Pre-market market movements
1. On Tuesday, September 29, ahead of the US stock market open, futures for the three major US stock indices were all trading higher. As of press time, Dow futures were up 0.29%, S&P 500 futures were up 0.26%, and Nasdaq futures were up 0.45%.
2. As of press time, Germany's DAX Index was up 0.74%, the UK's FTSE 100 was up 0.24%, France's CAC 40 was up 0.24%, and the Euro Stoxx 50 was up 0.95%.
3. As of press time, WTI crude oil was down 1.98% at $90.77 per barrel. Brent crude was down 1.77% at $96.10 per barrel.
Market News
OpenAI will not release GPT-6.1 Astra before developer conference due to safety standards not being met. OpenAI has decided not to release its upcoming AI model GPT-6.1 Astra after determining that the model did not sufficiently meet the company's safety standards. CNBC confirmed the news on Monday. This comes just one day before OpenAI's annual developer conference, as concerns over the safety of advanced models continue to mount across the AI industry. Leadership at Anthropic, OpenAI's main competitor, urged AI companies earlier this month in an article to slow the pace of model development, a position that OpenAI CEO Sam Altman has supported. Saachi Jain, head of OpenAI's safety systems, said in a statement: "We of course want to make sure model development is safe, both internally and when delivering to users. But when delivering to users, we set extremely high bars for safety and alignment."
US House Speaker: White House AI summit will focus on finding a balance between innovation and regulation. US House Speaker Mike Johnson said that President Trump's meeting with technology company executives on Tuesday regarding artificial intelligence will focus on how to strike a balance between innovation and regulation, as the federal government seeks to clarify its role in this emerging technology sector. According to people familiar with the matter, Meta CEO Mark Zuckerberg, Anthropic CEO Dario Amodei, OpenAI co-founder Greg Brockman, and Nvidia CEO Jensen Huang are among those expected to attend Tuesday's meeting with Trump and Johnson. Other possible attendees include Google CEO Sundar Pichai and SpaceX and xAI head Elon Musk. The White House meeting comes as several leading AI companies are calling for a slowdown in the development of increasingly powerful AI systems, warning of the risks they may pose to humanity and urging governments to work together to manage this growing technology.
US Treasury yields hit 20-year highs, traders flood into fixed-income ETF options at record pace. With 10-year and 30-year US Treasury yields rising to their highest levels in twenty years, traders are pouring into options tied to fixed-income ETFs at a record pace, eager to reposition their portfolios. Options trading volume in BlackRock's iShares 20+ Year Treasury Bond ETF (TLT) has surged, with the 20-day average options volume hitting the highest level in the ETF's history. Open interest, or existing positions held by investors, has more than doubled over the past year and is approaching the record 13.55 million contracts set before last week's monthly expiration.
Goldman Sachs warns: risk premiums have risen to a five-month high, and investors are starting to "choke." Amanda Lynam, head of credit strategy at Goldman Sachs Group, said that a surge in corporate bond supply in the US high-yield bond market is beginning to overwhelm bond investors and is pushing risk premiums to their highest level in five months. Amanda Lynam said in an interview on Monday: "The market is bracing for the kind of episodic indigestion seen in the investment-grade bond market earlier this summer. The same thing is now happening in the high-yield bond market."
A major reversal amid the US Treasury selloff! Bond market veteran Bianco turns bullish for the first time in six years, calling 5% yields a "value buy." On Wall Street, few people choose to turn bullish on bonds at the darkest moment for the bond market. But Jim Bianco did. The macro strategist, who has more than four decades of industry experience and previously worked at First Boston and UBS, now heads Chicago-based Bianco Research. Since 10-year US Treasury yields hit a record low of 0.3% during the deepest part of the pandemic in 2020, he has been one of the bond market's most steadfast bears. Yet now, with benchmark yields surging to near 20-year highs, he has loosened his bearish stance for the first time and is gradually building long positions with a "value buy" approach.
Fed Governor Cook: AI productivity dividends will struggle to contain inflation, and the Fed may need to tighten further. In prepared remarks for an event in Oakland, California, on Monday, Cook said that future productivity gains from artificial intelligence may not be enough to offset recent price pressures, and warned that the trend could push up inflation across the broader economy. She expects productivity gains to deliver a modest disinflationary effect in the coming years, but said those effects will not arrive in time to offset broadening inflationary pressures later this year. Cook said the Fed's decision to raise rates earlier this month was necessary to address high inflation, and that future policy actions will be guided by economic data.
JPMorgan: The valuation reset for the Magnificent Seven may be largely complete. After the Nasdaq 100 hit a record high last week, Wall Street financial giant JPMorgan began following Goldman Sachs, Jefferies, Yardeni Research, and other giants in turning bullish on US tech stocks, which also helped push institutional and retail investors to increasingly focus on buying the dip during Monday's pullback in the US stock market. JPMorgan believes that the overall valuation adjustment for the seven largest US tech giants that carry heavy weight in the US stock market (the Magnificent Seven, or Mag 7) may be largely complete, and earnings growth is expected to once again become the main force supporting share prices. JPMorgan said the ratio of the Magnificent Seven's forward 12-month price-to-earnings multiple relative to the broader market has fallen to about one standard deviation below the historical median, putting it at a 10-year low.
Worse than 2008? Beyond the AI bubble, a new fund backed by "The Big Short" investor Burry targets private credit risk. While Wall Street is busy searching for signs of a bubble in AI stocks, a new hedge fund associated with "The Big Short" investor Michael Burry is looking at what may be a more dangerous direction: private credit. Minerva Investment Management, a short-biased fund managed by Raks Ganapati, has hired Burry as a senior adviser. The fund is looking for short targets in industries including healthcare, retail, restaurants, and small banks. Ganapati said many companies in these industries have financing tied to private credit and may be quietly "rotting." Short-biased funds are usually set up as hedge funds and mainly profit when stock prices fall. Ganapati declined to disclose specific short targets or the size of the fund. She said the fund will launch later this month. "AI does not represent the whole market, even though it looks like it does," Ganapati said. "For us, credit is the leading indicator and signal for judging where the market is heading."
Consulting giant Bain sounds the alarm: the global AI industry needs $6 trillion in annual revenue to support the data center "cash-burning wave." Global consulting giant Bain said that by 2031, the global artificial intelligence industry will need to generate $6 trillion in annual revenue to justify the massive capital investment currently being made worldwide to build data centers. In its annual global technology report on Tuesday, Bain said existing consumer and enterprise AI services may contribute at most $1.8 trillion of that amount, meaning $4.2 trillion in new revenue still needs to be created. Bain said this revenue gap could come from areas still in their infancy, such as autonomous machines and robots, as well as emerging fields including drug discovery, mental health, and energy production.
Japan's finance minister reiterates concern: a undervalued yen is a "big problem," and Japan will work closely with the US to maintain order in the foreign exchange market. Japanese Finance Minister Satsuki Katayama said that yen weakness remains an ongoing concern and that Japan and the United States will continue to maintain close contact in seeking to keep the foreign exchange market operating in an orderly manner. Katayama said on Tuesday: "As Sanae Takaichi said during the recent Japan-US summit in New York, I think that, generally speaking, an undervalued yen is a problem. We will continue to maintain close communication between Japanese and US financial authorities and work to maintain the orderly operation of the foreign exchange market." Katayama made the remarks after a phone call with US Treasury Secretary Bessent late Friday.
Individual Stock News
AMD (AMD.US), now valued above $1 trillion, begins competing for the "right to define computing power"! It officially announces an $8.2 billion acquisition of World Labs, founded by Fei-Fei Li. AMD unexpectedly announced on Monday US Eastern Time that it will acquire World Labs, an AI startup founded by "AI godmother" Fei-Fei Li, for $8.2 billion. It is reported that AMD, led by Lisa Su, plans to acquire World Labs, founded by Fei-Fei Li, in an all-stock transaction valued at $8.2 billion, bringing one of the most core AI research forces in world models and spatial intelligence into the chip giant's overall business portfolio. The large-scale acquisition is expected to be completed by the end of 2026 and still requires approval from major regulators. According to a joint statement, after the relevant closing procedures are completed, Fei-Fei Li will serve as AMD executive vice president and chief scientist, reporting directly to AMD CEO Lisa Su.
SpaceX (SPCX.US) Starship reaches orbit for the first time and completes a revenue-generating mission, but an engine failure ends the mission early. SpaceX's (SPCX.US) next-generation heavy-lift launch vehicle, Starship, entered orbit for the first time on Monday and deployed new Starlink satellites. Although an engine failure caused the mission to end early, its 14th test flight still achieved a milestone. The uncrewed flight had been planned to last 10 hours, but after Starship separated from the lower Super Heavy booster, one of the three main engines shut down early, shortening the mission to 3 hours. Monday's engine failure was the latest setback for Starship since test flights began in 2023. It is not yet clear how much this will affect the goal of Elon Musk's newly listed company to put Starship into regular service later this year. Unlike previous Starship flights, Monday's mission was both a high-risk test of the next-generation rocket and an operational mission to place millions of dollars' worth of Starlink satellites into orbit, marking Starship's first revenue-generating mission even as its final design is still under development.
AstraZeneca (AZN.US) invests $2 billion and partners to develop a drug! Summit (SMMT.US) surges in response. After AstraZeneca announced an investment in US biotech company Summit Therapeutics and a collaboration on a new cancer drug, AstraZeneca rose about 2% in pre-market trading on Tuesday, while SMMT extended gains and rose about 23%. Analysts at JPMorgan and Citi welcomed the deal, saying it aligns with AstraZeneca's cancer strategy.
Jefferies (JEF.US) Q3 equities trading jumps 29%, but asset management stumble drags on results. Jefferies' latest quarterly results were sharply divided: equities trading and investment banking delivered record results, but bad bets in the asset management division continued to weigh on performance and keep the market cautious about its platform restructuring prospects. In the third fiscal quarter ended August 31, net revenue in Jefferies' asset management business fell to $85.6 million, down more than 50% from nearly $177 million a year earlier. Fee and investment return revenue plunged to $34 million from $84 million. The problem mainly stemmed from exposure of the Point Bonita fund under Leucadia Asset Management to First Brands Group and Radiant World. First Brands is a bankrupt auto parts supplier, while Radiant World faces fraud allegations. According to previous reports, Jefferies' exposure to Radiant World was less than $300 million.
US relaxes fuel standards, sharply lowering automakers' technology costs: General Motors (GM.US) could save $20.4 billion, and vehicle prices may fall by nearly $1,300. According to NHTSA, because fuel economy standards finalized this week were significantly cut, General Motors' technology costs are expected to fall by $20.4 billion by 2031. Similarly, Stellantis' (STLA.US) technology costs will fall by $6.2 billion, Ford's (F.US) by $5.1 billion, Hyundai Motor's (HYMLF.US) by $5.3 billion, Toyota's (TM.US) by $4.5 billion, and Honda's (HMC.US) by $4.1 billion. Overall, NHTSA estimates that automakers' technology costs will decline by $60.6 billion by 2031. The agency predicted: "If the cost savings are passed on to consumers, NHTSA estimates that the average cost per new vehicle in model year 2031 will be reduced by $1,289."
Samsung steps up AI infrastructure push! It spends $1 billion to invest in KKR's (KKR.US) Helix Digital. Several companies under Samsung Group, including Samsung Electronics, agreed to invest a combined $1 billion in US company Helix Digital Infrastructure, backed by private equity giant KKR, further expanding the South Korean conglomerate's presence in the rapidly expanding AI infrastructure market. According to a statement released by Samsung on Tuesday, Samsung Electronics, Samsung C&T, Samsung SDS, Samsung SDI, Samsung Life Insurance, and Samsung Fire & Marine Insurance will participate in the investment. The investment will give South Korea's largest industrial group a stake in a company whose business spans multiple sectors where Samsung already has significant operations, including semiconductors, construction, data centers, cloud computing, and finance. Helix was jointly founded in June by KKR, the Kuwait Investment Authority, Nvidia (NVDA.US), and US power producer Vistra (VST.US), and has already secured more than $10 billion in long-term capital commitments.
Tesla (TSLA.US) Roadster unveiling rescheduled to October 15 as severe weather halts the event. Tesla has rescheduled the unveiling event for its next-generation Roadster sports car, originally set for this week, to October 15. The company said in an update on social media platform X: "We have been closely tracking weather conditions with local meteorologists, but given the severe weather forecast and the fact that the event can only be held outdoors, we made the difficult decision to reschedule." The event is still expected to take place at SpaceX's test site in McGregor, Texas. The electric vehicle maker has not yet announced the final price, production timeline, or customer delivery date for the highly anticipated Roadster.
Key economic data and event preview
Beijing time 22:00: US August JOLTs job openings (in tens of thousands), US September Conference Board Consumer Confidence Index. Beijing time 23:00: Fed Governor Bowman speaks. Time TBD that day: US President Trump, House Speaker Johnson, and multiple tech company CEOs hold a meeting on artificial intelligence. Beijing time next day 0:00: OpenAI CEO Altman interviewed by CNBC. Beijing time next day 0:40: Fed Governor Barr speaks. Beijing time next day 1:00: 2027 FOMC voter and Chicago Fed President Goolsbee speaks; OpenAI CEO Altman delivers keynote at OpenAI Developer Conference. Beijing time next day 1:30: 2028 FOMC voter and St. Louis Fed President Musalem speaks at LSE. Beijing time next day 2:00: Permanent FOMC voter and New York Fed President Williams delivers keynote at University at Buffalo. Beijing time next day 3:00: Fed Governor Waller speaks. Beijing time next day 4:30: US API crude oil inventory change for the week ended September 25 (in ten thousand barrels), US API gasoline inventory change for the week ended September 25 (in ten thousand barrels).
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