US Stock Trend (July 29): Seagate and Corning Deliver Perfect Results Yet Sold Off, AI Hardware Valuation Standards Changed

Written by: TechFlow Research

US stocks staged a typical seesaw act on Tuesday. Apple touched a market cap of $5 trillion during the session, Coca-Cola hit a record high after earnings on the same day, and the Dow Jones came within a hair's breadth of the historical closing record. On the other side, storage and optical communication stocks were beaten down for the second consecutive day, with the Philadelphia Semiconductor Index falling over 4%, and SanDisk's stock price has halved since July. Earnings season delivered a bunch of contradictory report cards; Seagate and Corning both beat earnings expectations, yet their stock prices were still hammered. In the Middle East, oil prices plummeted during the day on ceasefire news, then violently rebounded after hours due to Iran striking a US military base in Jordan.

Three Major Indices Mixed, Equal-Weight Index Hits Record High

The S&P 500 rose 0.21% to 7428.78 points. The Dow Jones rose 1.03% to 52747.32 points, just a step away from the historical closing high of 53055.91 points. The Nasdaq fell 0.22% to 24876.91 points. Among S&P 500 components, 357 rose and 145 fell; the equal-weight index actually rose 1.14%,创下 a new historical high, indicating this round of decline is highly concentrated on a few tech weighted stocks.

Among the Magnificent Seven, Google Class A performed best with a 2.19% gain, Microsoft rose 1.09%, Nvidia micro-gained 0.25%, Amazon fell 0.23%, Meta fell 0.08%, and Tesla fell 0.58%. Chinese concept stocks continued their strong performance, with the Nasdaq Golden Dragon China Index rising 1.08%.

Apple Market Cap Breaks $5 Trillion, Defensive Stocks Perform Well Collectively

Apple touched $342.89 during the session, with market cap once breaking $5 trillion, closing up about 1% for the day. Coca-Cola rose 5% to create a new historical high, second quarter performance exceeded expectations and full year guidance was raised. JPMorgan Chase and 3M both refreshed historical closing records, software stocks Adobe, IBM, etc. strengthened simultaneously.

Storage and Optical Communication Collapse Continues, Philadelphia Semiconductor Falls for Two Consecutive Days

The Philadelphia Semiconductor Index fell 4.49%, declining for the second consecutive trading day. The storage sector bore the brunt, Micron fell 8.85%, SK Hynix fell 8.98%, SanDisk fell 14.25%, this stock's decline since July has reached the level of being halved. The DRAM Memory ETF plummeted 8.89% in a single day.

The optical communication sector was equally brutal, Corning fell over 12%, Coherent fell over 10%. Chip manufacturing and design ends were not spared either, Dell Technologies fell 8.15%, Intel fell 5.86%, AMD fell 8.15%, TSMC fell 1.7%.

Behind this round of selling is the combination of three pressures. First, market doubt continues to ferment on whether AI capital expenditure can yield actual returns, second, Nvidia's circular financing arrangement of over $750 billion scale makes the credit market feel uneasy.

The third pressure comes from the catch-up speed of domestic storage, the buzz from CXMT's listing in A-shares these past two days hasn't subsided, the re-evaluation by outside parties on the pace of self-sufficiency in China's DRAM industry directly impacted the original valuation logic of US storage stocks. These three factors combined transmitted this sell-off from US stocks all the way to the Asia-Pacific market.

Seagate and Corning Deliver Perfect Scores, But Stock Prices Did Not Approve

Seagate Technology's fourth fiscal quarter revenue and earnings per share both far exceeded analyst expectations, next fiscal quarter guidance was even significantly higher than market estimates. Despite this, Seagate still closed down 8.5% that day, until after-hours trading after the earnings release, stock price once rebounded over 10%, driving other storage stocks to warm up following.

Corning's situation was even more extreme. The company's second quarter revenue and profit both exceeded expectations, optical communication business revenue grew 32% year-over-year, but third quarter revenue guidance implied quarter-over-quarter growth rate dropped suddenly from 9% to 3% to 6%, the market obviously wanted a bigger surprise, Corning closed plummeting 12.1%.

NXP second quarter revenue and third quarter guidance both exceeded expectations, stock price still fell over 4% after hours. Viewing these earnings reports together, it shows the current pricing standard for semiconductor and storage companies has become extremely harsh, performance meeting or even exceeding is no longer a safety cushion, the only thing that can make stock price stand firm is the acceleration signal revealed in guidance.

This major test only just begun this week, earnings for storage, software and Mag7 will be unveiled successively. These companies' latest statements on AI spending and output will directly determine whether this round of sell-off spreading from storage can find a bottom.

Ceasefire Rumors Push Down Oil Prices, Jordan Attack Brings Oil Prices Back

The crude oil market experienced the largest single-day volatility in nearly three years that day. During the day, there were reports citing Middle East mediators news that US and Iran both sides were close to restarting the ceasefire agreement reached in June, WTI Crude Oil once fell over 5%, dropping to near $78, Brent fell over 6%, breaking below $84.

COMEX Gold fell 1.11%, at $4090.4/ounce. COMEX Silver fell 2.5%, at $57.335/ounce. Cryptocurrencies weakened simultaneously, Bitcoin opened Tuesday at $63706.66, down 2.5% from Monday, intraday once retreated to $63327.39; Ethereum opened at $1890.67, down 3.2%, intraday similarly dropped to $1877.71.

Iran simultaneously set conditions for resuming Strait of Hormuz passage, requesting all vessels divert to Iran's side waterways, abolish the current international traffic separation scheme, mine clearance can only be done by Iran itself, much tougher than plans previously guessed by outside.

Just after US stock market close, the situation saw a reversal. Reports emerged Iran struck a US military base in Jordan, after the news broke WTI crude jumped 4.5% in after-hours trading, bringing back part of what was lost during the day. Such intraday violent bull-bear switches indicate the market's judgment on the true direction of this conflict still remains in the speculation stage, any single news can cause pricing direction to instantly reverse.

Fed Decision Suspense, Can Wash Hold the Path of "No Guidance"

The Federal Reserve will announce interest rate decision during US trading hours on Wednesday, the market currently pricing probability for this rate hike at around one-third or so, but institutions have also given completely different judgments. The 10-year US Treasury yield fell about 5 basis points that day, at near 4.60%, 2-year yield fell 5.17 basis points, at 4.2706%, US Dollar Index slightly fell 0.03%, at 101.49.

Citadel Securities Head of Macro Strategy Frank Flight however took a contrarian view, he believes the possibility of an actual rate hike this time was underestimated by the market, reasoning that Wash needs one concrete action to prove himself fighting inflation is not just talk.

Wash's style of "not clarifying in advance" has drawn internal criticism, Governor Waller who once competed with him for the Chairman position publicly stated this month, he has never seen any theory proves hiding information can make the market operate more smoothly. Wednesday's decision and subsequent press conference will be the first window for observing whether Wash will adjust communication style.