U.S. Market Watch
Markets woke up Tuesday morning to a sharp jolt: Nvidia (NVDA) plunged over 7%, nearing its quarterly low of $103 per share, just shy of the unfilled earnings gap at $95. But with no major headlines in sight, many traders were left scrambling for answers.
Was It a Semiconductor Sector Issue?
At first glance, no sector-wide news seemed to justify the sudden drop. The only remotely related headline came from yesterday’s report that Apple’s AI systems might opt for TPU (Tensor Processing Units) over GPUs—a potential long-term shift, but not a catalyst for a 7% single-day crash.
Attention quickly turned to macroeconomic data released this morning, particularly the June JOLTS report and July Consumer Confidence Index. But a closer look revealed these weren’t responsible either:
• JOLTS Job Openings came in at 8.18 million, slightly above the 8.10 million forecast. While down from May’s revised 8.23 million, the higher-than-expected figure doesn’t qualify as a negative surprise.
• Consumer Confidence for July rose to 100.3, beating expectations (99.5) and improving from June’s 97.8—aligning with strong retail data and suggesting continued resilience in U.S. consumer spending.
Even looking ahead to Friday’s closely watched nonfarm payrolls report, forecasts such as Bank of America’s 4.1% unemployment estimate (unchanged from June) suggest labor market stability. The drop in the quits rate—a JOLTS component—also points to labor market tightening without a spike in layoffs.
In short: U.S. macro data doesn’t explain the semiconductor dump.
Enter: The Yen Surge
After deeper discussion among traders, the likely culprit emerged: the Japanese yen.
Recent charts show a tight correlation between yen strength and U.S. tech sector weakness, particularly tracking movements in QQQ. Since the yen began surging on July 24, QQQ and semiconductor stocks have been under intense pressure.
• The USD/JPY pair has shown almost minute-for-minute inverse correlation with tech performance.
• On July 30, rumors circulated that the Bank of Japan (BOJ) might raise rates by 25 basis points. The result? Another sharp yen spike and—coincidentally or not—one of the worst intraday sell-offs in recent weeks for U.S. equities.
The market appears to have treated the BOJ hike rumor as “priced in”, with QQQ futures rebounding 0.9% pre-market. Also helping sentiment was a strong earnings beat from AMD, which topped estimates.
What’s Next for U.S. Equities?
Whether today’s early panic marks a short-term bottom remains uncertain. Our current outlook includes the following key points:
• VIX below 15 remains the technical threshold to confirm the end of this correction.
• Since the yen carry trade unwind triggered the selloff, any stabilization—or reversal—of yen strength could ignite a bounce in U.S. equities.
• Short interest in semiconductor stocks has surged. With BOJ’s policy shift now public and AI-related earnings surprising to the upside, a short squeeze in names like NVDA is not off the table.
Risks Still Loom
• Key earnings from Meta and Apple (Wednesday–Thursday) could stir more volatility.
• Friday’s nonfarm payrolls report remains a wildcard for Fed policy expectations.
• VIX remains elevated, reflecting persistent macro and earnings uncertainty.
Nonetheless, there’s cautious optimism that today’s semiconductor rebound might extend through the week—assuming yen pressure eases and earnings continue to deliver.
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