One night passed, the market dodged a bullet

| A busy scene inside the NYSE trading hall last night

After waking up, Asian traders first breathed a sigh of relief: the sharp plunge in South Korean stocks did not turn into a global panic. But that breath wasn’t fully let out—U.S. stock index futures then weakened again, and gold kept probing lower. No one would dare say the market is really safe.

After waking up, there’s a feeling of being saved:
U.S. stocks did not replicate the magnitude of South Korea’s selloff; instead, they rose— the Dow Jones index posted a 1% gain. Meanwhile, the Nasdaq index fell 0.2%.

While U.S. stocks rose, the U.S. dollar, U.S. Treasury yields, and U.S. crude oil all fell in sync—the 10-year U.S. Treasury yield slid to around 4.60%, and U.S. crude oil broke below $80. Of the three alert signals we track, two have been temporarily cleared.

Traders exhaled. On one hand, the bad news was priced in early; on the other, forced selling may not be as bad as people imagined. But they still can’t relax too much, because this is only a localized rescue. Under normal circumstances, falling oil prices, falling Treasury yields, and a weaker dollar should all be supportive for the Nasdaq, semiconductors, gold, and Bitcoin—but yesterday these markets all declined together.

Worth watching is that after the U.S. market close, SK Hynix announced its second-quarter revenue came in below expectations. U.S. stock index futures weakened afterward, putting pressure on Asian markets. Gold’s slide also hasn’t stopped; within the first hour after the open, it probed lower again.

The real verdict must wait for two major events tonight:

· One is the Federal Reserve’s interest rate decision (around 2:00 a.m. Thursday Beijing time). The market assigns a 30% probability to a rate hike. As we said in today’s “Global Markets Strategy,” whether the Fed hikes or holds steady, a sizable portion of positioning will be wrong.

· The other is Microsoft and Meta releasing their earnings reports (around 4:00 a.m. Thursday Beijing time)—this matters even more than the Fed. Even if Waish cancels forward guidance, he still “has it all in mind” for every sentence he says—he will ensure the market doesn’t get out of control. The key isn’t just whether the earnings are good; it’s whether the market is willing to respond positively to good news. If the earnings are good enough and the stock price still falls, it means the problem with AI trading is no longer basic fundamentals data—rather, valuation, positioning, and capital expenditure patterns are being re-priced systemically.

In the first half, we escaped death by the skin of our teeth; leverage liquidations have paused for the moment, and the board has shifted from “indiscriminate selling” back to “divergence.”

In the second half, the hard battle begins—no sleep tonight.