US stock outlook | The Federal Reserve's interest rate decision hits, SK Hynix's record quarterly report responds to the “AI bubble theory,” and Google and Microsoft are on the list after the market

Pre-market market trends

1. Before the US stock market on October 28 (Wednesday), futures for the three major US stock indexes had mixed ups and downs. As of press release, Dow futures were down 0.22%, S&P 500 futures were up 0.12%, and NASDAQ futures were up 0.38%.

2. As of press release, the German DAX index rose 0.03%, the UK FTSE 100 index fell 0.29%, the French CAC40 index fell 0.12%, and the European Stoxx 50 index fell 0.20%.

3. As of press release, WTI crude oil rose 2.01% to $101.91 per barrel. Brent crude rose 1.80% to $111.38 per barrel.

Market news

Xiaomo: The Federal Reserve will stand still tonight. The $4.1 trillion financing gap is getting closer. The real highlight of US debt is next week. J.P. Morgan Chase is in agreement with the market consensus. Jay Barry and others from J.P. Morgan's fixed income strategy team said that the Fed is expected to remain on hold, but there may be more than one hawkish dissenting vote; however, Cleveland Federal Reserve Chairman Hamak and Dallas Federal Reserve Chairman Logan are expected to cast hawkish objections, and Minneapolis Federal Reserve Chairman Kashkari is also at risk of joining. For the US debt market, next week's Treasury Department's quarterly refinancing announcement is the real highlight. The Ministry of Finance will announce quarterly financing estimates on November 2 and a full refinancing announcement on November 4. J.P. Morgan expects the interest-bearing bond auction scale to remain unchanged. The fundamental figures are: the 2026 deficit is 1.992 trillion US dollars, which is only 28 billion US dollars narrower than the bank's forecast; the 2027 deficit forecast remains at 1.960 trillion US dollars. According to the current auction schedule, the funding gap for the 2027-2030 fiscal year is as high as US$4.1 trillion. According to the report, reducing long-term auctions to reduce yields lacks structural significance; it will only shift financing pressure to short-term debt.

It is almost a foregone conclusion that the Federal Reserve remains on hold tonight. The Bank of America bucked the trend and saw interest rate hikes. Bank of America said the Federal Reserve has good reasons to raise interest rates in October. If it remains on hold in October, the Federal Reserve will only reserve the option to be in place once; if interest rates are raised in October, it can retain the flexibility to continue raising interest rates in December, making the interest rate hike cycle more in line with expectations of interest rate cuts in 2024 and 2025. Given that inflation data is more threatening, the latter option has more strategic value.

Allies aren't buying it either! Pro-American purchases of US bonds plummeted 60% in August, Japan plummeted 99%, and South Korea recorded record net sales. According to data from the US Treasury Department and State Department, in the first eight months of 2026, countries and regions with a high degree of agreement with the US position made net purchases of US medium- and long-term treasury bonds excluding short-term treasury bills were US$174.3 billion, a new low since the same period in 2021, with a year-on-year decline of more than 60%. This shift is particularly notable in Asia — economies that maintain large surpluses all year round are reducing the allocation of surplus funds to US debt. Japan is the largest overseas holder of US debt. Net purchases in the first eight months of this year were only 389 million US dollars, a sharp drop of 99% from the previous year; South Korea's net sales were 23.8 billion US dollars, the highest reduction in holdings in the same period since statistics were available in 1977; Taiwan Province of China is also in a state of net sales.

AI computing power supplier Crusoe: The CoreWeave (CRWV.US) sell-off wave has been “exaggerated” and demand for AI computing power is “falling apart”. Chase Lochmiller, CEO of data center developer and AI computing power provider Crusoe, said at the Dallas Bloomberg Investment Conference on Tuesday that the recent sell-off of so-called “neoclouds” (neoclouds) has been “exaggerated” and that competitor CoreWeave has reached “some very good deals.” Crusoe has contracts with companies such as Meta Platforms, Oracle, and Alphabet's Google.

The new British government's first budget bill was announced tonight, and the bond market is keeping a close eye on fiscal discipline. The government led by British Prime Minister Andy Burnham will announce its first budget at 20:30 Beijing time on Wednesday. Global investors' confidence in British assets will be tested critically. This is the first time since Burnham became Prime Minister of the United Kingdom in July this year that the new government has comprehensively explained fiscal policy. Markets generally bet that this budget will focus on fiscal discipline and that there will be no major surprises. This expectation has boosted the performance of the British Treasury, the stock market, and the British pound in recent weeks. Some investors believe that compared to the turbulence in the Eurozone bond market, British treasury bonds now have safe-haven properties. For this wave of gains to continue, British Chancellor of the Exchequer John Healy will need to avoid major long-term fiscal commitments such as large-scale tax cuts or spending increases. Bond investors will pay particular attention to the deficit forecast simultaneously announced by the Office of Budget Responsibility and the treasury bond issuance plan of the Debt Management Office.

Individual stock news

Profits skyrocketed sevenfold and revenue broke trillions of dollars for the first time: SK Hynix (SKHY.US) responds to the AI bubble theory with a record quarterly report. According to the Q3 financial report, the company's revenue for the quarter was 104.62 trillion won, up 328% year on year, exceeding 100 trillion won for the first time, higher than market expectations; operating profit of 83.33 trillion won, up about 7 times year on year, and 80% of the operating profit margin hit a record high in a single quarter, which also exceeded expectations. The company also announced a total shareholder return of approximately 100 trillion won for the 2026 fiscal year, including more than 30 trillion won in cash dividends and over 60 trillion won repurchase cancellation; a third quarter dividend of 20,000 won per share, of which 10,000 won was a special dividend from Kioxia's investment income.

OpenAI was revealed to be planning to purchase Google (GOOGL.US) TPU chips to expand computing power in multiple ways. According to a source familiar with the matter, OpenAI is interested in purchasing artificial intelligence (AI) computing chips from Alphabet's Google as part of the ChatGPT developer's broader effort to build its AI infrastructure. This move reflects that OpenAI is taking a multi-pronged approach to rapidly expand AI computing power. The company has previously announced plans to start using self-developed chips to support its AI models later this year. Currently, a large number of technology companies are developing their own AI chips in an attempt to break the monopoly position of Nvidia (NVDA.US) in this field, and OpenAI is one of them.

The Apple (AAPL.US) new product event will be held in the early hours of the morning. MacBook Pro upgrades may affect stock price performance. Apple will hold a new product experience event in Los Angeles on October 29th at 1 a.m. Beijing time. The market is concerned about the product upgrade of the new MacBook Pro and its effect on boosting the demand for switching. If the new product brings unexpected changes in screen, performance, and design, it is expected to boost market expectations for Mac business growth; if the upgrade lacks highlights, stock price performance may still be affected by market expectations and overall technology stock sentiment. This event is not a traditional public launch. Specific new product information and market reactions are yet to be seen.

Cerebras (CBRS.US) won the Oracle (ORCL.US) order and deployed in 2027. Oracle will provide cloud services based on Cerebras computers in its data centers, adding another major customer to the emerging company challenging Nvidia's dominance of AI hardware. Cerebras sells computers using a novel chip scheme — giant chips are made from whole silicon wafers, and usually whole wafers are used to make multiple processors. The chipmaker claims that the solution enables its products to deliver meaningful results faster than competitors when processing AI queries (i.e. inference). The two companies said in a statement on Tuesday that Oracle Cloud Infrastructure will begin deploying related devices in the first half of 2027.

The Q3 performance of Vertiv (VRT.US), the leading liquid cooling leader in the AI infrastructure wave, exceeded expectations and raised its full-year guidance. Vertiv's net sales for the third quarter reached $4.313 billion, up 61% year over year, with organic growth of 55%, and mergers and acquisitions contributing about 6%, far exceeding FactSet survey analysts' expectations of $3.75 billion. Adjusted earnings per diluted share of $2.21 were up 78% year over year, also significantly higher than analysts' expectations of $1.82. The company also raised its full-year results guidance. It now expects net sales for the full year of 2026 to be US$14.65 billion, organic sales up 38%; diluted earnings per share will be US$6.29, and adjusted diluted earnings per share will be US$7.15, up 84% and 70% respectively from the full year of 2025. Analysts had previously predicted adjusted diluted earnings of $6.73 per share.

Expectations for the recovery of automotive chips have intensified, and the NXP (NXPI.US) Q4 guidance falls short of expectations. Revenue for the quarter was US$3.786 billion, up 19% year over year, higher than the market's agreed expectations; non-GAAP diluted earnings per share of US$4.20, up 35% year over year, also exceeded expectations. Non-GAAP gross margin of 58.6%, operating margin of 37.1%; free cash flow for the quarter was US$1.21 billion, accounting for 31.9% of revenue. The company expects fourth-quarter revenue of US$3.75 billion to US$3.95 billion, with a median value of US$3.85 billion (up about 15% year over year), lower than analysts' expectations of US$3.87 billion; median non-GAAP operating profit of US$1.44 billion is also slightly lower than expected.

Net losses have narrowed by 90% and the North American business has reversed losses, and Stellantis (STLA.US) is still struggling to escape cash flow pressure. Stellantis announced third-quarter results: net revenue of 37.611 billion euros, up 1% year on year, about 36.4 billion euros; net loss of 453 million euros, 90% narrower than loss of 4.532 billion euros in the same period last year; adjusted operating profit of 256 million euros (US$285 million), slightly higher than the agreed market expectations, up 184% year on year and profit margin of 0.7%. The company kept its guidance unchanged throughout the year and reaffirmed the goal of positive industrial free cash flow in 2027.

Robinhood's (HOOD.US) Q3 revenue reached a record high, and cryptocurrency trading revenue plummeted 55%. According to the data, the company's total net revenue for the quarter reached a record high of 1,424 million US dollars, up 12% year on year and 9% month on month; net profit was 476 million US dollars, down 14% year on year and 17% month on month; diluted earnings per share were 0.51 US dollars, down from 0.61 US dollars in the same period last year, down 16% year on year. Cryptocurrency transaction revenue plummeted 55% year over year to US$120 million, becoming a major drag on the trading business.

Visa (V.US) Q4 revenue increased 13% year over year to US$12.1 billion in cross-border payment transactions increased 14%. According to the data, the company's net revenue for the fourth fiscal quarter was US$12.139 billion, up 13% year on year; diluted earnings per share were US$3.19, up 22% year on year. Non-GAAP adjusted net profit was $6.552 billion, up 13% year over year, and adjusted earnings per share were $3.48, up 17% year over year. Visa said that revenue growth in the fourth fiscal quarter was mainly due to continued increases in payment transaction volume, cross-border payment transaction volume, and number of transactions processed. Specifically, Visa's fourth fiscal quarter payment transaction volume increased 9% year over year based on a fixed exchange rate; excluding intra-European transactions, cross-border payment transaction volume increased 14% year over year, and overall cross-border payment transaction volume also increased 14%. The number of transactions processed by the company during the quarter reached 74.2 billion, an increase of 10% over the previous year.

Key economic data and event forecasts

Preliminary monthly rate of US wholesale inventory in September at 20:30 Beijing time (%)

At 20:30 Beijing time, British Chancellor of the Exchequer John Healy announced his first annual budget since taking office in the British Parliament

21:45 Beijing time, Canada's central bank overnight loan interest rate on October 28 (%)

Changes in US EIA crude oil inventories for the week ending October 23 at 22:30 Beijing time (10,000 barrels)

The next day at 02:00 Beijing time, the Federal Reserve FOMC announced the interest rate decision.

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

Performance Forecast

Thursday morning: Microsoft (MSFT.US), Alphabet (GOOGL.US), ServiceNow (NOW.US), Fita Information (FTNT.US), KLEI (KLAC.US), Ford (F.US), FedEx (FDX.US)

Thursday pre-market: Shell (SHEL.US), Linde (LIN.US), Total (TTE.US), STMicroelectronics (STM.US), Good Future (TAL.US), Lilly (LLY.US), Mastercard (MA.US), MSD (MRK.US), Caterpillar (CAT.US), Bristol-Myers Squibb (BMY.US)