U.S. stocks mixed flat thanks to stabilizing interest rates despite economic instability

11/17 U.S. stocks mixed flat thanks to stabilizing interest rates despite economic instability

The U.S. stock market started lower due to the recent rise in profit-making sales, economic indicators, individual companies’ earnings reports, and the sluggish energy sector due to a sharp drop in international oil prices. Of course, the sluggishness of Chinese companies after the U.S.-China summit is also burdensome. However, the decline was limited by strong technology stocks on the back of falling government bond rates due to weak industrial production, broadening some big technology stocks, and the Nasdaq eventually succeeded in a turnaround. (Dow -0.13%, Nasdaq +0.07%, S&P 500 +0.12%, Russell 2000 index -1.53% and Philadelphia Semiconductor index +0.32%)

Variables: U.S.-China summit and individual corporate issues

The U.S.-China summit is over. The results are not much different from what the market expected. However, the White House stated that it was very satisfied with the outcome of the summit, and announced that Chinese Foreign Minister Wang Yi had also agreed on 20 items. However, some disappointing sales tend to be released in that there was little mention of tariffs imposed by the U.S. and Chinese governments on semiconductors and battery parts.

In particular, it plunged after Alibaba (-9.14%) announced that it would not spin off its cloud division, saying that despite its good performance, there were uncertainties in its business due to semiconductor export controls. As such, most Chinese companies fell disappointed in the fact that U.S.-China friction is affecting Chinese companies’ business operations and that related discussions were absent from the talks. However, it is friendly that US-China communication, which was once suspended, has begun. In addition, the announcement that working-level negotiations will continue is also positive in the long run.

Meanwhile, it is noteworthy that the number of new weekly unemployment benefit claims in the U.S. increased from 217,000 to 231,000, and the number of consecutive applications also increased from 183.3 to 1865,000, showing signs of a slowdown in employment. This is because it could act as a factor in falling government bond rates considering concerns about future employment contraction. In addition, expectations for price stability also affected interest rates, with import prices falling 0.8% month-on-month. In particular, concerns about the economy have also increased, with industrial production falling 0.6% month-on-month and factory utilization slowing from 79.5% to 78.9%.

As such, interest rates on government bonds fell due to the results of economic indicators along with the U.S.-China summit, but it is too much to drive the overall index’s rise. As interest rates on government bonds stabilized, they began to pay attention to the economy. Considering this, the market is expected to change in the future by paying more attention to the economy.

• Featured stocks: Tesla, Chinese companies slump

Tesla (-3.81%) fell after GM (-2.35%) acquired TEI, a CNC foundry that was an important supplier of Tesla, along with disappointment over the U.S.-China summit. TEI is a company that promoted Tesla’s giga-casting mold design and development and solidified its position in the electric vehicle market. In particular, TEI’s technology that made it possible to cast complex parts of Tesla, and GM’s acquisition of it highlights concerns about Tesla’s vehicle production. Meanwhile, Volvo bought two 9,000-tonne machines last week and Toyota unveiled its latest device that can make a third of its body in three minutes, further intensifying competition over the Gigafactory

Alibaba (-9.14%) plunged after it announced it would not split its cloud division, citing U.S. semiconductor chip control, despite a solid earnings report. In the end, most Chinese companies, including Nio (-6.80%) and Xiaofeng (-6.67%), fell as well as Jingdong Dotcom (-1.78%) and Baidu (-3.15%) because they were disappointed that the U.S.-China friction affected business operations and that there was no related discussion at the U.S.-China summit. In addition, semiconductor industries such as Broadcom (-1.62%) and On Semiconductor (-2.35%) are also sluggish. On the other hand, Intel (+6.73%) also features an increase in that Mizuho is a beneficiary of continued U.S.-China friction after raising its investment opinion to buy.

Cisco Systems (-9.83%) plunged in the wake of lower guidance despite better-than-expected earnings. This has spurred concerns about the possibility of U.S. companies cutting spending in the IT sector. Walmart (-8.09%) fell after citing concerns about its future outlook despite good earnings and guidance. Retail sectors such as Costco (-3.05%) also fell. Cybersecurity firm Palo Alto (-5.42%) fell on disappointment with guidance for the next fiscal year despite better-than-expected earnings and guidance for the year. Energy industries such as Exxon Mobil (-1.16%) and ConocoPhillips (-2.64%) are sluggish as WTI plunged nearly 5% due to issues of slowing demand and increasing supply due to shrinking U.S. industrial production and decreasing Chinese crude oil refining throughput.

11/17 Overseas financial markets

◆ the U.S. stock market

• – DOW: 34,945.47p (-45.74p, -0.13%)
• – S&P500: 4,508.24p (+5.36p, +0.12%)
• – NASDAQ: 14,113.67p (+9.83p, +0.07%)
• Russell 2000: 1,773.76p (-27.46p, -1.52%)

◆ Korea-related

• MSCI Korea Index ETF: $62.78 (+0.44, +0.71%)
• MSCI Emerging Index ETF: $39.31 (-0.38, -0.96%)
• – Eurex kospi 200: 334.20p (-0.35p, -0.10%)
• NDF exchange rate (1 month): 1,290.KRW 72 / Expected to start down KRW 7 from the previous day
• Philadelphia Semiconductor: 3,724.10 (+12.01, +0.32%)

◆ the foreign exchange market

• Dollar Index: 104.416 (+0.022, +0.02%)
• Euro/dollar: 1.0849 (+0.0001, +0.01%)
• Dollar/yen: 150.76 (-0.60, -0.40%)
• Pound/Dollar: 1.2411 (-0.0005, -0.04%)

◆ the U.S. government bond market

• 2-year: 4.8460% (-6.6bp)
• 5-year: 4.4240% (-9.3bp)
• 10-year: 4.4433% (-8.8 bp)
• 30-year: 4.6193% (-7.6bp)
• – 10Y-2Y: -40.27bp (2.23bp reverse enlargement)
  (Gift for government bonds)
• – 2YR T-Notes: 10119 (+004 , +0.12%)
• – 5YR T-Notes: 10531 (+012 , +0.36%)
• – 10YR T-Notes: 10827 1/2 (+019 , +0.55%)
• – US T-Bonds: 11510 (+030 , +0.82%)
• – Ultra US T-Bonds: 11925 (+18 , +1.06%)

◆ Commodity Market ($, sweet grain, copper in cents)

• – WTI: 72.90 (-3.74, -4.88%)
• Brent crude: 77.42 (-3.68, -4.53%)
• Gold: 1,987.30 (+19.90, +1).01%)
• Silver: 23.93 (+0.28, +1.20%)
• Zinc (LME, 3M): 2,576.00 (-80.00, -3.01%)
• Copper: 370.25 (-2.40, -0.65%)
• Corn: 493.25 (+4.00, +0.82%)
• Wheat: 581.00 (-6.50, -1.11%)
• Soybean: 1,360.25 (-25.00, -1.81%)

U.S. hedge funds’ net purchases of large tech

12% at the beginning of the year -> 99% as of now

Active long money, index funds are already holding enough of the top stocks in the index to reduce BM tracking errors.

Individuals also still seem to be picky about U.S. innovative companies.

For quite a while, hedge funds have maintained a short view of the stock. I usually prefer index futures short to individual stocks.

Suppose, then, that the recent expectation of reducing interest rate risk has led to a significant portion of their positions through short covering..

No buyers left. Who else wants to buy more? Please name it.