Preview of US Stock Market | Fed rate decision looms; SK Hynix's record quarterly report counters "AI bubble" narrative; Google and Microsoft to report after the bell

Pre-market Market Moves 1. On Wednesday, October 28, ahead of the U.S. stock market open, the three major U.S. stock index futures traded mixed. As of press time, Dow futures fell 0.22%, S&P 500 futures rose 0.12%, and Nasdaq futures rose 0.38%. 2. As of press time, Germany's DAX index rose 0.03%, the UK's FTSE 100 fell 0.29%, France's CAC 40 fell 0.12%, and the Euro Stoxx 50 fell 0.20%. 3. As of press time, WTI crude oil rose 2.01% to $101.91 per barrel. Brent crude rose 1.80% to $111.38 per barrel. Market News JP Morgan: The Fed will hold steady tonight, a $4.1 trillion financing gap is closing in, and the real highlight for U.S. Treasuries is next week. JPMorgan is aligned with market consensus. Jay Barry and others on JPMorgan's fixed income strategy team said they expect the Fed to hold steady, but there may be more than one hawkish dissenting vote; however, Cleveland Fed President Hammack and Dallas Fed President Logan are expected to cast hawkish dissenting votes, and Minneapolis Fed President Kashkari also risks joining. For the Treasury market, next week's quarterly refunding announcement from the Treasury Department is the real highlight. The Treasury will release quarterly financing estimates on November 2 and the full refunding announcement on November 4. JPMorgan expects coupon auction sizes to remain unchanged. The fundamental numbers are: a FY2026 deficit of $1.992 trillion, only $28 billion narrower than the bank's forecast; the FY2027 deficit forecast is maintained at $1.960 trillion. Under current auction arrangements, the funding gap from FY2027 to FY2030 is as high as $4.1 trillion. The report argues that cutting long-end auctions to yields lacks structural significance and would only shift financing pressure to short-term bills. The Fed holding steady tonight is almost certain, while BofA contrarily sees a rate hike. Bank of America Corp said the Fed has ample reason to raise rates in October. If it holds steady in October, the Fed will retain only one option for a single move; if it hikes in October, it can preserve flexibility for further hikes in December, making the hiking cycle more consistent with the 2024 and 2025 rate-cut expectations. Given that inflation data is more threatening, the latter option has greater strategic value. Allies aren't buying either! Purchases of U.S. Treasuries by pro-U.S. countries plunged 60% in the first eight months, Japan plummeted 99%, and South Korea recorded net selling. Based on calculations from U.S. Treasury and State Department data, in the first eight months of 2026, countries and regions highly aligned with the U.S. position net purchased $174.3 billion of U.S. medium- and long-term Treasuries excluding short-term bills, a new low for the same period since 2021 and a year-on-year decline of more than 60%. This shift is particularly notable in Asiaeconomies that have long maintained large surpluses are reducing the allocation of surplus funds to U.S. Treasuries. Japan is the largest overseas holder of U.S. Treasuries, with net purchases of only $389 million in the first eight months of this year, a year-on-year plunge of 99%; South Korea recorded net selling of $23.8 billion, the highest same-period reduction since records began in 1977; China's Taiwan region was also in a state of net selling. AI compute supplier Crusoe: CoreWeave (CRWV.US) selloff is "overblown" AI compute demand is "overwhelming." Chase Lochmiller, CEO of data center developer and AI compute supplier Crusoe, said on Tuesday at the Bloomberg Invest conference in Dallas that the recent selloff in so-called "neoclouds" is "overblown," and said competitor CoreWeave has struck "some very good deals." Crusoe has contracts with Meta Platforms, Oracle Corporation, and Alphabet Inc. Class C under Alphabet. UK new government's first budget to be released tonight Bond market closely watching fiscal discipline. The government led by UK Prime Minister Andy Burnham will release its first budget at 20:30 Beijing time on Wednesday, a key test of global investor confidence in UK assets. This is the first comprehensive exposition of fiscal policy by the new government since Burnham became UK prime minister in July this year. The market widely bets that the budget will focus on fiscal discipline and avoid major surprises, an expectation that has boosted UK gilts, equities, and the pound in recent weeks. Some investors believe that, compared with turmoil in the eurozone bond market, UK gilts now instead have safe-haven attributes. To sustain this rally, UK Chancellor of the Exchequer John Healey needs to avoid major long-term fiscal commitments such as large-scale tax cuts or expanded spending. Bond investors will pay particular attention to the deficit forecasts released simultaneously by the Office for Budget Responsibility and the Debt Management Office's gilt issuance plan. Individual Stock News Profit surges 7-fold, revenue tops 100 trillion for the first time: SK Hynix (SKHY.US) responds to the AI bubble narrative with a record quarterly report. Q3 financial results show that the company's quarterly revenue was KRW 104.62 trillion, up 328% year-on-year, the first time single-quarter revenue exceeded KRW 100 trillion, above market expectations; operating profit was KRW 83.33 trillion, up about 7-fold year-on-year, with an operating margin of 80%, a record high for a single quarter and also above expectations. The company also announced total shareholder returns of about KRW 100 trillion for fiscal 2026, including more than KRW 30 trillion in cash dividends and more than KRW 60 trillion in buybacks and cancellation; third-quarter dividend per share was KRW 20,000, of which KRW 10,000 was a special dividend from investment gains in Kioxia. OpenAI reportedly plans to procure Alphabet Inc. Class C (GOOGL.US) TPU chips, expanding compute through multiple routes. According to a person familiar with the matter, OpenAI intends to buy artificial intelligence (AI) computing chips from Alphabet's Alphabet Inc. Class C, part of the ChatGPT developer's broader efforts to build its AI infrastructure. The move reflects OpenAI's multi-pronged approach to rapidly expand AI compute. The company previously announced plans to begin using self-developed chips later this year to support its AI models. A large number of tech companies are now developing their own AI chips in an attempt to break NVIDIA Corporation's (NVDA.US) monopoly in the field, and OpenAI is one of them. Apple Inc. (AAPL.US) new product event to be held early morning, MacBook Pro upgrade may affect stock performance. Apple Inc. will hold a new product experience event in Los Angeles at 1 a.m. Beijing time on October 29. The market is focused on the product upgrades of the new MacBook Pro and their effect on boosting replacement demand. If the new products bring better-than-expected changes in screen, performance, and design, it could boost market expectations for Mac business growth; if the upgrades lack highlights, stock performance may still be affected by market expectations and overall tech stock sentiment. This event is not a traditional public launch event, and specific product information and market reaction remain to be seen. Cerebras (CBRS.US) wins big Oracle Corporation (ORCL.US) order, deployment in 2027. Oracle Corporation will provide cloud services based on Cerebras computers in its data centers, adding another major customer for the emerging company challenging NVIDIA Corporation's dominance in AI hardware. Cerebras sells computers using a novel chip approachbuilding giant chips from an entire silicon wafer, whereas normally an entire wafer is used to make multiple processors. The chipmaker says this approach 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 Corporation Cloud Infrastructure will begin deploying the equipment in the first half of 2027. AI infrastructure wave continues Liquid cooling leader Vertiv (VRT.US) Q3 results beat expectations and full-year guidance raised. Vertiv's third-quarter net sales reached $4.313 billion, up 61% year-on-year, including 55% organic growth and about 6% contribution from acquisitions, far exceeding the $3.75 billion expected by analysts surveyed by FactSet. Adjusted diluted earnings per share were $2.21, up 78% year-on-year, also well above analysts' expectation of $1.82. The company also raised full-year guidance, now expecting full-year 2026 net sales of $14.65 billion, organic sales growth of 38%; diluted earnings per share of $6.29, and adjusted diluted earnings per share of $7.15, up 84% and 70%, respectively, from full-year 2025. Analysts had previously forecast adjusted diluted earnings per share of $6.73. Expectations for an automotive chip recovery diverge further, NXP Semiconductors NV (NXPI.US) Q4 guidance misses expectations. Quarterly revenue was $3.786 billion, up 19% year-on-year and above market consensus; non-GAAP diluted earnings per share were $4.20, up 35% year-on-year, also beating expectations. Non-GAAP gross margin was 58.6%, operating margin 37.1%; quarterly free cash flow was $1.21 billion, or 31.9% of revenue. The company expects fourth-quarter revenue of $3.75 billion$3.95 billion, with a midpoint of $3.85 billion (up about 15% year-on-year), below analysts' expectation of $3.87 billion; non-GAAP operating profit midpoint of $1.44 billion, also slightly below expectations. Net loss narrows 90%, North America business turns profitable, Stellantis (STLA.US) still struggles to shake off cash flow pressure. Stellantis released third-quarter results: net revenue was EUR 37.611 billion, up 1% year-on-year, above market expectations of about EUR 36.4 billion; net loss was EUR 453 million, narrowing by 90% from a loss of EUR 4.532 billion in the same period last year; adjusted operating profit was EUR 256 million ($285 million), slightly above market consensus, up 184% year-on-year, with a margin of 0.7%. The company maintained its full-year guidance unchanged and reiterated its goal of turning industrial free cash flow positive in 2027. Robinhood (HOOD.US) Q3 revenue hits record high Cryptocurrency trading revenue plunges 55%. Data show that the company's quarterly total net revenue reached $1.424 billion, a record high, up 12% year-on-year and 9% quarter-on-quarter; net income was $476 million, down 14% year-on-year and 17% quarter-on-quarter; diluted earnings per share were $0.51, below $0.61 in the same period last year, down 16% year-on-year. Cryptocurrency trading revenue plunged 55% year-on-year to $120 million, becoming the main drag on the trading business. Visa (V.US) Q4 revenue rises 13% year-on-year to $12.1 billion Cross-border payment volume grows 14%. Data show that the company's fourth-quarter net revenue was $12.139 billion, up 13% year-on-year; diluted earnings per share were $3.19, up 22% year-on-year. Non-GAAP adjusted net income was $6.552 billion, up 13% year-on-year, and adjusted earnings per share were $3.48, up 17% year-on-year. Visa said fourth-quarter revenue growth was mainly driven by continued increases in payments volume, cross-border payment volume, and processed transactions. Specifically, Visa's fourth-quarter payments volume rose 9% year-on-year on a constant-dollar basis; cross-border payment volume excluding intra-Europe transactions rose 14% year-on-year, and total cross-border payment volume also rose 14%. The company processed 74.2 billion transactions in the quarter, up 10% year-on-year. Important Economic Data and Event Preview 20:30 Beijing time U.S. September wholesale inventories preliminary month-on-month (%) 20:30 Beijing time UK Chancellor of the Exchequer John Healey announces his first annual budget since taking office in the UK Parliament 21:45 Beijing time Canada October 28 central bank overnight lending rate (%) 22:30 Beijing time U.S. EIA crude oil inventory change for the week ended October 23 (10,000 barrels) 02:00 Beijing time next day Fed FOMC announces interest rate decision. 02:30 Beijing time next day Fed Chair Warsh holds monetary policy press conference Earnings Preview Thursday morning: Microsoft Corporation (MSFT.US), Alphabet (GOOGL.US), ServiceNow (NOW.US), Fortinet, Inc. (FTNT.US), KLA Corporation (KLAC.US), Ford Motor Company (F.US), FedEx Corporation (FDX.US) Thursday pre-market: Shell (SHEL.US), Linde plc (LIN.US), TotalEnergies (TTE.US), STMicroelectronics NV ADR RegS (STM.US), TAL Education Group Sponsored ADR Class A (TAL.US), Eli Lilly (LLY.US), Mastercard (MA.US), Merck & Co., Inc. (MRK.US), Carter's Incorporated, Caterpillar (CAT.US), Bristol-Myers Squibb Company (BMY.US)