US stock outlook | The three major stock index futures had mixed ups and downs, and SanDisk and Western Digital's guidelines fell short of high market expectations, dragging down the general decline of memory chip stocks

Pre-market market trends

1. Before the US stock market on August 6 (Thursday), futures for the three major US stock indexes had mixed ups and downs. As of press release, Dow futures were up 0.17%, S&P 500 futures were up 0.10%, and NASDAQ futures were down 0.51%.

2. As of press release, the German DAX index rose 0.16%, the British FTSE 100 index rose 0.08%, the French CAC40 index rose 0.58%, and the European Stoxx 50 index rose 0.54%.

3. As of press release, WTI crude oil rose 0.89% to $75.89 per barrel. Brent crude rose 1.15% to $80.36 per barrel.

Market news

The collapse of technology stocks in July left “sequelae”! Xiaomo warns that hedge funds have been hit hard by “structural”, and technology stocks may become more “retail” and more volatile in the future. This past July, global technology stocks experienced a sharp sell-off. The latest evaluation report released by J.P. Morgan Chase points out that this sharp decline may be profoundly changing the market structure of technology stock trading — the ability of hedge funds to participate may structurally decline, while the influence of retail investors is expected to expand further, and the volatility of the technology sector may also increase. The bank warned that the sharp losses in technology stocks in July could force hedge funds to implement stricter risk management frameworks and concentration restrictions, thereby limiting their ability to hold highly volatile technology stocks. Additionally, prime brokers may also reduce the balance sheet space allocated to such strategies. The bank's strategist wrote, “If this assessment is proven correct, and there is a structural contraction in the space for hedge funds to hold technology stocks, then technology transactions will become more dependent on retail investors over the long term, making them more vulnerable to fluctuations caused by leveraged ETFs, retail option purchases, and retail financing accounts.”

Federal Reserve Daly: We support keeping interest rates unchanged in July, but we need to be wary of the risk of inflation spreading. After the interest rate meeting in July, internal policy differences between the Federal Reserve intensified, and stubborn inflation once again became an important concern at the policy level. San Francisco Federal Reserve Chairman Mary Daly said on Wednesday that she supports the Federal Reserve's decision to keep interest rates unchanged last week, but warned that high inflation may be a broader issue and requires policy makers to take more active measures. She believes that there are two possible scenarios for inflation — one is that inflation begins to cool down, and the other is that price pressure continues to increase. These two situations require different policy measures. “The solution is to pay close attention to the continuous influx of information and be fully prepared to take action.” She warned that the second scenario is becoming more likely, where rising tariffs, rising energy costs, and continued increases in AI investment lead to rising prices. At that time, inflation will be more widespread and enduring, requiring the Federal Reserve to take more active measures. Daly said that policymakers should pay close attention to the possibility of the second scenario occurring and keep a close eye on relevant data in the next few weeks.

The number of US layoffs in July hit a two-year low, and demand for offline recruitment bucked the trend! According to the latest report released by Global Career Transformation Company Challenger on Thursday, the number of layoffs announced by US employers in July this year was 33,429, a sharp drop from the level of about 46,000 in June, setting a record low in a single month in the past two years. At the same time, companies' enthusiasm for recruitment is heating up, and the July recruitment plan hit the highest point in the same period since 2022. Although artificial intelligence is rapidly reshaping the tech industry — the tech industry is still the hardest hit area of layoffs, accounting for nearly one-third of this year's total layoffs — strong demand from manufacturing and offline services supports the job market. Currently, the market's focus has turned to the July non-farm payrolls report to be released on Friday. The market generally anticipates that 83,000 new jobs will be added at that time, and the unemployment rate is expected to remain low at 4.2%.

Komo CEO Dimon warned that market leverage is already “quite high,” and hidden loans may explode fluctuations. J.P. Morgan CEO Jamie Dimon recently issued a warning saying that the current level of leverage in the financial market is still too high, and reminded investors that hidden borrowing may increase market volatility. He said, “The size of debt in securities financing has reached the highest level in history. Furthermore, there are also a large number of loans that are not included in securities financing; they exist under other names. Some of these types of leverage are hidden, while others are public.” He further pointed out that these lending channels cover areas such as prime brokerage business, hedge funds, exchange-traded funds (ETFs), and treasury bond arbitrage strategies, and said, “Overall, the level of market leverage is already quite high.” Dimon pointed out that a highly leveraged environment increases the possibility that a single investor or fund will trigger widespread fluctuations. “Under such circumstances, the probability that an entity will quickly disrupt the market and cause investors to panic is indeed higher.”

Traders are “playing with fire”: oil prices are falling, but oil is even scarce! The global crude oil market is in a fierce game between “optimistic expectations” and “harsh reality.” As of August 6, the price of Brent crude oil had fallen from a high of $100 per barrel in late July to below $80. The rebound in market confidence is mainly due to rumors at the diplomatic level. According to several US, Iranian, and Gulf officials, the parties are close to reaching a new agreement, which is expected to restore partial access to the Strait of Hormuz, the global energy stronghold. However, in this game where traders have high hopes, the reality is far worse than during the “aborted” cease-fire agreement in mid-June. Currently, Brent crude oil delivered in October has a premium of up to 1.5 US dollars compared to the November contract. This strong “spot rise” structure clearly shows that the spot market is extremely scarce. Even if crude oil supply is partially restored, the crisis in the refined oil market has not abated. Due to long-term turmoil, global oil stocks have been exhausted during peak summer consumption. Among them, the diesel situation is the most serious.

Individual stock news

SanDisk (SNDK.US)'s Q4 performance exceeded expectations across the board, but the Q1 guidance fell short of the market's most optimistic expectations, causing the stock price to fall. According to financial reports, SanDisk's fourth fiscal quarter revenue increased 372% year over year to US$8.97 billion, better than market expectations of US$8.39 billion; adjusted earnings per share were US$39.25, better than market expectations of US$34.45. The rapid growth and penetration of generative AI and AI agents has been driving demand for SanDisk enterprise-grade solid-state drives and NAND flash memory chips. Data center business revenue doubled month-on-month to US$2.98 billion in the fourth fiscal quarter, proving that the core of growth has shifted from traditional mobile phones and PC flash memory to AI infrastructure. Although the fourth fiscal quarter results exceeded expectations, the company expects revenue for the first fiscal quarter to be between $10.3 billion and $10.8 billion. The median range is expected to increase 359% year over year. The median range is higher than the average analysts' estimate of US$10.47 billion based on LSEG data. However, analysts compiled by other data operators agree that the median value of the SanDisk range is about US$10.55 billion, which is nearly 5.5% lower than the US$11.16 billion shown by consistent expectations. The company also expects quarterly adjusted earnings per share to be between $44 and $46, with a median guidance value of $45, which is slightly lower than the market's consensus estimate of about $45.58. At a time when expectations for the company's growth became more stringent, failure to meet the hot expectations of the market led to a sharp decline in the stock performance after that. As of press release, SanDisk's US stocks fell more than 9% before the market on Thursday.

Western Digital (WDC.US) performance and guidance both exceeded expectations, but the “cliff of expectations” caused the stock price to plummet later. According to financial reports, Western Digital's net revenue for the fourth fiscal quarter increased 44% year over year to US$3.75 billion, better than market expectations of US$3.68 billion; adjusted earnings per share (EPS) was US$3.56, better than market expectations of US$3.31. The company's performance outlook is also strong — revenue for the first fiscal quarter is expected to be between $4 billion and $4.2 billion, and the median forecast range is higher than the market forecast of $4.06 billion. Although the results and guidelines handed over by Western Digital highlight the almost “endless” explosive demand from global technology companies for near-term high-capacity HDDs, Western Digital's stock price increase reached about 201% during the year before the financial report was released. The market had already pre-priced and traded HDD shortage expectations, and although the outlook given by Western Digital exceeded analysts' benchmarks, it did not release more aggressive forward supply, order locking, and profit prospects like Seagate, so it is biased in comparison. This “cliff of expectations” means that although performance and guidance have exceeded the consensus of the market, they have not crossed the higher threshold required for extremely crowded positions. Slightly falling short of expectations (even if they are still growing) will cause a collapse in confidence and a cliff-style decline in asset prices. As of press release, Western Digital's US stocks fell nearly 16% before the market on Thursday.

Memory chip stocks generally fell before the market. Before the US stock market on Thursday, dragged down by the lower price performance of SanDisk and Western Digital. As of press release, SK Hynix (SKHY.US) was down more than 6%, while Micron Technology (MU.US) and Seagate Technology (STX.US) all fell more than 4%.

AppLovin (APP.US) revenue surged 53% and was still being destroyed! Just because the AI model upgrade was one step slower. Financial reports show that for the second fiscal quarter ending June 30, AppLovin achieved revenue of US$1.92 billion, an increase of 53% year over year, but still below analysts' previous expectations of US$1.94 billion; net profit climbed 55% year over year to US$1.27 billion; adjusted EBITDA increased 58% year over year to US$1.61 billion; adjusted earnings per share were US$3.76, slightly exceeding the market consensus of US$3.75. Although AppLovin handed over a report card showing a sharp rise in profits, it faced a cold trial from investors. In addition to second-quarter revenue slightly below expectations, the company's guidance for the next quarter wasn't encouraging enough — the company expected third-quarter revenue of $20.55 to $2,085 billion, with a median forecast of $2.07 billion slightly lower than analysts' general expectations of $2.08 billion. Furthermore, Adam Foroughi, the company's co-founder and CEO, admits that the company's game-based advertising business is highly dependent on improving the performance of its AI model. Every substantial iteration of the model allows advertisers to dare to invest more while maintaining the target return on ad spend. However, in the past second quarter, this jump in model performance did not come as expected. As of press release, AppLovin's premarket stock plummeted by more than 18% on Thursday.

The chaos in the Middle East has spawned huge profits! Oil prices soared by 19%, combined with rising production, and Occidental Petroleum (OXY.US) Q2 profit hit a four-year high. According to financial reports, Occidental Petroleum's Q2 revenue reached US$8.32 billion, up 57.0% year on year, exceeding expectations of US$1.07 billion; adjusted earnings per share were US$2.40, exceeding expectations of US$0.55. In the three months ending June 30, the price of crude oil produced by Occidental Petroleum soared more than 50% year over year to 96.78 US dollars per barrel. Average global production increased by 2.4% to 1.43 million barrels of oil equivalent per day, mainly driven by strong US performance. However, Occidental Petroleum's international asset production in Algeria, Oman, Qatar, and the United Arab Emirates fell by 12% to 205,000 barrels of oil equivalent per day because repeated conflicts and attacks on energy infrastructure in the Middle East have strained the situation in this important oil-producing region. The company currently expects capital expenditure of $5.5 billion to $5.9 billion in 2026, compared to the previous forecast of $6.3 billion to $6.7 billion. As of press release, Occidental Petroleum's US stocks rose nearly 2% in the premarket on Thursday.

Strategic transformation continued to advance, and advertising giant WPP (WPP.US) H1 revenue and profit declined but were better than expected. WPP's profit for the first half of the year exceeded analysts' expectations, mainly due to cost reduction measures implemented by the advertising company in a sluggish market environment. According to financial reports, current operating profit fell 3.4% to 398 million pounds ($536 million), higher than analysts' average expectations of 347.2 million pounds; revenue without passing costs fell 5.6% to 4.75 billion pounds, higher than analysts' average expectations of 4.65 billion pounds. WPP also plans to achieve £500 million in annual cost savings over the next few years, and reinvest those savings into growth areas. As the strategic transformation progressed, WPP announced in early July the expansion of its AI-focused business division, WPP Enterprise Solutions. The department will launch a series of AI-based business portfolios, covering fields such as AI transformation consulting, intelligent e-commerce agents, customer data management, user loyalty operations, and content automation. As of press release, US stocks surged more than 25% before the market on Thursday.

After going through regulatory setbacks, we finally broke through! Moderna's (MRNA.US) first mRNA influenza vaccine approved for marketing. After being previously opposed by the US Food and Drug Administration (FDA), Moderna's influenza vaccine mFlusiva developed based on mRNA technology was finally approved for marketing, which is certainly a major victory for the company. Moderna said in a statement that mFlusiva has been approved for use by adults aged 50 and above. This is the first mRNA influenza vaccine approved in the US. It is also Moderna's 5th product approved globally, and the 4th FDA product approved in the US. This mRNA influenza vaccine, called mFlusiva, is an important part of Moderna's plans to drive business growth. As demand for the COVID-19 vaccine that helped the company become famous during the pandemic gradually subsides, Moderna is seeking new growth drivers. As of press release, Moderna's US stocks rose nearly 4% before the market on Thursday.

Key economic data and event forecasts

Number of jobless claims in the US at 20:30 Beijing time at the beginning of the week ending August 1

The next day at 05:30 Beijing time, 2028 FOMC voting committee and St. Louis Federal Reserve Chairman Mussalem delivered a speech on the US economy and monetary policy

Performance Forecast

Friday morning: Airbnb (ABNB.US), Roku (ROKU.US)

Friday pre-market: Yuchai International (CYD.US)