[US Market Report] October 23 | SOX -6.72%, Interest Rates Fall Below 5% — What the Market Feared Was Not 'High Interest Rates'
The SOX plummeted by 6.72%. Meanwhile, the US 10-year Treasury yield fell to 4.961%.
Good morning, this is Long-Term Investor @VOO.
Yesterday, semiconductor stocks rebounded following strong earnings from AI-related companies.
However, today, they took a sharp turn downward.
The NASDAQ 100 was down 2.90%. The SOX was down 6.72%.
And what is interesting is the US 10-year Treasury yield.
It fell significantly from the previous day’s 5.123% to 4.961%.
Until now, the market has been wary that high interest rates would be a burden on AI stocks.
But today, even with interest rates falling, AI stocks are being sold off.
What the market has begun to fear may not just be the level of interest rates, but the question of whether massive AI investments will truly generate profits.
📊 Market Sentiment & Key Indicators
Fear & Greed Index: 20
→ A sharp drop of 11 points from the previous day’s 31. Back into Extreme Fear.
Put/Call Ratio: 0.87 (CPC) / 0.935 (PCC)
→ The CPC is flat, but the PCC has risen from 0.856. Caution regarding individual stocks is intensifying.
US 10-Year Treasury Yield: 4.961%
→ A drop of approximately 16.2bp from the previous day’s 5.123%. Buying of US Treasuries, a safe-haven asset, has strengthened.
VIX Index: 19.02
→ Up from the previous day’s 16.67. However, at around 20, it cannot be called full-blown panic.
Dollar Index (DXY): 101.6
→ Almost flat from the previous day.
USD/JPY: 156.8 yen
→ An appreciation of the yen by about 1.3 yen from the previous day’s 158.1 yen. Risk-averse buying of the yen has strengthened.
What is concerning here is that while the Fear & Greed Index has fallen to 20, the VIX remains at 19.02 and the CPC at 0.87.
Market sentiment has deteriorated rapidly.
However, the entire stock market is not being sold off in unison.
📈 Market Movements
The NY Dow is 52,867.98 (+11.89) +0.02%
The S&P 500 is 7,663.43 (-93.74) -1.21%
The NASDAQ 100 is 28,958.69 (-863.83) -2.90%
The Russell 2000 is 2,784.03 (+3.01) +0.11%
The Philadelphia Semiconductor Index is 10,731.98 (-773.58) -6.72%
Today’s numbers are quite extreme.
The SOX fell 6.72% in a single day.
The NASDAQ 100 also fell by about 3%.
On the other hand, the NY Dow and the Russell 2000 are slightly positive.
In other words, the entire US stock market did not collapse.
While the valuation of AI and semiconductors is becoming strict again, capital remains in other sectors.
That is how I view today’s session.
📰 Notable News and Factors
🤖 ① Meta Earnings — Even with good revenue, doubts about massive investments did not disappear
With today’s decline, what I focused on most was Meta.
The company’s quarterly revenue exceeded market expectations.
However, massive AI-related investments caused capital outflows, and a fundraising plan utilizing non-voting shares was also revealed.
Following this, Meta stock fell significantly.
What is important here is,
It is not that they were sold off because sales were poor.
Investment in AI will increase.
Facilities will also increase.
Sales will also grow.
However, even more massive amounts of capital will be needed to maintain that growth.
The market is now
‘Is AI demand strong?’
from the question of
‘How much more is needed for that growth? And when can it be recovered?’
I feel that it is shifting its gaze to.
Yesterday, Super Micro was evaluated for its positive outlook on sales and profit margins.
Today, Meta’s massive investment was viewed with caution.
Even within the same AI-related sector, market evaluations are sharply divided.
📉 ② Interest rates below 5% – The reason why AI stocks were still sold off
Another important factor today is the US 10-year Treasury yield.
5.123% → 4.961%
This is a significant drop of about 16bp.
Normally, a decline in long-term interest rates is a tailwind for growth stocks.
This is because when converting future earnings into present value, lower interest rates make it easier for valuations to rise.
However, today was different.
The SOX index fell 6.72%.
The NASDAQ 100 fell 2.90%.
What we can see from this is the reason for the decline in interest rates.
This time, there is an aspect where anxiety toward the stock market intensified, leading to buying of US Treasury bonds, which are safe assets.
In other words,
Anxiety toward stocks
↓
Capital shift to US Treasuries
↓
Rise in bond prices
↓
Yield decline
is the flow.
Just because interest rates fall does not mean stocks will necessarily rise.
We need to see whether the decline in interest rates was born from a sense of relief or from anxiety.
Right now, we need to look at that difference.
🛢 ③ Rising Crude Oil Prices – Another Burden on AI Investment
The situation in the Middle East is also becoming tense again.
Following the attack on Saudi Arabia by the Houthi rebels in Yemen, concerns over energy supply have intensified.
Brent crude oil futures rose about 4%, marking a five-month high.
Rising crude oil prices are not just a matter of energy costs.
They could push up transportation and manufacturing costs, putting pressure on corporate profits.
And if inflation re-accelerates, it will become harder for the Fed to ease monetary policy.
In the current market,
there is anxiety over the profitability of AI investment and anxiety over the resurgence of inflation due to rising crude oil prices.
These two things exist simultaneously.
It is understandable that the market is becoming cautious ahead of next week’s FOMC.
💱 Exchange Rates, Interest Rates, and Commodity Trends
WTI Crude Oil Futures: $99.0 range
→ Rose from $97.6 the previous day. Escalating tensions in the Middle East are leading to supply concerns.
Gold: $4,038 range
→ Fell from $4,150 the previous day. Even in risk-off phases, gold does not always rise.
Bitcoin: $81,318 range
→ Fell from $84,544 the previous day. Caution toward risk assets is spreading.
The dollar-yen pair strengthened to 156.8 yen.
In addition to the decline in long-term US interest rates, it is believed that yen buying due to stock market instability also had an impact.
Interest rates, stocks, crude oil, and exchange rates.
Today was a day where the market’s overall risk perception shifted, rather than each moving independently.
💬 Impressions and Summary – A Long-Term Investor’s Perspective –
Looking at today’s market, I was reminded of last week’s market.
The SOX also fell significantly last week.
However, during that time, the US 10-year Treasury yield was falling.
And it is the same today.
Interest rates fell below 5%.
Yet AI stocks were sold off.
I believe this reflects the changes in the current market.
Previously,
‘AI stocks are being sold because interest rates are high’
was the central explanation.
However, now,
“Even if interest rates fall, if the profitability of AI investment itself is questioned, it will be sold off”
we may have entered that stage.
Of course, it is not that AI demand has disappeared.
Yesterday, Super Micro’s positive outlook was well-received.
However, as the amount of investment in AI increases, the question of how to recoup that money becomes heavier.
In upcoming earnings reports, I would like to look at the relationship between capital expenditure and cash flow, not just revenue.
And one more thing.
Today, the Dow and the Russell 2000 were positive.
This is a bit of a relief.
Even if AI-related stocks are sold off heavily, the entire stock market is not collapsing in the same direction.
However, the Fear & Greed index is at 20.
Caution is necessary.
I will continue my regular investments into the S&P 500 and NASDAQ 100 today as usual.
Regarding additional investments, I will observe market sentiment and price movements without rushing.
Understanding why the market is afraid and letting that fear control you are two different things.
As a long-term investor, I want to value that sense of distance.
📩 If you found this article even slightly helpful, I would be happy if you could support me with a ‘Like’ and a ‘Follow’! The US Market Report is updated every business day 📅. I organize market sentiment and index movements in an easy-to-understand way from the perspective of a long-term investor.
By checking it every day, you will develop the habit of being able to “take a bird’s-eye view” of market trends.
👉In the “US Market Report” we update the latest reports as they become available. To ensure you don’t miss our daily morning market reports, please be sure to follow the magazine!
Comments are also very welcome. Please feel free to share your opinions or ask questions!
#USStocks #SP500 #NASDAQ #LongTermInvestment #VOO #WealthBuilding #IndexInvesting #USMarketReport #AI #Semiconductors