U.S. bond yields hit new highs, triggering market turbulence. Tech Stocks lead the decline, and Crypto prices pull back accordingly.

Fears of leadership changes at the Federal Reserve intensify, coupled with ongoing rises in long-term bond yields, putting pressure on global stock markets. On December 15, the three major US stock indices all declined, with the Nasdaq dropping the deepest at 1.69%, the Dow Jones down 0.51%, and the S&P 500 down 1.07%; European stocks also weakened, with Germany’s DAX 30 down 0.45%, France’s CAC 40 down 0.21%, and the UK FTSE 100 down 0.56%.

US Treasury prices under pressure, long-term yields hit new highs since September

The US Treasury market volatility became the main trigger for this round of decline. The 30-year US Treasury yield rose to 4.86%, a new high since September 5; the 10-year yield increased to 4.18%, up 3 basis points from the previous trading day; the 2-year yield fell to 3.52%. The steepening of the yield curve reflects market concerns over persistent high inflation.

The rise in long-term interest rates is closely related to expectations about the Federal Reserve Chair appointment. Trump recently indicated a preference for either former Fed director Kevin Warsh or current White House National Economic Council Director Kevin Hassett to succeed Powell. Warsh is the preferred candidate. However, Trump also emphasized that the next Fed Chair should seek his opinion on interest rate issues and expressed hope that rates could fall to 1% or even lower within a year. These comments sparked market concerns over the Fed’s independence, pushing up long-term bond yields.

Commodities and cryptocurrencies both weaken, gold and silver lose gains

Dragged down by rising US bond yields, safe-haven assets performed weakly. Gold’s gains narrowed to 0.47%, at $4,299.2 per ounce; WTI crude oil fell 0.67%, at $57.5 per barrel. The cryptocurrency market also adjusted in tandem, with Bitcoin down 0.05% in 24 hours, currently at $87.72K; Ethereum down 0.50% in 24 hours, at $2.95K.

The US dollar index rose slightly by 0.06% to 98.39, USD/JPY increased by 0.17%, and EUR/USD was nearly flat, up 0.01%.

Hong Kong night session futures also felt the impact, with the Hang Seng Index night futures closing at 25,735 points, 242 points below yesterday’s close; the China Enterprises Index night futures closed at 8,998 points.

Inflation concerns deepen, Fed internal divisions become apparent

Chicago Fed President Goolsbee and Kansas Fed President Scheld on Friday expressed opposition to further rate cuts, mainly due to concerns over inflation. Their statements indicate that, although markets still expect two 25 bps rate cuts before the end of 2026, there are disagreements within the Fed on inflation assessment, posing downside risks to US Treasuries.

Powell’s term ends in May next year. During his tenure, he repeatedly rejected Trump’s calls for significant rate cuts, leading to multiple public criticisms from the President. Uncertainty over personnel changes and rate cut expectations further dampen market risk sentiment.

Goldman Sachs bullish on US stocks next year, S&P 500 target up to 7600 points

Despite short-term volatility, investment firms remain optimistic about US stocks in 2025. Goldman Sachs reaffirmed its target for the S&P 500 at 7,600 points next year, about 10% above current levels. The firm expects earnings per share of S&P 500 companies to grow 12% next year and another 10% in 2027; productivity gains from AI applications are expected to contribute approximately 0.4 percentage points and 1.5 percentage points respectively.

Tech giants’ earnings diverge, Broadcom surges then pulls back, Oracle bonds under pressure

Broadcom reported Q4 earnings exceeding expectations, with net profit up 97% year-over-year to $8.5 billion, adjusted EPS of $1.95, above the expected $1.86; revenue increased 28% YoY to $18 billion, surpassing the $17.5 billion forecast. The stock initially rose over 3% after hours but then declined more than 11% amid tech sector adjustments.

CEO Hock Tan revealed that Broadcom expects AI chip sales in Q1 to double year-over-year to $8.2 billion, covering custom AI chips and AI networking chips. Despite the positive outlook, investors are concerned about high AI industry spending and profit realization, leading to profit-taking.

Oracle bonds face greater pressure. Bloomberg reported delays in completing data centers involved with OpenAI, raising investor concerns. Oracle issued a statement clarifying that project progress is unaffected. However, confidence has been damaged; the $18 billion of senior bonds purchased in September are now at a loss of $1.35 billion. Its 2035 maturity bonds with a 5.2% coupon rate saw the 5-year credit default swap spread widen to 1.71 percentage points, higher than comparable US Treasuries, with a yield of 5.9%, surpassing the average for junk bonds.

Elon Musk may become the first trillion-dollar billionaire, SpaceX IPO expected in mid to late next year

Another focus is SpaceX’s IPO plan. Bloomberg reports that SpaceX is seeking to go public in mid to late next year, with an estimated valuation of around $1.5 trillion, close to Saudi Aramco’s 2019 IPO valuation of about $1.7 trillion. Musk owns approximately 42% of SpaceX, which could make him the world’s first trillionaire.

Signs of easing geopolitical tensions

US and Belarus relations show signs of improvement. The US announced the lifting of sanctions on Belarusian potash fertilizers, and Lukashenko decided to pardon 123 prisoners, including Nobel Peace Prize laureate and Belarusian human rights leader Bialiatski in 2022. This move is seen as a signal of normalization of relations.

Meanwhile, the US intensified sanctions on Venezuela, listing six oil tankers and related companies for alleged fraud and unsafe shipping, including the Hong Kong-flagged, UK-registered COSCO Shipping Services’ TAMIA oil tanker.

Today’s key focus

• China November total retail sales of consumer goods YoY
• China November industrial added value above designated size YoY
• Eurozone October industrial output MoM
• Canada November CPI MoM
• US December NY Fed Manufacturing Index
• Fed Governor Mester’s speech on economic outlook
• US December NAHB Housing Market Index
• Fed Williams’ speech on economic prospects