[October 6] NASDAQ 100 hits record high! Semiconductor stocks lead despite high interest rates
US Market and October 6 (Tue) Japan Market Outlook
Summary of Today’s Key Points
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Nikkei 225 temporarily recovers to 70,000, reaching a major milestone for the first time in 3 months
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Nasdaq 100 hits record high, with broadening market interest in the US
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Divergent movements in short and long-term interest rates, with US 10-year Treasury yield at 5.31%
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Today features a 10-year Treasury auction, with a 30-year auction and FOMC minutes scheduled for Thursday
1. Nikkei 225 temporarily recovers to 70,000, reaching a major milestone for the first time in 3 months
The Nikkei 225 rebounded yesterday, rising 1,637 yen (2.40%) to 69,946 yen, recovering the 69,000 yen level for the first time in about a month and a half since August 17. During trading hours, it even briefly exceeded 70,000 yen for the first time in about three months since July 6. This was driven by the cooling of expectations for an early interest rate hike following the weaker-than-expected US employment report. Advantest hit a record high for the second consecutive day. Fast Retailing also rose, buoyed by strong September domestic existing-store sales for Uniqlo, which were up 10.8% year-on-year. This marks a rise of about 4,000 yen in a short period from the 65,000 yen level on September 29.
2. Nasdaq 100 hits record high, with broadening market interest in the US
In the US market last night, the Nasdaq 100 closed at a record high of 31,076. What is noteworthy is the composition. In the S&P 500, all sectors except real estate rose, indicating a broadening of market interest. This is a sign of change, as funds had previously been concentrated solely in AI and semiconductors. The September ISM non-manufacturing index also remained in expansionary territory at 54.9. Semiconductor stocks were mixed, with Nvidia and Broadcom each rising 2.1%, while Intel fell 2.6%.
3. Divergent movements in short and long-term interest rates, with US 10-year Treasury yield at 5.31%
In the bond market, movements are diverging depending on the maturity. While the US 10-year Treasury yield rose to 5.31%, the 2-year yield fell slightly to 4.82%. Short-term rates are falling due to receding rate hike expectations, while long-term rates are rising due to concerns over fiscal deficits and bond supply. The slope of the yield curve is changing. This is evidence that structural factors, rather than monetary policy, are determining long-term interest rates. Crude oil fell to around $89 following the G7’s release of strategic reserves.
4. Today features a 10-year Treasury auction, with a 30-year auction and FOMC minutes scheduled for Thursday
Today, a 10-year interest-bearing government bond auction worth approximately 2.6 trillion yen will be held. The results will be released at noon. Domestic long-term interest rates are around 3.09%, and the 20-year bond is at 3.94%, nearing the 4% level. Some in the market expect the target range for the new 10-year bond to be 3.05–3.25%. If the auction is weak, it could push up interest rates across the board, starting from the super-long end. Furthermore, Thursday the 8th will see both a 30-year bond auction and the release of the FOMC minutes. Today, Governor Ueda and Finance Minister Katayama are also scheduled to give speeches at the National Securities Convention.
Outlook for today’s Japanese market
Today’s Tokyo market is expected to see steady sentiment, while also showing caution ahead of the midday auction results.
The tailwinds are clear.The NASDAQ 100 hit a record high, and the scope of buying in the US has broadened. Crude oil falling to $89 and the G7’s strategic reserve release working to curb the surge in diesel prices are also supportive. The Taiwan Weighted Index continues to hit record highs day after day, creating a climate where semiconductor-related stocks are easily bought.
However, two points of caution are necessary.
One is the price level. The Nikkei 225 has risen by about 4,000 yen in four trading days from the 65,000 yen level on September 29. Market participants have pointed out that the rapid rise has pushed up the level, and new catalysts are needed for further gains. Profit-taking is likely at the 70,000 yen milestone, and there were moments when the market struggled to gain momentum yesterday afternoon.
The other is today’s auction. The results will be known at midday. If they are weak, interest rates across the board, starting from super-long-term bonds, will be pushed up, and the overvaluation of stocks will be immediately recognized. The 30-year bond auction and FOMC minutes are also scheduled for Thursday. Practically speaking, if you wait until after the auction to increase your holdings, you can avoid facing bad results head-on.
The exchange rate continues to battle between the 156 yen level and just under 160 yen, which is also a variable for export stocks. Today is a day to make decisions after confirming the midday auction results.
Market Health Report by Opus 5
— Summary of Reasons for Rise/Fall and Outlook —
1. Gold ▼
COMEX Gold December futures fell for the second consecutive day, down $5.50 (0.13%) to $4,156.80. Although the dip was bought during off-hours, rallies were sold off following the euro’s decline due to fiscal concerns in France. During European hours, the market tightened as the dollar’s strength paused, but during daytime trading, it turned to selling dominance following the US ISM non-manufacturing index, which indicated inflationary pressure, and the rise in US Treasury yields. The structure is one where buying initially led due to the retreat of early rate hike expectations after the employment report, but was pushed back by the rise in long-term interest rates.
Outlook: The reason gold is not recovering even though the October rate hike has almost disappeared is that the dominant factors are long-term interest rates and the dollar, not the policy rate. I see this as a phase of either stagnation around $4,150 or testing the downside.
2. Crude Oil ▼
WTI November futures fell for the second consecutive day, down $1.68 (1.84%) to $89.43. The G7’s agreement last weekend to release 100 million barrels in a coordinated effort continued to ease immediate supply concerns. This is an additional release while the release of up to 400 million barrels agreed upon by IEA member countries in March has not yet been completed. Reports that supply via the Strait of Hormuz has recovered to pre-Iran war levels were also a weight. Although it rose to $91.88 during off-hours, the positive territory was temporary, and it softened to $88.74 after the start of regular trading.
Outlook: With reports that Iran has stepped up attacks on ships navigating the strait and that the recovered supply has decreased again, the downside is also limited. I expect the back-and-forth around $90 to continue.
3. Bitcoin △
Up 0.8-1.5% in the $86,000 range. It rose to nearly $87,000 early Monday morning, coming within about $500 of the late September high of $87,397, but was pushed back by selling and fell below $86,000. Following the 2nd, it has been repelled at the same level for two consecutive trading days.
Outlook: The liquidation map shows short positions piling up around $88,000 and $90,000, creating a market environment where a breakout could easily trigger a short squeeze. However, during the short squeeze on September 21, $750 million in shorts were liquidated, causing a $6,500 rise in one day, only to be fully retraced within four days. Whether there is accompanying spot buying is the deciding factor for sustainability.
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[October 6] PickUp Momentum Stocks
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*This article is not intended to solicit the purchase of specific stocks or provide investment advice. The information provided is based on the author’s personal views and analysis, and does not guarantee its accuracy or future investment results. Please take responsibility for your own investment decisions.