Breakfast | U.S. Treasury disturbances cause a significant drop in U.S. stocks, with Tesla and NVIDIA down 4% and 6%

Market Overview

U.S. data has dampened interest rate cut expectations, with investors speculating that the Federal Reserve will not cut rates before July this year due to inflation risks. Tech stocks plummeted, dragging down U.S. stocks, with the S&P and NASDAQ halting their two-day winning streaks. The NASDAQ fell nearly 2%, NVIDIA dropped over 6%, marking its largest decline in four months, and Tesla fell over 4%. Chinese concept stocks faced two consecutive declines, but XPeng rose over 9%, and the newly listed Jilin Zhengye Bio surged 21% on its debut.

After the release of U.S. service industry data, the sell-off of U.S. Treasuries intensified, leading to a rise in bond yields during the session, with the ten-year U.S. Treasury yield reaching an eight-month high. The U.S. dollar index jumped, refreshing its daily high; gold, which had rebounded over 1% during the session, retraced most of its gains.

The offshore RMB rose nearly 200 points during the session, approaching 7.33, but later came close to erasing its gains after the U.S. data. Bitcoin plummeted over $6,000 during the session, falling below the $97,000 mark.

Crude oil rebounded to a two-month high, rising over 1% at one point.

During the Asian session, A-shares turned to gains across the board, with Cambricon rising over 10% to reach a new high, while Hong Kong stocks fell, with Tencent dropping over 7% and Xiaomi nearly 6%.

Stock Price Plummets! NVIDIA Unveils New Products at CES, Jensen Huang Delivers Stunning Speech, Why Did the Stock Price Still Plummet?

NVIDIA made a stunning appearance at the Consumer Electronics Show (CES) this week, but it seems to have failed to impress stock market investors, with its stock price recording the worst performance in four months.

On Tuesday, January 7, Eastern Time, NVIDIA's stock opened high, rising nearly 2.5% at the beginning of the session, but then significantly retreated, turning negative less than half an hour after the market opened. It continued to decline, and when U.S. stocks refreshed their daily lows at the end of the session, it had dropped 6.3%, ultimately closing down 6.2%, marking the largest single-day decline since September 3, 2024.

It appeared that NVIDIA presented a series of dazzling demonstrations, which are expected to have a profound revolutionary impact in some areas. So why did NVIDIA's stock price plummet on Tuesday?

Some commentators believe that the latest news released by NVIDIA provides an optimistic outlook for the company's long-term prospects, but the short-term upside potential is not as significant as some investors had hoped, failing to meet investors' expectations for short-term benefits.

A report from Stifel Financial Corp. stated that the news NVIDIA released on Monday was significant, but it is more relevant in the long term.

U.S. 10-Year Treasury Auction Results Poor, Yield Hits Highest Since 2007

The latest monthly auction of U.S. government 10-year Treasuries concluded with the highest yield of 4.68% since 2007, a result attributed to recent economic data indicating a reduced likelihood of the Federal Reserve cutting rates further before mid-year.

The auction size was $39 billion, with the yield slightly above market expectations at 1 PM New York time (the bid deadline). Following stronger-than-expected service industry activity and job vacancy data, yields on Treasuries of all maturities rose by several basis points.

Previously, traders had fully bet that the Federal Reserve would cut rates again before March next year, but this has now been pushed back to the second half of this year.

Before the December employment data set to be released on Friday, November's JOLTS job vacancies unexpectedly increased, and the December ISM service index also exceeded expectations. Among them, the indicator related to corporate payment prices surged to its highest level since 2023 Michael Cloherty, the head of U.S. interest rate strategy at UBS Securities, pointed out: "Concerns about persistent inflation risks remain high in the market, which increases term premiums. Additionally, worries about the financing needs of the budget deficit, as well as the shift from expectations of a hard landing for the economy last year to a soft landing or even no landing, also affect interest rate trends."

Trump: U.S. interest rates are too high, does not rule out military action to control the Panama Canal, economic power merger with Canada

Trump stated at Mar-a-Lago that U.S. inflation continues to rage, "at unprecedented levels"; he wants to immediately overturn Biden's offshore drilling ban and increase drilling, which would significantly lower energy costs; he hopes that no wind farms will be built during his term. He does not commit to avoiding the use of military force to seize Greenland and the Panama Canal, stating that the Gulf of Mexico should be renamed the American Gulf, and if Denmark does not give Greenland, he will impose "very high" tariffs on Denmark. He warned that the Russia-Ukraine conflict could escalate further; if hostages held in Gaza are not released before his inauguration this month, the Middle East could fall into chaos.

In addition, Trump announced that UAE real estate development giant Damac Properties will invest at least $20 billion in the U.S. to build data centers. He said these large data centers are crucial for maintaining the U.S. competitiveness in emerging technologies such as artificial intelligence.

"Danger Signals" in U.S. Stocks: Why are Hedge Funds Suddenly Selling?

Recently, the U.S. stock market has been hitting new highs, but a disturbing phenomenon is drawing the attention of Wall Street analysts—according to a recent report from Goldman Sachs, institutional investors, especially hedge funds, are massively shorting the U.S. stock market, which could be an "important warning signal for stock investors."

On January 5, Goldman derivatives strategist John Marshall pointed out that equity funding spreads are an important indicator of professional investors' positions, and this indicator saw a significant decline after the Federal Reserve announced a hawkish policy stance on December 18 last year, indicating that institutional investors are significantly reducing leveraged long positions.

Bitcoin Price Plummets, Cryptocurrency-Related Stocks Also Drop

On Tuesday, Bitcoin's price fell sharply due to the surge in U.S. Treasury yields putting pressure on risk assets overall.

According to Coin Metrics, Bitcoin's price dropped by 5% to $96,525.50. Ethereum fell by 8%, while the broader cryptocurrency market (measured by the CoinDesk 20 index) declined by 7%.

Cryptocurrency-related stocks were also impacted. Shares of Coinbase and MicroStrategy fell by more than 8% and 9%, respectively, while Bitcoin mining companies Mara Holdings and Core Scientific saw their stock prices drop by approximately 7% and 6%.

The trigger for this market volatility was the data released by the Institute for Supply Management (ISM), which showed that the growth rate of the U.S. services sector in December exceeded expectations, exacerbating market concerns about "sticky inflation." The yield on the 10-year U.S. Treasury bond quickly rose, and rising yields typically put pressure on growth-oriented risk assets

Most Quantum Computing Concept Stocks Decline, Jensen Huang: Applications Will Take Several More Years

Quantum Corporation fell 13.05%, D-Wave Quantum dropped 6.46%, Rigetti Computing decreased 5.74%, Quantum Computing declined 3.32%, and IonQ fell 2.9%. IBM rose 0.58%, Kingsoft Cloud ADR increased 0.93%, and WM Hologram ADR surged 30.94%