Summary of Key Points
On Thursday, the U.S. stock market experienced a stark contrast: the Nasdaq index fell for four consecutive days (with leading tech stocks generally declining), while the Dow Jones index reached a record high (non-AI sectors and traditional industries performed strongly). The May PCE inflation data met expectations, providing some relief to the market; however, tensions in the Middle East drove up international oil prices. There was significant divergence among tech stocks—Micron's earnings exceeded expectations, boosting the semiconductor sector, but Apple and Microsoft saw sharp declines due to concerns about profit erosion from price increases. Chinese concept stocks (listed in the U.S.) also generally fell.
I. Why Did the Nasdaq Fall While the Dow Jones Hit a Record High?
The market showed clear divergence: the Nasdaq dropped 0.46% (after four consecutive days of decline), while the Dow Jones rose 0.14% and reached a record high during trading.
- Reasons for the Nasdaq's decline: Investors sold off leading tech stocks, such as Apple (-6.12%) and Microsoft (-3.46%), worried that rising chip prices would squeeze profits.
- Reasons for the Dow Jones' rise: Non-AI-related sectors and traditional industries performed well, with sectors like healthcare, finance, and manufacturing gaining momentum. For example, industrial giant Caterpillar rose 6.29%. These sectors are less affected by the AI bubble or rising chip prices and instead benefit from stable economic prospects.
II. The Divergence Among Tech Stocks: Upstream Winners, Downstream Worriers
There was a clear split within the tech sector:
- Upstream Semiconductor Sector: Micron's earnings exceeded expectations, driving the entire semiconductor sector higher. The VanEck Semiconductor ETF rose 2.75%, and companies like Sandisk and Applied Materials gained 13.42% each. This is because demand for memory surged due to the expansion of AI data centers, benefiting upstream memory manufacturers.
- Downstream Tech Giants: Downstream tech companies, such as Apple and Microsoft, suffered heavy losses. Apple passed on some of the cost increases to consumers by raising prices for its MacBook and iPad products, and Microsoft also increased the price of its Xbox. There are concerns that higher costs may deter consumers from purchasing, potentially eroding profits.
III. PCE Inflation Data: Meeting Expectations, Market Relaxes Temporarily
The May PCE (Producer Price Index, a key inflation indicator for the Federal Reserve) data was released:
- Overall PCE rose 4.1% year-on-year (in line with expectations) and 0.4% month-on-month (slightly below the expected 0.5%).
- Core PCE (excluding food and energy) rose 3.4% year-on-year, as expected.
- Why is this important? The Federal Reserve's decision to raise interest rates depends on inflation levels. If inflation exceeds expectations, it may continue to raise rates. Since the data was not particularly surprising, market tensions eased, and U.S. Treasury yields only decreased slightly (by 0.01 percentage points for the 10-year bond).
IV. Tensions in the Middle East: Why Are Oil Prices Rising?
International oil prices rose by about 2% (WTI up 2.25%, Brent up 2.06%) due to security concerns in the Strait of Hormuz:
- Ships in the Gulf of Oman were attacked, and the International Maritime Organization suspended evacuation efforts.
- Iran warned that ships must follow designated routes or risk safety threats.
- The Strait of Hormuz is a critical route for global oil transportation, accounting for about one-third of maritime oil shipments. Any disruption could lead to supply shortages and thus higher oil prices.
V. Why Did Chinese Concept Stocks Generally Fall?
The Nasdaq Golden Dragon China Index fell 2.7%, with almost all popular Chinese concept stocks declining (i.e., iQiyi down 4.83%, Alibaba down 4.74%):
- This was mainly due to the overall market sentiment: as tech stocks in the U.S. declined, Chinese concept stocks were affected negatively.
- Additionally, international markets became less willing to invest in riskier assets, leading to a temporary withdrawal of funds from Chinese concept stocks.
In summary, the main focus of the market on that day was the chain reaction caused by rising chip prices: upstream semiconductor companies benefited, while downstream tech giants faced pressure. Meanwhile, tensions in the Middle East and inflation data also influenced market trends. For individuals considering investment, it's clear that the tech industry is experiencing significant divergence, and global events have a direct impact on asset prices. Investing involves looking at both upstream and downstream sectors as well as the broader global context.