Preview of US Stock Market | All three major stock index futures fell, and Walmart dropped after earnings. Institutions warn that the U.S. Treasury's increased long-term bond repurchases will not stop the yield curve from steepening.

Pre-Market Market Trends 1. As of August 20 (Thursday), U.S. stock futures are all down ahead of the market open. As of press time, Dow futures fell by 0.33%, S&P 500 futures dropped by 0.11%, and Nasdaq futures declined by 0.23%. 2. As of press time, the German DAX index decreased by 0.53%, the UK FTSE 100 index fell by 0.24%, the French CAC40 index dropped by 0.31%, and the European Stoxx 50 index declined by 0.25%. 3. As of press time, WTI crude oil rose by 3.25% to $87.13 per barrel. Brent crude oil increased by 2.89% to $94.27 per barrel. Market News JPMorgan warns: The U.S. Treasury's decision to double bond repurchases lacks credibility, and long-end yields may face upward pressure again. JPMorgan analysts caution that the market may see the Treasury's unexpected move to curb long-term financing costs as lacking credibility, which could raise term premiums and yields over time. Analysts, including Jay Barry, wrote in a report, "Without genuine fiscal consolidation, we worry that the market will perceive this action as lacking credibility." They added, "If the Treasury becomes more opportunistic in its debt management approach and further deviates from its 'conventional and predictable' principles, this may lead to higher term premiums and yields over time." Aegon pushes back against the U.S. Treasury: The increase in long bond repurchases is of "limited significance," and the steepening logic remains unchanged. Despite U.S. Treasury Secretary Scott Bansen's attempts to curb long bond rates, Aegon Asset Management remains firm in its bet that the spread between short-term and long-term borrowing costs will continue to widen. According to Aegon portfolio manager James Lynch, increasing the scale of long U.S. bond repurchases is of "limited significance" and does not change his view that the yield curve in the U.S. and Europe will continue to steepen. Lynch stated, "Fiscal issuesmassive deficit sizes, large-scale corporate debt flooding the market, inflation rates still above target, coupled with unclear communication from the Fedhave all injected additional premiums into the market. I don't think these factors will disappear anytime soon." The U.S. Treasury's expansion of long bond repurchases may exacerbate inflation risks, analysts say: The Fed faces a more complex policy environment. Economists and bond traders believe that if the Treasury continues to suppress long-term rates by adjusting debt structure, it could stimulate economic activity and increase inflation stickiness while making the U.S. government debt financing costs more susceptible to changes in short-term rates. Moreover, this could place even greater pressure on the Fed to maintain policy independence. RSM US Chief Economist Joseph Brusuelas noted that policies are gradually trending toward a direction that may require central bank support for fiscal objectives. He believes Treasury intervention could distort the market and present the Fed, under the leadership of Waller, with a more challenging policy environment. Wilmington Trust senior bond portfolio manager Wil Stith said that if inflation remains stable or continues to rise, the easing effects of the Treasury's suppression of long-term yields might force the Fed to raise interest rates more aggressively. The AI debt wave is here, September will test U.S. treasuries. As the U.S. Treasury expands the long-term Treasury bond repurchase program to alleviate pressure on the U.S. bond market, another massive wave of debt financing is unfolding. The driving force behind this round of financing expansion comes from AI infrastructure development. The U.S. investment-grade corporate bond market typically sees a peak in issuance after Labor Day. With the financing needs of massive cloud computing companies increasing, corporate bond issuance could reach $200 billion in September, potentially posing a new round of pressure on an already stressed Treasury market. According to market estimates, since 2026, U.S. investment-grade corporate bond issuance has increased by 38% year-over-year, with total issuance expected to reach a record $2.1 trillion for the year. Much of the new supply stems from capital expenditures related to AI. This supply wave, coupled with the expansion of the U.S. fiscal deficit, rising inflation expectations, and uncertainty in Fed policy, is reshaping the supply-demand dynamics of the fixed income market. Is the U.S. economy at risk of collapsing at any moment? Three key indicators flashing red, AI bubble may be the last straw. Finnish economist Tuomas Malinen, who specializes in financial crises and GEO Group Inc. politics, believes that while the U.S. economy has yet to show clear signs of a recession timeline, downside risks have significantly increased based on his analysis of several key indicators in the market and economy. He pointed out that bankruptcy filings in the U.S. have surged to their highest level since the pandemic, and the private sector yield curve is signaling that "a U.S. recession is about to begin." Meanwhile, new orders in U.S. manufacturing are the only remaining indicator sending positive signals, but this is insufficient to offset other risks, as current U.S. economic growth appears highly concentrated in a few sectors. He is especially concerned that the AI investment frenzy is creating a new market bubble. If AI trading suddenly crashes, the economy could weaken rapidly, similar to the aftermath of the internet bubble burst. Stock News Walmart Inc. (WMT.US) Q2 results mixed, annual guidance falls short of expectations. The financial report shows that Walmart Inc. reported a 6% year-on-year increase in Q2 revenue to $187.94 billion, better than the market expectation of $186.6 billion; same-store sales rose by 2.6%, below market expectations of 3.8%; adjusted earnings per share were $0.81, exceeding the market expectation of $0.74. However, the companys provided performance guidance fell short of expectations. The company expects Q3 sales to increase by 3%-3.75%; adjusted EPS is expected to be between $0.62 and $0.64, below market expectations of $0.68. The company also forecasts annual sales growth of 4%-5% (previously expected to be 3.5%-4.5%), which falls short of the market expectation of 5.3%; anticipated annual adjusted EPS is between $2.80 and $2.87 (previously expected to be $2.75-$2.85), also below the market expectation of $2.90. As of press time, Walmart Inc. shares were down over 6% in pre-market trading on Thursday. Alibaba Group Holding Limited Sponsored ADR (BABA.US) reports a 75.56% year-on-year decrease in net profit attributable to shareholders in Q1, while revenue from AI-related products continues to see triple-digit year-on-year growth for twelve consecutive quarters. Alibaba Group Holding Limited Sponsored ADR announced its quarterly performance ending June 30, 2026, with revenue of 268.953 billion yuan ($39.639 billion), a year-on-year increase of 9%. Operating profit was 15.161 billion yuan ($2.334 billion), a 57% year-on-year decline. Net profit attributable to ordinary shareholders was 10.537 billion yuan ($1.553 billion), a year-on-year decrease of 75.56%. Revenue from AI cloud and computing services reached 48.437 billion yuan ($7.139 billion), with total revenue and revenue from external customers both accelerating to 45% year-on-year growth. This growth momentum was mainly driven by the increase in adoption of AI-related products. Revenue from AI-related products continues to maintain strong momentum, reaching 12.376 billion yuan ($1.824 billion), achieving triple-digit year-on-year growth for the twelfth consecutive quarter. SK Hynix (SKHY.US) preliminary huge bonus distribution plan finalized: 60% issued in stock, 40% in cash, with an average of 779 million Korean won per person expected. According to an insider, South Korean chip giant SK Hynix has reached an agreement in a preliminary salary deal to distribute 60% of this years employee bonuses in company stock, with the remaining 40% paid in cash. The sources further indicated that under the latest plan, employees will receive stock equivalent to 40% of the total bonus in 2027, with the remaining 20% deferred to be issued in 2028 and 2029, and there will be no lock-up period for this stock. The remaining 40% of the bonus portion will be paid in cash in a one-time payment in 2027. Additionally, SK Hynix announced on Wednesday that it will repurchase and cancel treasury stock worth 40 trillion Korean won (approximately $28.6 billion) and intends to use more than 50% of free cash flow generated between 2025 and 2027 to enhance shareholder returns. SpaceX (SPCX.US) lock-up period expiration is coming: 319 million shares available for trading, investors are concerned whether Musks employees will sell. The second round of stock lock-up expiration for SpaceX is approaching, with a maximum of 319 million shares held by insiders becoming tradable as of August 20 local time, accounting for approximately 7% of shares held by early investors and employees. This expiration means that more employees and investors who obtained SpaceX shares prior to its IPO can now sell their stocks, and the market will pay attention to whether this additional supply will exert pressure on stock prices. However, shares held by SpaceX CEO Elon Musk and some major investors are still under a longer lock-up period and will not be affected by this expiration. Morgan Stanley analyst Adam Jonas believes that the release pressure may not represent a risk, but rather an investment opportunity. IBM (IBM.US) reaches a critical milestone in quantum computing: Successfully connects and cools two low-temperature modules, aiming to launch the worlds first fault-tolerant quantum computer by 2029. IBM announced that it has successfully connected and cooled two low-temperature modules to the same operational environment and completed preliminary testing. The company stated that this modular architecture is designed to scale into a super-low-temperature shared system capable of connecting hundreds of quantum chips, marking a key step towards the anticipated launch of IBM Quantum Starling in 2029. IBM expects Quantum Starling to become the worlds first fault-tolerant quantum computer, integrating advancements in error correction, processor design, decoding, and system engineering. Compared to the most widely used IBM quantum systems, each module's vacuum shell provides up to 12 times more wiring space. IBM noted that this supports more chip-to-chip connections both within and between modules, providing the hardware foundation for larger-scale quantum computing. Important Economic Data and Event Forecasts Beijing Time 20:30: Initial jobless claims for the week ending August 15 in the U.S. Beijing Time 20:30: Philadelphia Fed manufacturing index for August in the U.S. Beijing Time 20:30: Speech by 2027 FOMC voting member and San Francisco Fed President Daly Beijing Time 23:10: Interview with 2028 FOMC voting member and St. Louis Fed President Bullard on CNBC Earnings Forecast Friday Morning: Ross Stores, Inc. (ROST.US) Friday Pre-Market: KE Holdings, Inc. 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