US stock outlook | Futures of the three major stock indexes are rising sharply, oil prices are falling, and the Fed's interest rate decision hits hard tonight

Pre-market market trends

1. On September 16 (Wednesday), the futures of the three major US stock indexes rose sharply before the US stock market. As of press release, Dow futures were up 0.26%, S&P 500 futures were up 0.25%, and NASDAQ futures were up 0.51%.

2. As of press release, the German DAX index rose 0.24%, the UK FTSE 100 index rose 0.60%, the French CAC40 index rose 0.53%, and the European Stoxx 50 index rose 0.55%.

3. As of press release, WTI crude oil fell 2.38% to $103.31 per barrel. Brent crude oil fell 1.49% to $107.13 per barrel.

Market news

The Federal Reserve's interest rate decision is a big hit! At 2 a.m. Beijing time on Thursday, the Federal Reserve will announce the interest rate decision and the latest economic forecast. Half an hour later, Federal Reserve Chairman Walsh held a press conference. A month ago, the market believed that the probability of this rate hike was only 33.1%. Now this set of figures is close to 95%, and the market's pricing of interest rate hikes is close to one-sided. If the Federal Reserve raises interest rates as scheduled, this will also be the first time in more than three years that the Federal Reserve has raised interest rates. However, what the market is really waiting for is not this 25 basis point rate hike; more importantly, the three signals. How does the Federal Reserve determine whether the impact on oil prices is a short-term disturbance, or will it spread to wages, service prices, and long-term inflation expectations? Is this just an adjustment or the beginning of a new cycle of rate hikes? How much economic and market pressure is Walsh willing to bear in order to keep inflation down?

Pressure from the White House will make it difficult to stop the hawks from turning! The Federal Reserve's interest rate hike is on the way, and the relationship between Walsh and Trump is facing a major test. Markets expect the Federal Reserve to raise interest rates on Wednesday for the first time since 2023 — as policymakers' confidence that “inflation can cool down sufficiently without at least one push from the central bank” is being lost. This is likely to strain the relationship between President Walsh and US President Trump. The rate hike could attract fresh criticism from the White House. Just last Sunday, Trump repeated his argument that the US should have the lowest borrowing costs in the world. Since Trump appointed Walsh to replace Powell as chairman, the president has drastically calmed down his attacks on the Federal Reserve. He even hinted that Walsh was being pressured by other Federal Reserve officials to raise interest rates, accusing these officials of being “very politicized.” However, in a speech at the end of August, Walsh made it clear that there has been no substantial improvement in potential price pressure. If the Fed does not obtain new guarantees and confirms that inflation is on the path to the central bank's 2% target, then the Fed “still has work to do.”

The doves defy! Nomura Securities: Two major reasons prompted the Federal Reserve to raise interest rates twice during the year. Nomura Securities, which has always taken a pigeon-sided position in the Wall Street camp, recently unexpectedly overturned previous interest rate predictions that had been put on hold and chose to completely switch to hawks. According to the agency's latest research, the Federal Reserve is expected to raise policy interest rates twice in a row in September and December of this year, with a rate increase of 25 basis points each time, which means that the current US austerity cycle may extend further. Nomura's reversal of position did not come out of nowhere. It was mainly strongly driven by two realistic factors: first, the US anti-inflation front showed repeated signs, and second, the policy communication style at the core level of the Federal Reserve showed a more clear preference for austerity. According to Nomura, the stagnation of the downward trend in inflation is fundamentally forcing the Federal Reserve to restart and tighten the valves. Furthermore, there is a substantial difference between the tough attitude conveyed by Walsh and the “suspension of interest rate hikes for a long period of time,” which the market generally bet before, directly disrupts the balance of policies maintaining the status quo.

Don't fight the profit cycle! Did US stocks break 8,000 points this year? Jefferies expects the S&P 500 index to soar to 8,000 points by the end of this year, and hit a further 9,000 points in 2027, driven by the AI investment frenzy and rising corporate profits exceeding expectations. According to the report, despite facing macroeconomic headwinds such as rising 10-year US Treasury yields, inflationary stickiness, and midterm elections, corporate fundamentals will still be the core driving force that determines returns. Jefferies's core logic is clear and powerful: in a cycle where profits grow more than twice the historical average, it is dangerous to fight against profit trends. Furthermore, Jefferies believes that AI-driven profit expansion is spreading from the Big Seven to a wider market, providing a more solid foundation for the market. It should focus on overfit industries with strong profit revisions and macro-level support, such as technology, finance, healthcare, and materials, and seize this rare profit supercycle amid concerns about shrinking valuations. However, Jefferies also specifically pointed out two core risks in the report: one is a substantial slowdown in the profit growth of AI-related companies, which will directly shake the foundation of the entire bull market logic; the other is the continued rise in 10-year US bond yields, which will put systemic pressure on the stock market through valuation compression channels.

The “AI deceleration theory” hit the 5% “anchor of global asset pricing”, and technological risks soared! Wells Fargo redrew the US stock investment landscape and lowered the S&P 500 target point. Ohsung Kwon, chief stock strategist at Wells Fargo Bank, lowered the S&P 500 target from 7950 points to 7,700 points, and lowered the tech sector from the “overrated” rating previously given to the “equal weight standard” because the upcoming midterm elections are increasingly at risk for this sector, especially as voices against data center development continue to grow. The strategist is increasingly concerned that the profit expansion that has continued for many years has pushed market expectations to near historical highs, while AI capital spending, US state governments' policy restrictions on the data center construction process, and uncertainty about fiscal policy and monetary policy have been increasing recently. It is worth noting that the strategist did not show much concern about 2027 profits. The main warning is that the slowdown in capital expenditure associated with AI data center construction may impact 2028 profits. As a result, this adjustment is closer to re-examining the long-term growth and valuation of the US stock market.

Individual stock news

US Optical Communications stocks generally rose before the market. Before the US stock market on Wednesday, as of press release, Nokia (NOK.US) had risen more than 6%, Coherent (COHR.US) and Lumentum (LITE.US) had risen more than 3%, and Corning (GLW.US), Maywell (MRVL.US), Credo Technology (CRDO.US), and Astera Labs (ALAB.US) had risen nearly 2%.

Rumor has it that SK Hynix (SKHY.US) plans to make memory chips in the US for the first time, rent an Intel (INTC.US) Ohio factory or establish a joint venture. South Korea's SK Hynix is reportedly negotiating a deal with Intel. If successful, it will produce memory chips in the US for the first time. One potential solution is for SK Hynix to rent part of Intel's long-term planned fab facility in Ohio; the other is to establish joint ventures with Intel and major cloud vendors that are anxious to lock in the supply of memory chips. However, sources said that potential opposition from South Korea could pose a major obstacle. A source said that the relevant negotiations are still in the exploration stage and stressed that no decisions have been made; SK Hynix may also consider other transaction structures. SK Hynix said in a statement that it is “evaluating various measures, including the establishment of more production sites, to enhance the competitiveness of the storage business,” but “no matters have yet been determined.”

Meta (META.US) adds self-developed AI chip! Data centers will be deployed in the first half of next year to reduce inference costs and energy consumption. Meta plans to deploy a new generation of self-developed artificial intelligence chips to data centers in the first half of 2027, hoping to reduce the energy consumption and costs required to run AI models through customized chips. At the same time, the company has promised a deployment scale of more than 1 gigawatt for related chips, and stated that if AI demand continues to be strong, the speed of subsequent deployment will be further accelerated. Yee Jiun Song, vice president of engineering at Meta, said that the company's third-generation self-developed AI processor, MTIA 450, is currently in the testing phase, and the chip is codenamed “Arke.” Arke has now entered the actual testing phase. On September 1, the first batch of 12 Arke chips was delivered by TSMC to Meta. The gap between their actual performance and previous simulation results was only 2% to 3%.

Rumor has it that Starbucks (SBUX.US) is considering selling a majority stake in the Japanese business, with a valuation of up to 3 billion US dollars. According to two people familiar with the matter, Starbucks is considering selling a majority stake in its Japanese business. The potential deal could value the coffee chain giant's largest overseas proprietary market at around $3 billion. People familiar with the matter said that Starbucks has sought opinions from a number of financial advisors on various plans for the business and is willing to sell most of its shares. One of the people familiar with the matter said that the final share ratio to be sold has not yet been determined, and the valuation that Starbucks is ultimately seeking will also depend on the outcome of the negotiations. The potential sale comes at a time when Starbucks is reorienting its global business portfolio under Nicole's leadership. Nicole has closed stores and cut corporate jobs in North America to push the company back to profitability. People familiar with the matter said that the process of divesting majority shares in Starbucks' Japanese business is expected to attract the interest of global and local private equity acquisition companies. One of the people familiar with the matter added that the formal sale process could begin in the fourth quarter.

The trading business of Wall Street giants is showing “two days of ice and fire”: J.P. Morgan Chase (JPM.US) expects Q3 results to soar, and Bank of America (BAC.US) warns of slowing down. Xiaomo Co-President Doug Petnor said on Tuesday that for the quarter ending September 30, transaction revenue is expected to increase in the middle to high range of ten percentage points. He also said that J.P. Morgan Chase's investment bank fee revenue may also rise by a similar margin. At the same meeting just a day ago, Bank of America CEO Brian Moynihan said that third-quarter revenue will be “basically the same” compared to the same period in 2025. Moynihan said that the bank's financing business declined in part due to a slowdown in the balance of major Asian brokers.

Key economic data and event forecasts

Monthly rate of retail sales in the US in August at 20:30 Beijing time

At 02:00 Beijing time the next day, the Federal Reserve announced the interest rate decision

The Federal Reserve Chairman held a monetary policy press conference at 02:30 Beijing time the next day