😶‍🌫️citing weak interest rate cut expectations and AI industry value burden

11/14 U.S. stocks fall, citing weak interest rate cut expectations and AI industry value burden

The U.S. stock market fell as the Fed members’ remarks weakened expectations for a rate cut ahead of the announcement of full-fledged economic indicators after the shutdown. In response, semiconductors and other AI-related companies and major theme stocks led the decline. On the other hand, the pharmaceutical sector’s strong performance has continued recently, and the industry’s cyclical sales have continued to expand. (Dow -1.65%, Nasdaq -2.29%, S&P 500 -1.65%, Russell 2000 -2.77% and Philadelphia Semiconductor Index -3.72%)

*Variables: Monetary policy, AI industry instability

In CME FedWatch, the probability of a rate cut in December decreased from 62.9% the previous day to 49.4% in the market (a slight increase to 51.9% due to a drop in stock prices). This is because many Fed members made somewhat hawkish remarks this week. Last week, Cleveland Fed President Hamack opposed further rate cuts, citing instability in prices, while New York Fed President John Williams said widening the wealth gap could be a downside risk to the economy, but was skeptical about cutting rates. Many other Fed members also mentioned job insecurity, but most were more focused on tariff-driven prices and expressed their burden on cutting rates.

Again today, Minneapolis Fed President Kashkari noted that prices are too high. The Reserve Bank of Cleveland Governor Hamack pointed to high prices while employment remained solid. He continued to make mostly negative comments on the Fed’s further rate cuts. Of course, the Federal Reserve Bank of San Francisco also argued that prices are stable and employment is cooling down amid falling demand and supply, but most Fed members have recently been skeptical of a rate cut in December, citing anxiety about prices. Treasury yields rose. The dollar is a strong factor, but weakened against other exchange rates, citing jitters over the U.S. economy. Stock markets have led declines in semiconductors, AI-related companies, and major theme stocks

Meanwhile, it is also noteworthy that the issuance of U.S. corporate bonds reached $1.5 trillion this year, the largest since 2020, when it was the first in history. The reason for the surge in corporate bonds by these companies is estimated to have been influenced by Meta Platforms’ issuance of $30 billion corporate bonds. There were M&As for related funds, but many of them are estimated to be investments in the AI industry. Amid the recent controversy over the AI bubble, the cash flow of mega cloud companies has been decreasing since last year, and they are making up for the declining cash flow by issuing corporate bonds. In fact, Oracle’s CDS premium is still stable but tends to continue to rise.

In addition, the announcement of weak performance by Japanese NAND maker Kioxia on the previous day, following sluggish sales by TSMC (-2.90 percent), also raised anxiety. The market turned a blind eye after TSMC’s October sales announcement, saying it was temporary, but it is estimated that Kioxia’s performance was also sluggish. These factors contribute to the U.S. stock market, especially in AI-related industries

*Featured Stocks: Semiconductors, Most Major Theme Stocks Fall Hugely

Semiconductors: Drops as AI Industries Open for Sale Amid Instability
Nvidia (-3.58%) fell after Oppenheimer raised its price target from 225 dollars to 265 dollars. It is also burdensome that competition is intensifying with Baidu announcing two AI chips, valuation instability characteristic of the market and most AI-related companies have been put on sale today. On top of that, it is also burdensome to see if it is temporary or not after Kioxia’s disappointing earnings report in the Japanese market. It was also due to sluggish sales of TSMC (-2.90%) in October. As a result, Micron (-3.25 percent) fell as Morgan Stanley recommended buying the chips due to surging memory chip prices. Most semiconductor companies including Broadcom (-4.29 percent), AMD (-4.23 percent), Ram Research (-5.02%), and ARM (-5.67 percent) also fell. The Philadelphia Semiconductor Index fell 3.72 percent

Semiconductors, Servers, AI: Drops As Sales Open Amid Overvalued Controversy
Cisco Systems (+4.62%) rose after reporting better-than-expected earnings and guidance due to increased AI industry-oriented sales. On the other hand, super microcomputer (-7.44%) fell due to falling margins and valuation burdens caused by intensifying competition amid news of LaFont’s position liquidation. Cloud-related companies such as Coreweave (-8.30%), Western Digital (-5.39%), and SanDisk (-13.96%) as well as Pastry (-3.87%) and Snowflake (-4.78%) are also sluggish. Most AI-related companies, such as C3AI (-4.92%), Big Bear AI (-11.58%), and Paladine Ai (-8.27%), are also selling, falling. After the market closed, AMAT (-3.25) was falling by around 2% after hours as its margin rate only met expectations despite its better-than-expected performance

Cars: Tesla Slips In China Sales Slump And Home Energy Storage System Recall
Tesla (-6.64 percent) continued to decline following a sharp drop in sales in China. Adding to the burden is the announcement that it will officially recall more than 10,000 units of Powerwall, a home energy storage system, in the U.S. following multiple fire accidents in Australia at the beginning of the year. Adding to the burden is the fact that it has been put up for sale due to anxiety over the electric car industry. Electric cars such as Rivian (-6.45 percent0 and Lucit (-8.56 percent) and secondary electric companies such as QuantumScape (-7.31 percent) are also sluggish. While Chinese carbon lithium carbonate prices rose, Albemarle (+3.85%) rose, but lithium-related companies were mixed, with lithium America (-5.54%) and Standard Lithium (-5.64%) falling.

Cars: Internal combustion cars, Tide
GM (+0.07%) rose as solid performance and expectations of continued vehicle sales were highlighted, especially if the Supreme Court nullified Trump’s tariffs. Ford (-1.26%) fell as it digested the sale. AutoZone (+0.81%) said that the weak demand for the DIY, which Goldman Sachs repairs itself, is temporary and leaves repairs to on-time