman Sachs strategists have stated that investors are increasingly concerned about American tech giants investing too much in artificial intelligence. The strategist of the bank said, "Oversized enterprises will eventually be required to prove that their investments will generate income and profits. However, there may not be early signs of income and profits, which could lead to valuation depreciation
On that day, Tesla was hit by an "air raid". Bloomberg reported that Tesla plans to postpone the release of its autonomous taxi Robotaxi to October, allowing the project team more time to manufacture more prototype vehicles. According to insiders, the news of the delayed launch of Robotaxi has been communicated internally within the company, and the design team was informed this week that certain elements of this taxi need to be redesigned. After the above news spread, Tesla's stock price plummeted significantly.
Previously, against the backdrop of the concept of intelligent driving becoming a core hot topic and Tesla's better than expected delivery volume in the second quarter, Tesla's stock price rose for 11 consecutive days, with a market value increase of nearly $260 billion, completely recovering all the losses from the beginning of the year to date. The idea of launching an autonomous taxi service has been brewing for Tesla for many years, at least dating back to Elon Musk's "Tesla Vision II" written in 2016. Tesla CEO Elon Musk has prioritized this project in recent months over developing an electric car that is cheaper than the Tesla Model 3.
Expectations of Fed interest rate cuts strengthen
The report released by the US Department of Labor on Thursday stated that the non quarterly adjusted CPI in June rose by 3.0% year-on-year, lower than the market expectation of 3.1%, reaching the lowest level since June last year. Meanwhile, the CPI in June decreased by 0.1% month on month, marking the first negative growth since May 2020.
These data further demonstrate that inflation has resumed its downward trend after a sharp increase at the beginning of the year, while broader economic activity appears to be slowing down. The non farm payroll report released last week showed that the unemployment rate has risen for the third consecutive month, and these data are expected to open the door for the Federal Reserve to cut interest rates later this year.
The general cooling of inflation in the United States in June further boosted the confidence of Federal Reserve officials, and the market expects them to cut interest rates soon. CME's Federal Reserve Rate Watch tool shows that the likelihood of the Fed cutting interest rates at its September meeting has surged to nearly 90%, higher than the 80% expected before the report was released.
Lindsay Rosner, the head of multi department investments at Goldman Sachs Asset Management, stated that there were three inflation data releases between the Federal Reserve meetings on July 11th and September. The data on July 11th is crucial in helping the Fed gain confidence that inflation is still moving in the right direction. The heat wave of economic data seems to have subsided, and after the cooling of labor market data last week, we have received even cooler inflation data, indicating that the Federal Reserve will cut interest rates in September
Chinese assets rise against the market trend
On that day, Chinese assets rose against the trend in the US stock market. On that day, the Nasdaq China Golden Dragon Index rose 2.24%. In terms of individual stocks, Artus Solar rose 7.94%, Dada Group rose 7.64%, JD.com rose 6.99%, and Vipshop rose 6.39%. China's new energy vehicle stocks rose across the board, with Xiaopeng Motors up 7.56% and Ideal Motors up 3.42%.
The latest research report of CICC believes that the Federal Reserve's interest rate cut reduces the external constraints of monetary easing in China and is conducive to the performance of China's bond market and exchange rate. Interest rate cuts also benefit risk assets such as stocks and commodities.
Li Lifeng and Feng Yihua of Huaxi Securities said that when the Federal Reserve started to cut interest rates, the space for domestic monetary policy would be opened, and economic growth would be repaired from "expectation" to "reality". When it was mapped to the asset side, it would be an increase in risk appetite, and the upward space of A-share and Hong Kong stock markets would be opened gradually driven by policies and fundamentals.
It is worth noting that on the evening of July 11th, good news came from the A-share market. That evening, China National Nuclear Corporation released a plan to issue A-shares to specific targets, including the controlling shareholder China National Nuclear Corporation and the strategic investor Social Security Foundation. Among them, China National Nuclear Corporation plans to subscribe for 2 billion yuan, and the Social Security Foundation plans to subscribe for 12 billion yuan. It is reported that this is the first time that the Social Security Fund has participated in the targeted issuance of shares by a listed company as a strategic investor, which is an important manifestation of actively responding to the China Securities Regulatory Commission's efforts to promote the active entry of long-term funds such as insurance funds, social security funds, and pension funds into the market.
China Nuclear Power Corporation stated that the Social Security Fund is the cornerstone of the social security system and has a natural blood connection with central enterprises. The joint participation of the Social Security Foundation and China National Nuclear Corporation in the issuance of China Nuclear Power will help demonstrate the concern and confidence of the Social Security Foundation and China National Nuclear Corporation in the high-quality development of the company and China's nuclear power industry to the capital market. It is also a new model of complementary advantages and win-win cooperation between the Social Security Foundation and China National Nuclear Corporation, serving the national strategy together.