[10/22] Today's Financial Market in 3 Minutes | Counterattack in the AI Market, US Tech Stocks Rebound on Strong Earnings
Good morning. This is Pimenta Works🌶️
In the financial markets on the 21st, US stock markets rose across the board as AI-related stocks were bought back on the back of strong earnings from US companies. The Nasdaq Composite Index closed at 26,703 points, up 1.05% from the previous day, the S&P 500 at 7,757 points, up 0.58%, and the Dow Jones Industrial Average at $52,856, up $360. In addition to the favorable earnings outlook for AI server giant Super Micro Computer, strong earnings from SpaceX also improved investor sentiment. In the Tokyo market, the Nikkei Stock Average also rebounded for the first time in three business days, closing at 64,621 yen, up 546 yen from the previous day.
Meanwhile, in the crude oil market, WTI crude oil prices briefly fell below $100 on expectations of easing tensions between the US and Iran, and the US 10-year Treasury yield also fell to around 5.1%. The dollar-yen pair briefly strengthened to 157.84 yen. What is noteworthy is that while AI-related stocks are rebounding, investor interest is shifting from the expansion of capital investment to actual profitability. It remains to be seen whether strong earnings will lead to a further rise in the AI market.
🌶️ Today’s HOT Points
1. US Nasdaq +1.05%, AI-related stocks rebound. Strong earnings ease credit concerns
In the US stock market on the 21st, the Nasdaq Composite Index rose 1.05%, the S&P 500 rose 0.58%, and the Dow Jones Industrial Average rose 0.69%. AI server giant Super Micro Computer rose 9.6% on favorable revenue and profit margin forecasts, and SpaceX also rose 7.8% following strong earnings. Buying also spread to Dell Technologies (+5.3%) and HPE (+3.7%), and semiconductor-related stocks also rebounded. The correction in AI-related stocks that had been continuing since last week has paused, and growth expectations have once again supported the market.
However, concerns about the credit risk of AI-related companies have not been resolved. Since the credit anxiety surrounding CoreWeave, the market has been focusing on how to finance massive capital investments and the certainty of investment recovery. While these strong earnings have provided evidence of the resilience of AI demand, it is important going forward not only to see revenue growth but also whether businesses can expand without incurring debt burdens or cash flow issues. The evaluation criteria for AI-related stocks are shifting from expectations for investment scale to the certainty of monetization.
2. Crude oil falls below $100, US interest rates also decline. Expectations of easing tensions in the Middle East provide a tailwind
In the crude oil market, supply concerns have receded somewhat on expectations of progress in talks between the US and Iran, and WTI crude oil futures briefly fell to $96.94. Crude oil prices had been hovering above $100 due to escalating tensions in the Middle East, but expectations for a diplomatic solution are acting as a selling factor. However, uncertainty regarding the Strait of Hormuz remains, and prices could fluctuate significantly again depending on the progress of the talks.
In the US bond market, the 10-year Treasury yield briefly fell to around 5.08% on the back of receding inflation concerns due to lower crude oil prices. The decline in crude oil prices eases the cost burden on companies and acts as a factor to suppress expectations of additional interest rate hikes by the Fed. On the other hand, recently released US housing-related indicators were weak, and there is growing awareness that the high-interest-rate environment may be weighing on the real economy. The focus going forward will be on whether lower crude oil prices will support stock prices through slowing inflation, or whether concerns about an economic slowdown will lead to lower interest rates.
3. Dollar-yen briefly in the high 157 range. Lower US interest rates and expectations of BOJ normalization support the yen
In the foreign exchange market on the 21st, dollar selling became dominant on the back of falling crude oil prices and lower US long-term interest rates, and the dollar-yen pair briefly fell to 157.84 yen. It was then bought back to around 158.18 yen, showing a lack of direction around the 158 yen level. The euro-dollar pair briefly rose to 1.1241 dollars, and the dollar remained somewhat soft against major currencies.
In Japan, Bank of Japan Deputy Governor Himino expressed the view that the underlying inflation rate is approaching the 2% target, given the rise in medium- to long-term expected inflation rates. Although the policy interest rate is expected to remain unchanged at the Bank of Japan meeting at the end of October, the path of financial normalization is being maintained, and if expectations for additional US interest rate hikes recede, the narrowing of the Japan-US interest rate gap could support the yen. However, since the resurgence of high crude oil prices and changes in risk appetite following US corporate earnings also affect the direction of the dollar-yen, we will continue to pay attention to trends in US interest rates and the stock market.
👀 Today’s Focus | Profitability of AI investment questioned in Meta and Tesla earnings
After the close of trading on the 21st in the US, Meta Platforms and Tesla announced their earnings. Meta’s revenue grew steadily by 26% year-on-year to $64.6 billion, and its stock price rose in after-hours trading. On the other hand, capital expenditure reached $34.9 billion in the third quarter alone, confirming once again that massive AI investment is continuing.
Although Tesla’s adjusted EPS exceeded market expectations, its stock price remained soft after the earnings announcement as the market became aware of the pressure on profit margins due to AI and R&D investments. The earnings of both companies show that while demand for AI-related products continues to expand, the market’s assessment of the balance between investment burden and monetization varies from company to company.
Going forward, in addition to large US tech companies, earnings from Japanese semiconductor and electronic component companies will also begin in earnest. For the rebound in AI-related stocks to be sustained, it will be important not only to confirm the expansion of demand but also to show a path toward investment recovery and profit margin improvement.
🌶️ Today’s 3-Minute Summary
Stocks: The US Nasdaq rose 1.05% and the S&P 500 rose 0.58%. AI-related stocks rebounded following strong earnings from Super Micro and SpaceX, and the Nikkei Stock Average also rose for the first time in three business days to 64,621 yen, up 546 yen.
Interest Rates/Crude Oil: WTI crude oil briefly fell below $100, and the US 10-year Treasury yield also fell to around 5.08%. While expectations of easing tensions in the Middle East are easing inflation concerns, caution regarding an economic slowdown remains.
Forex: The dollar-yen pair briefly fell to 157.84 yen. While lower US interest rates are weighing on the dollar, expectations for normalization by the Bank of Japan are supporting the yen. The market continues to lack clear direction, hovering around 158 yen.
The most important takeaway from yesterday’s market was that while AI-related stocks rebounded on the back of strong earnings, the challenge of monetizing massive capital expenditures was once again highlighted. With lower oil prices and falling interest rates providing a tailwind, whether the AI market enters a full-scale recovery phase depends on whether future corporate earnings can demonstrate the certainty of investment returns.
Financial markets, in 3 minutes for busy people.
🌶️ Pimenta Works
#FinancialMarkets #USStocks #Nikkei225 #DollarYen #USTreasuries #FRB #BOJ #AIRelatedStocks #Semiconductors #CrudeOil #PimentaWorks