Pre-market market trends
1. On August 20 (Thursday), the futures of the three major US stock indexes fell sharply before the US stock market. As of press release, Dow futures were down 0.33%, S&P 500 futures were down 0.11%, and NASDAQ futures were down 0.23%.
2. As of press release, the German DAX index fell 0.53%, the UK FTSE 100 index fell 0.24%, the French CAC40 index fell 0.31%, and the European Stoxx 50 index fell 0.25%.
3. As of press release, WTI crude oil rose 3.25% to $87.13 per barrel. Brent crude rose 2.89% to $94.27 per barrel.
Market news
J.P. Morgan warned that the US Treasury's repurchase of treasury bonds lacks credibility, and long-term yields may face further upward pressure. J.P. Morgan strategists warned that the market might see the unexpected steps taken by the US Treasury to curb long-term financing costs lacking credibility, which could drive up term premiums and yields over time. Strategists, including Jay Barry, wrote in a report, “If there is no real fiscal consolidation, we are concerned that the market will see this action as lacking credibility,” and “if the Treasury becomes more speculative in its debt management methods and deviates further from its 'routine and predictable' principles, this could lead to higher term premiums and yields over time.”
Aegon “tough” US Treasury: The increase in long-term debt repurchases “makes little sense”, and the steeper logic will not change. Although US Treasury Secretary Scott Bessent is trying to curb interest rates on long-term bonds, Aegon Asset Management remains firm that the spread between short-term and long-term US borrowing costs will continue to widen. According to Aegon portfolio manager James Lynch, expanding the scale of long-term US bond repurchases “makes little sense” and will not change his view that the yield curve in the US and Europe will continue to steep. Lynch said, “Fiscal issues — huge deficits, the influx of large-scale corporate debt into the market, the inflation rate is still above target levels, and the Federal Reserve's lack of clear communication are all injecting an additional premium into the market. I don't think these factors will go away anytime soon.”
The US Treasury Department is expanding the scale of long-term debt repurchases or increasing the risk of inflation. Analyst: The Federal Reserve is facing a more complex policy environment. Economists and bond traders believe that if the Treasury continues to reduce long-term interest rates by adjusting the debt structure, it may stimulate economic activity and increase inflationary stickiness, and at the same time make US government debt financing costs more vulnerable to changes in short-term interest rates. Furthermore, it could also put more pressure on the Federal Reserve to maintain its policy independence. Joseph Brusuelas, chief economist at RSM US, said that the policy is gradually moving in a direction that may require the central bank to support fiscal goals. He believes that the intervention of the Ministry of Finance may distort the market and cause the Federal Reserve under Walsh to face a more difficult policy environment. Wil Sith, senior bond portfolio manager at Wilmington Trust, said that if inflation remains constant or continues to rise, the easing effect of the Treasury depressing long-term yields may force the Federal Reserve to raise interest rates more aggressively.
AI debt is at its peak, and September is the testing period for US debt. At a time when the US Treasury is easing the pressure on the US bond market by expanding its long-term treasury bond repurchase program, another huge wave of debt financing is unfolding. The core force driving this round of financing expansion comes from AI infrastructure construction. The US investment-grade corporate bond market usually peaks in issuance after Labor Day. As the financing needs of hyperscale cloud computing companies increase, the scale of corporate bond issuance in September may reach 200 billion US dollars, or a new round of impact on the treasury bond market, which is already under pressure. According to market agency estimates, since 2026, the issuance volume of US investment-grade corporate bonds has increased 38% year over year, and the annual issuance scale is expected to reach a record amount of 2.1 trillion US dollars. Among them, a large amount of the additional supply comes from AI-related capital expenses. This supply wave, compounded by the expansion of the US fiscal deficit, rising inflation expectations, and uncertainty about the Federal Reserve's policy, is reshaping the supply and demand pattern in the fixed income market.
Is the US economy afraid that it will “collapse at any time”? The three indicators light up red, and the AI bubble becomes the final straw. Finnish economist Tuomas Malinen, who specializes in financial crises and geopolitics, after analyzing several key indicators in the US financial market and economy, believes that although the current US economy has not shown a clear schedule of recession, downside risks have clearly risen. He pointed out that US bankruptcy filings have risen to the highest level since the pandemic, and the private sector yield curve is sending a signal that “the US recession is about to begin.” Meanwhile, new orders from the US manufacturing industry are the only indicator that still sends a positive signal, but it is not enough to offset other risks, as the current growth of the US economy seems to be highly concentrated in a few sectors. He is particularly concerned that the AI investment boom is creating a new market bubble. If AI trading suddenly collapses, the economy could weaken as fast as it did after the internet bubble burst.
Individual stock news
Walmart (WMT.US) Q2 performance was mixed, and full-year guidance fell short of expectations. Financial reports show that Walmart's Q2 revenue increased 6% year over year to US$187.94 billion, better than market expectations of US$186.6 billion; same-store sales increased 2.6%, falling short of market expectations of 3.8%; and adjusted earnings per share were US$0.81, better than market expectations of US$0.74. Furthermore, the performance guidance given by the company fell short of expectations. The company expects Q3 sales to increase by 3%-3.75%; adjusted earnings per share are expected to be $0.62-0.64, falling short of market expectations of $0.68. The company also expects full-year sales to grow by 4%-5% (previously estimated at 3.5%-4.5%), falling short of market expectations of 5.3%; it expects full-year adjusted earnings per share of $2.80-2.87 (previously estimated at $2.75 to $2.85), falling short of market expectations of $2.90. As of press release, Walmart's US stocks fell more than 6% in the premarket on Thursday.
Alibaba (BABA.US) net profit for the first quarter decreased by 75.56% year on year, and revenue from AI-related products achieved three-digit year-on-year growth for 12 consecutive quarters. Alibaba announced quarterly results for the quarter ended June 30, 2026, with revenue of 268.953 billion yuan (US$39.639 billion), an increase of 9% over the previous year. Operating profit was 15.161 billion yuan (US$2,234 billion), a year-on-year decrease of 57%. Net profit attributable to common shareholders was $10.537 billion (US$1,553 million), a year-on-year decrease of 75.56%. Among them, AI cloud and computing power service revenue was 48.437 billion yuan (US$7.139 billion), and total revenue and external customer revenue both accelerated to 45% year-on-year. This growth is mainly driven by increased adoption of AI-related products. Revenue from AI-related products continued to maintain a strong momentum of 12.376 billion yuan (US$1,824 million), achieving the twelfth consecutive quarter of three-digit year-on-year growth.
SK Hynix (SKHY.US)'s “sky-high bonus” distribution plan was initially finalized: 60% of shares will be issued and 40% cash will be paid, which is expected to reach 779 million won per person. According to a source familiar with the matter, South Korean chip giant SK Hynix has agreed on a preliminary salary agreement. It plans to distribute 60% of this year's employee bonuses in the form of company shares, while the remaining 40% will be paid in cash. The source further pointed out that according to the latest plan, employees will receive shares equivalent to 40% of the total bonus amount in 2027, while the distribution of the remaining 20% of the shares will be deferred until 2028 and 2029, and there is no sales limit for these shares. The remaining 40% of the bonus will be paid in a lump sum in cash in 2027. Additionally, SK Hynix announced on Wednesday that it will repurchase and cancel treasury shares worth 40 trillion won (US$28.6 billion) and use more than 50% of the free cash flow generated between 2025 and 2027 to increase shareholder returns.
SpaceX (SPCX.US) restricted shares have been lifted again: 319 million shares can be traded. Investors are concerned about whether Musk employees will sell them. The lifting of the ban on restricted shares in the second round after SpaceX's listing is imminent. Up to 319 million shares held by insiders will become tradable on August 20, local time, accounting for about 7% of the shares held by early investors and employees. The lifting of the ban means that more employees and investors who obtained shares of SpaceX before listing can sell shares, and the market will pay attention to whether the new supply will put pressure on stock prices. However, the shares held by SpaceX CEO Elon Musk and some important investors are still under longer lockdown and will not be affected by the lifting of the ban. Morgan Stanley analyst Adam Jonas believes that the pressure to lift the ban may not be a risk, but rather an investment opportunity.
IBM (IBM.US) quantum computing reached a key milestone: successfully connecting and cooling two low temperature modules, with the goal of launching the world's first fault-tolerant quantum computer in 2029. IBM announced that the two cryogenic modules have been successfully connected and cooled to the same operating environment, and preliminary tests have been completed. According to the company, this modular architecture is intended to be expanded into an ultra-low temperature sharing system that can connect hundreds of quantum chips, and is a key step towards the launch of IBM Quantum Starling in 2029. IBM anticipates that Quantum Starling will be the world's first fault-tolerant quantum computer, integrating advances in error correction, processor design, decoding, and systems engineering. Compared to the most widely used IBM quantum systems today, the vacuum housing of each module provides up to 12 times more wiring space. IBM pointed out that this supports more chip-to-chip connections within and between modules, providing a hardware foundation for larger scale quantum computation.
Key economic data and event forecasts
Number of jobless claims in the US at 20:30 Beijing time at the beginning of the week ending August 15
20:30 Beijing time US August Philadelphia Federal Reserve Manufacturing Index
20:30 Beijing time 2027 FOMC voting committee and San Francisco Federal Reserve Chairman Daly delivered speeches
23:10 Beijing time 2028 FOMC voting committee and St. Louis Federal Reserve Chairman Mussalem was interviewed by CNBC
Performance Forecast
Friday morning: ROST.US
Friday pre-market: Seashells (BEKE.US)