Overnight US stocks | Inflationary pressure continues to heat up, the three major indices rise, Dell (DELL.US) falls 6.8%

The Zhitong Finance App learned that on Thursday, the three major indices rose. Pharmaceutical stocks rose, and LLY.US (LLY.US) rose more than 3%, and investors began to withdraw from the AI trading sector and switch to other value targets. Traders also digested the US economic data showing that inflation is resilient.

[US Stocks] At the close, the Dow Jones index rose 557.51 points, or 1.08%, to 52178.99 points; the S&P 500 rose 25.18 points, or 0.33%, to 7744.12 points; and the Nasdaq Composite rose 20.16 points, or 0.08%, to 26713.03 points. Micron Technology (MU.US) rose 1.87%, SK Hynix (SKHY.US) fell 0.98%, Nvidia (NVDA.US) fell 1.84%, and Dell (DELL.US) fell 6.8%.

[European stocks] The German DAX30 index rose 87.32 points, or 0.35%, to 25385.93 points; the UK FTSE 100 index rose 111.87 points, or 1.04%, to 10836.73 points; the French CAC40 index rose 61.59 points, or 0.78%, to 7934.70 points; the European Stoxx 50 index fell 19.22 points, or 0.31%, to 6171.15 points; Spain's IBEX35 index fell 42.06 points, or 0.22%, to report 19188.64 points; Italy's FTSE MIB index fell 336.34 points, or 0.68%, to 49417.50 points.

[Foreign Exchange] The US dollar index, which measures the US dollar against the six major currencies, fell 0.49% on the same day and closed at 102.055 at the end of the foreign exchange market. As of the end of the exchange market in New York, 1 euro was worth $1.1212, up from $1.1153 on the previous trading day; 1 pound was worth $1.3272, up from $1.3181 on the previous trading day. 1 US dollar was worth 158.14 yen, lower than 158.20 yen on the previous trading day; 1 US dollar was worth 0.8271 Swiss franc, lower than 0.8345 Swiss franc on the previous trading day; 1 US dollar was worth 1.4190 Canadian dollars, lower than 1.4247 Canadian dollars on the previous trading day; 1 US dollar was worth 9.9597 SEK, lower than SEK 10.0321 on the previous trading day.

[Cryptocurrency] Bitcoin rose more than 1% to $82,367 as of the press release. Ethereum rose 1.8% to $2,460.

[Precious Metals] Spot gold reported $4170.26 per ounce; spot silver reported $57.425 per ounce.

[Crude oil] Light crude oil futures for November delivery on the New York Mercantile Exchange rose $2.88, or 3.03%, to close at $97.97 a barrel; London Brent crude oil futures for December delivery fell 14 cents, or 0.13%, to close at $105.92 a barrel.

[Macro News]

The US military said the Strait of Hormuz waterway is still unobstructed. The US Central Command issued a statement refuting Iran's Revolutionary Guard Corps's three claims in the past 24 hours relating to control of the Strait of Hormuz, attacks on merchant ships, and US military casualties. The US side said that the US and regional partners still control the Strait of Hormuz, and commercial ships continue to pass through. In response to Iran's Revolutionary Guard Corps claim that a Singapore-flagged container ship hit a lightning strike in the strait on Wednesday, the US side said that the ship involved, the GFS Pride, was actually hit by shells fired by Iran's Revolutionary Guard Corps and sank while being dragged to shore; it was not a lightning strike. The US side stressed that the main waterways in the Strait of Hormuz have not been blocked by torpedoes, and more than 40 ships have passed through in the past 24 hours. Furthermore, the US side denies Iran's Revolutionary Guard Corps claims that hundreds of US military personnel were killed in Jordan, saying that in July of this year, 3 US military personnel were killed in action during partner forces resisting attacks on Iran.

Federal Reserve Hamak: Inflation expectations worsen or force the Federal Reserve to take stronger action. Cleveland Federal Reserve Chairman Hamak said on Thursday that if public inflation expectations worsen, the Federal Reserve may need to take more aggressive action to deal with it. Hamak said, “What I'm worried about is that if an inflationary mindset is formed, that is, the public begins to expect price pressure to become more and more enduring, then it will be more difficult for monetary policy to play its due role. If an inflationary mindset is in place, the Federal Reserve may need to act more vigorously.”

Interest rates on 30-year US mortgages remained at 7.4% for eight consecutive weeks without falling. According to data released by Freddie Mac on Thursday, the average interest rate for 30-year fixed mortgages in the US remained at 7.4%, close to the highest level since November 2023, up from 6.27% in the same period last year. Mortgage interest rates in the US have not declined for eight consecutive weeks, the longest record since 2021, with a cumulative increase of 75 basis points during this period. The rapid rise in borrowing costs is forcing sellers to cut prices and dampen demand for home purchases. According to data from real estate brokerage firm Redfin, the number of housing contracts for sale in the US fell 4% month-on-month in September, the biggest drop in more than three years, to the lowest level since 2014 other than the beginning of the 2020 pandemic. Lisa Sturtevant, chief economist at Bright MLS, predicts that high mortgage interest rates, rising inflation, and weak consumer confidence will cause the US property market to slow significantly this fall, and the annual sales volume of existing homes may fall below 4 million units for the first time since the 1990s.

Strong US retail sales data and increased inflationary pressure is eroding purchasing power. The increase in retail sales in the US in September exceeded expectations, but was mainly driven by an increase in consumer spending at gas stations, which covered up the fragmentation of consumption performance in other retail industries. According to data released by the US Department of Commerce on Thursday, retail sales in September increased 0.8% month-on-month without price changes, and the revised increase in August was 1.3%. Excluding automobiles and gasoline, retail sales increased 0.2% in September. Eight of the 13 retail categories achieved growth, with gas station sales rising 6.4%, the highest increase. Consumers are spending less on things like hobby goods and construction materials, but sales at furniture retailers, electronics stores, and restaurants have increased. The data showed that as the third quarter came to an end and price pressure intensified, the growth momentum of US consumer spending weakened. Accelerated inflation is further eroding Americans' purchasing power of wages and squeezing household budgets. The CEO of Domino's Pizza and Albertsons recently acknowledged during an earnings call that many consumers are still facing a difficult economic environment.

Inflationary pressure continues to heat up, and the US PPI data for September rose sharply. Affected by rising energy costs, the US producer price index for September completely exceeded expectations, indicating that the impact of rising energy prices is being transmitted to various sectors of the US economy. According to data released by the US Bureau of Labor Statistics on Thursday, the producer price index rose 1.3% month-on-month and 6.3% year-on-year in September. Excluding food and energy, core PPI rose 0.7% month-on-month and 5% year-on-year. The report shows that while fuel prices are rising, potential inflationary pressure in the US remains stubborn. There are only a few weeks left until the November midterm elections, and the cost of living burden has become a central issue in the election. The data may also prompt Federal Reserve officials to continue to raise interest rates in the coming months. In particular, another report released on Wednesday showed that a key consumer price indicator in the US rose more than expected in September. The report also shows that price pressure is expected to remain high in the next few months. The indicator that measures investment price expectations for the next six months has risen to its highest level since 2022.

[Individual Stock News]

Meta released open-weighted AI model, and the strongest technology remains closed source. According to media reports, Meta Platforms (META.US) launched a new open weighted AI model, Muse Spark Open, which is mainly aimed at programming and AI agent tasks, but it has not opened its most powerful model. Meta's chief AI officer, Alexandr Wang, said that the Muse Spark Open is not the strongest model developed or released by the company. Meta's Muse Wonder, which was launched earlier this week, still uses a closed source model. Meta also acknowledged that in software development and some other tasks, China's open weight model still performs better than Muse Spark Open. Meanwhile, Meta and Apple (AAPL.US) have partnered to support developers to run Muse Spark Open locally on multiple high-end Mac computers. Apple has updated the MLX software toolkit to support the model running on Mac devices.

Chip startup Bolt Graphics plans to raise $100 million. Three people familiar with the matter reported that the chip design startup Bolt Graphics is seeking financing of about 100 million US dollars, with a valuation of about 700 million US dollars. The company hopes to use this to develop graphics chips to compete with Nvidia (NVDA.US) and AMD (AMD.US). The two giants continue to increase their investment in research and development of underlying hardware, while Bolt plans to design chips focused on non-AI fields, such as high-precision computing required for supercomputers and video game graphics processing. People familiar with the matter said that financing is still ongoing, and the scale and valuation of the capital raised by Bolt's plan may change.

Google's quantum computing has achieved a new breakthrough, and the error rate of Willow chips has been reduced by about 40 times. Google (GOOG.US) announced on October 15 that its quantum AI team successfully verified a new technology called “Magic State Cultivation” (Magic State Cultivation) on the Willow quantum chip, reducing the error rate of specific quantum states by about 40 times, and the accuracy of the prepared quantum states reached 99.99%. The relevant research results have been published in the journal “Science”. Google explained that quantum computers are prone to interference and errors. In order to complete complex calculations, special quantum states need to be prepared in advance, but this process consumes a lot of computational resources. Some studies estimate that traditional methods may take up to 95% of the computational power of quantum computers. By detecting and eliminating erroneous quantum states, this new technology has improved preparation efficiency, and is expected to reduce the resource consumption of future quantum computers in error correction. Google said that this achievement is an important step towards practical quantum computing, but further verification of whether it can be applied to larger quantum computing systems is still needed.

The EU plans to speed up approval of European satellite giants merger projects to compete with SpaceX. According to people familiar with the matter, the European Union is preparing to speed up antitrust approval of Project Bromo, a European satellite joint venture project. The project is being jointly promoted by Airbus (Airbus), Italy's Leonardo (Leonardo), and France's Thales (Thales). It aims to build a giant in the European satellite industry and reduce dependence on US satellite service providers such as SpaceX (SPCX.US). People familiar with the matter said that the European Commission has continued negotiations with the three companies over the past year to identify and resolve potential competition issues in advance. The three companies have yet to officially submit applications for approval, but they are expected to do so within the next few weeks. If the relevant enterprise proposes remedial measures such as asset divestment, the project may be approved after the first phase of antitrust review, which lasts more than a month, and there is no need to go into an in-depth investigation that takes several months. European Commission President von der Leyen supported the project, but EU Competition Commissioner Rivera stressed that even with political support, the project must comply with EU competition regulations.

Huang Renxun strongly supports CoreWeave: Continued financial improvements do not require Nvidia guarantees. Nvidia CEO Hwang In-hoon said that the financial situation of data center operator CoreWeave is improving. Nvidia is CoreWeave's computing equipment supplier. “CoreWeave's strength is growing every day,” Hwang In-hoon said at an event in Stockholm. He sees no need for Nvidia to provide financial guarantees for CoreWeave. “I'm optimistic. In fact, their cost of capital is falling.” Previously, the credit market's confidence in CoreWeave had deteriorated, believing that its risk of default was rising, and Hwang In-hoon was trying to restore the market's confidence in the company. CoreWeave is an important case for testing the sustainability of the business model of an emerging AI infrastructure enterprise. This type of enterprise has emerged to meet what companies such as Nvidia and the like call the almost limitless growth in artificial intelligence computing power needs. Companies such as CoreWeave borrow heavily with the support of suppliers including Nvidia, raising market concerns about creating false demand for revolving finance.

[Major Bank Ratings]

UBS Group: Raised Microsoft (MSFT.US) price target from $525 to $675; raised BlackRock (BLK.US) target price from $1,277 to $1,300.