US Stock Market Trends (July 14): Geopolitical Conflicts Intensify Coupled with Hawkish Fed, Nasdaq Drops 1.55%, Semiconductor Index Plunges
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US Stock Market Trends (July 14): Geopolitical Conflicts Intensify Coupled with Hawkish Fed, Nasdaq Drops 1.55%, Semiconductor Index Plunges
The key variable is Wednesday's CPI data.
Navigating Web3 tides with focused insightsWritten by: TechFlow Research
Trump announced a new round of naval blockade on the Strait of Hormuz, US military confirmed the operation would launch Tuesday afternoon, crude oil surged in response. Fed Governor Waller stated if core inflation rises again, will consider tightening policy soon; rate hike expectation surged from freezing point to about 50%. Under double blow, Nasdaq closed down 1.55%, fell below 50-day moving average; Philadelphia Semiconductor Index plunged 4.78%, hit recent monthly low; Gold once broke through 4000 USD level. In sharp contrast, Apple rose 0.71% against the trend, hit historic high, funds withdrew from chip and AI sectors collectively, turned to defensive allocation.
Market Performance
S&P 500 fell 0.79%, at 7515.34 points; Dow fell 0.26%, at 52498.64 points; Nasdaq fell 1.55%, at 25873.176 points, closed below 50-day moving average; Nasdaq 100 fell 1.88%, at 29264.103 points; Russell 2000 fell 0.83%, at 2953.166 points; VIX rose 14.11%, at 17.15.
Philadelphia Semiconductor Index fell 4.78%, at 12347.784 points. Nvidia fell 3.52%, at 203.53 USD; Broadcom fell 3.98%; AMD fell 4.21%; ARM fell nearly 8%; Micron fell over 7%; SanDisk fell over 12%. TSMC ADR fell 2.88%. SK Hynix US ADR fell over 9%, its Seoul listed shares plunged 15.37%, recorded historic largest single-day decline.
Apple rose 0.71% to 316.91 USD, hit intraday historic high; Microsoft rose 1.53%; Amazon rose 0.80%; Meta fell 1.86%; Tesla fell 3.19%; Google A fell 1.31%. Magnificent Seven Index fell 0.96%.
Semiconductor ETF fell 4.16%, Global Tech Stock Index ETF fell 2.88%, Energy Sector ETF rose 3.03%.
WTI Crude Oil rose nearly 10%, touched near one-month high, and stood above 50-day moving average. Spot Gold once plunged over 3% to 3992.48 USD, fell below 4000 USD key support. Spot Silver under pressure simultaneously. Bitcoin fell over 3%, once fell below 62000 USD; Ethereum fell about 3%.
2-Year US Treasury Yield surged 6 basis points to 4.28%. 10-Year Real Interest Rate surged to 2.34%, hit highest since April last year. US Dollar Index rose significantly over 0.5% from intraday low.
Macro and Outlook
Trump announced resumption of naval blockade on Iran, US will impose a 20% toll on goods transported via Strait of Hormuz. US Central Command confirmed blockade operation launch Tuesday afternoon. Strait of Hormuz commercial traffic volume plummeted to only 3 times per 24 hours after news announced, hit historic low, reflecting commercial shipping companies chose to avoid risk in this area. Goldman Sachs baseline scenario predicts Brent oil price will oscillate in 75 to 85 USD range, but if US military directly attacks offshore energy infrastructure or multiple key straits interrupted simultaneously, oil price may rush to over 100 USD.
Fed Governor Waller released hawkish signal in New York, clearly stated if this week's core inflation data rises again, FOMC will consider tightening policy in near term. He emphasized "no matter what metric used, inflation is rising this year", and expressed concern on core inflation trend. This statement changed market expectation on Fed maintaining patience, CME data shows July rate hike implied probability has surged to near 50%.
Rapid rise of real interest rate became core pressure of market that day. 10-Year Real Interest Rate surged from 2.11% at end of June to 2.34%, approaching 2.40% key threshold. Rate of change of real interest rate rather than absolute level has greater impact on equity market, if quickly breaks through 2.40%, will cause widespread negative impact on entire stock market. Real interest rate surge simultaneously pushed up USD, pressed down gold price.
Market concern on sustainability of AI capital expenditure cycle has spread from questioning demand side to doubt on entire investment cycle itself. South Korea stock market plunged 8.95%, accumulated decline of 27% since June high, this extreme decline spillover effect directly transmitted to US stocks, AI infrastructure suppliers and chip manufacturers sold off simultaneously, and latter fell more. SK Hynix hit historic largest single-day decline, reflecting market expectation on storage chip demand cooling rapidly.
In contrast, Apple's independent strength attracted large fund inflows. Apple rose in 13 out of recent 16 weeks, only about 5% gain away from surpassing Nvidia to become global largest market cap company. But analysts' interpretation of this trend differentiated into two camps: Fundamental camp believes supporting factors lie in autumn replacement cycle and gross margin stability; Technical camp believes this is defensive rotation from high volatility tech stocks to low volatility assets, funds are within tech sector from bearish storage chip companies, turning to targets with robust balance sheets like Apple.
TechFlow Perspective
Monday's market decline, essentially is result of combined action of geopolitical and monetary policy dual factors. Real blockade of Strait of Hormuz pushed oil price to current high, Waller's statement shifted rate hike expectation from market pricing to real action. Two signals superimposed, means pressure faced by equity assets has turned from expectation level to real level.
Behind plunge of chip stocks, is collective doubt on AI investment sustainability. Market in past few weeks has started questioning whether enterprises will still maintain previously promised capital expenditure level, SK Hynix 15% single-day decline indicates investors have already given answer, they believe demand is sliding off a cliff.
Apple's strong trend, may just be helpless choice of funds in panic. When AI sector is identified "growth expectation excessive", funds need a safe haven, Apple became lowest volatility choice. But whether this defensive rotation can sustain, depends on whether next week's earnings season can verify if enterprises are really cutting AI expenditure. If earnings show enterprises still increasing AI investment, Apple's strength may be proved just short-term hedging, funds will flow back to chip stocks rapidly.
Key variable is Wednesday's CPI data. If data shows inflation really accelerating again, Waller's statement is not bluff, rate hike expectation will further heat up, US stocks still have room to continue falling.
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