Market-wide Weakness Amid Soaring Oil Prices and Interest Rates

The S&P 500 fell by 0.58%, Nasdaq by 0.6%, Dow by 0.6%, and Russell by 1% respectively. Immediately after the PPI index announcement in the morning, the market experienced a tremor and opened lower.

Rising crude oil and gas prices have increased overall inflationary pressure. As a result, investors are continuously engaged in sell-offs.

The sharp rise in international oil prices had a negative impact across the stock market. Brent crude rose 6.32% to $108, and West Texas Intermediate (WTI) crude surpassed its previous high, reaching $102. The surge in oil prices is identified as the main reason exacerbating overall market pressure, and further increases are expected to lead to index declines.

U.S. Treasury yields rose sharply, putting pressure on the stock market. The 10-year yield rose 2.39% to surpass 4.96%, and the 30-year yield climbed to 5.36%. When interest rates approach or surpass the 5% mark, stock appreciation becomes difficult. High bond yields increase the discount rate, which lowers corporate valuations.

September is the last month of the fiscal year, with a new fiscal year starting on October 1st. During this period, portfolio rebalancing related to tax payments occurs actively. These seasonal factors add uncertainty to the market, and investors are closely monitoring changes in fund flows due to tax issues.

This market outlook indicates that the time is approaching for the Federal Reserve (Fed) to consider tightening monetary policy.

West Texas Intermediate (WTI) crude oil surpassed $100 for the first time in three and a half months, identified as the main reason for today's market decline. Rising oil prices push up inflation indices, which in turn leads to interest rate hikes, creating a vicious cycle of stock price declines. In particular, geopolitical risks in the Middle East, such as the possibility of an attack on an Iranian oil tanker, are intensifying, putting stronger upward pressure on oil prices.

Even if the Consumer Price Index (CPI) comes in low, companies sometimes struggle to pass price increases on to consumers. The Producer Price Index (PPI) released today serves as evidence that inflation issues remain serious across the supply chain. This is interpreted to mean that even if CPI figures are low, overall economic inflationary pressure persists.

This is a 0.3 percentage point increase from July. Furthermore, on a year-over-year basis, it is expected to rise 3.4%, up 0.04 percentage points from the previous month's 3.36%. This is because rising energy prices are the main factor driving the headline index.

However, Chair Powell did not clearly present specific evidence to trigger a rate hike. Consequently, the market is filling the void itself, pre-reflecting an interest rate hike that Powell did not promise.

This is an increase compared to the previous auction rate of 5.216%. The bid-to-cover ratio was 2.61x. The fact that Treasury bonds were auctioned despite high interest rates shows that investors have a strong tendency to lock in interest income on long-term bonds.

If interest rates continue to rise, money may leave the market, reducing liquidity. This is highly likely to lead to a decline in stock prices. High interest rates cause funds to flock to bonds, which are safe-haven assets, and are accompanied by a stronger demand from investors seeking to lock in long-term bond interest income.

An analysis of eight indicators, including corporate value, earnings, and index concentration, shows that expected earnings growth rates are approaching levels seen during the dot-com bubble, and some indicators have already peaked or are nearing their peak.

Key indicators such as valuation, corporate fundamentals, and leverage are at high levels. In particular, index concentration is extremely high, similar to the dot-com bubble era, and net equity issuance and foreign ownership percentages have reached all-time highs.

The S&P 500 index is expected to rise from the current 7,650 to 8,250 by the end of 2025. However, it is ultimately projected to fall to 6,500 by the end of 2027. This means there is a high possibility of entering a correction phase by 2027 after a short-term upward trend. Based on past examples, such a bubble collapse could occur within a few months.

It showed performance 10 times higher in early usage compared to the learning cohort. This indicates that Meta's strategy to diversify its revenue structure from advertising to AI-based services has successfully begun.

This is analyzed as a strategy to expand market share rather than focusing on short-term profits. The pricing, $1 cheaper than Samsung's Galaxy Fold 7, also appears to be part of this strategy.

Bank of America (BoA) positively evaluated the Apple iPhone 'Duo,' giving it a 'buy' rating and a target price of $370. The analysis suggests that the Duo shows a meaningful change in form factor after a long time, perfectly integrating hardware and software to expect improved productivity. However, UBS and Jefferies maintain a 'neutral' opinion due to concerns about reduced margins and poor performance.