● AI Rally, Earnings Test, Yield Shock, Oil Crash, Yen Defense, SpaceX Spotlight
AI Rally Round Two Begins: Earnings Now Determine the Outcome — U.S. Equities, Yen Defense, Oil, and SpaceX Results
This week, the U.S. equity market is no longer focused only on whether AI stocks can rise again.
The central issue is whether AI investment is beginning to translate into revenue, operating profit, and cash flow.
In addition, the market is facing a joint U.S.-Japan foreign exchange intervention, the sharp decline in crude oil, Friday’s U.S. employment report, earnings from Palantir and AMD, and SpaceX’s first earnings release.
Although U.S. equities are rebounding on lower oil prices, the deeper drivers are interest-rate expectations, inflation, AI investment returns, yen defense, and stability in the U.S. Treasury market.
1. Early U.S. Market Action: Lower Oil Prices Lifted Indices
U.S. equities opened on a relatively firm note.
At the start of trading, the Dow Jones Industrial Average was up about 1%, while the S&P 500 and Nasdaq were also in positive territory.
The Russell 2000 advanced as well, indicating some buying interest beyond large-cap stocks.
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Dow Jones Industrial Average: up about 1%
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S&P 500: up about 0.6%
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Nasdaq: modest gain
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Russell 2000: up about 0.6%
The main driver of the early move was the sharp decline in crude oil.
WTI fell as much as 6% to 7% intraday, while Brent dropped more than 5%.
Lower oil prices can reduce gasoline, transportation, and production costs.
Markets initially interpreted the move as easing inflation pressure.
Semiconductor stocks were weaker overall.
Shares of Nvidia, Broadcom, Micron, AMD, and Intel were under pressure early in the session.
Reports that Yangtze Memory Technologies is considering a second chip plant in Beijing also raised concerns about future memory supply.
However, any such facility would likely take at least five years to become fully operational.
As a result, the issue is better viewed as a medium- to long-term supply-cycle concern rather than an immediate earnings shock for Samsung Electronics, SK hynix, or Micron.
2. Fifteen Years Later, a Joint U.S.-Japan FX Intervention: The Real Target May Be U.S. Treasuries
The most important global financial market development today is the joint U.S.-Japan foreign exchange intervention.
The two countries moved to defend the yen, which had weakened to its lowest level in 40 years, by selling dollars and buying yen.
USD/JPY rose to around 163 before the intervention, then declined to roughly 155.
President Trump said the U.S. and Japan are close friends and that Japan was helped for that reason.
Treasury Secretary Bessent also signaled that additional coordinated intervention could follow if needed.
The move matters because it is the first joint U.S.-Japan intervention in about 15 years, since the 2011 earthquake period.
In 2011, the two countries sold yen and bought dollars to weaken an excessively strong yen.
This time, the policy direction is reversed: dollars are being sold to support a weak yen.
3. The Market’s Deeper Focus: Preventing Japan From Selling U.S. Treasuries
Much of the public discussion focuses on the surface message that the U.S. helped Japan.
However, the more important issue is the U.S. Treasury market.
If Japan needs dollars to defend the yen, the simplest option is to sell its U.S. Treasury holdings.
Japan is among the largest foreign holders of U.S. Treasuries.
A large-scale sale of Treasuries by Japan could push long-term U.S. yields higher.
The 30-year U.S. Treasury yield already reached as high as 5.27% last week.
That was the highest level since before the 2007 financial crisis.
Higher long-term yields raise corporate borrowing costs, mortgage rates, and the federal government’s interest burden.
That creates broader pressure on the U.S. economy.
For that reason, the joint intervention should be seen not only as yen defense.
It also functions as a measure to stabilize the U.S. Treasury market.
4. Why the PIMA Repo Matters: A Channel to Raise Dollars Without Selling Bonds Into the Market
One term that matters in this context is the PIMA repo.
A PIMA repo allows a foreign central bank to post U.S. Treasuries with the Federal Reserve and borrow dollars, rather than selling those Treasuries directly in the market.
In simple terms, Japan can obtain dollars for yen defense without dumping Treasuries into the market.
That helps Japan defend the yen while reducing disruption to the U.S. bond market.
This is the hidden core of the U.S.-Japan coordination.
This development also matters for Korea.
If yen weakness eases, volatility in the won and other Asian currencies may also moderate.
If yen defense fails, upward pressure on the dollar could return across Asian FX markets.
5. Crude Oil Drops Sharply: Inflation Relief Supports Equities
The direct catalyst for today’s equity rebound is the sharp decline in crude oil.
President Trump suggested that negotiations with Iran may be possible, reducing concerns about disruption in the Strait of Hormuz.
Markets had been pricing in the risk that conflict in the Middle East could escalate and threaten supply through the Strait.
Now, expectations of renewed talks have raised the possibility that the supply shock may be smaller than feared.
OPEC+ production increases also added downward pressure on oil.
Reports indicate the group decided to raise output by about 619,000 barrels per day.
Supply expansion and easing geopolitical risk both contributed to the decline.
Lower oil prices can reduce inflation pressure.
That in turn may lessen the need for additional Federal Reserve tightening.
As a result, both rate expectations and U.S. equities reacted sensitively to the oil move.
However, no agreement has been reached yet.
Middle East markets can change direction quickly.
If negotiations break down or military tensions re-escalate, oil could rebound just as quickly.
In that case, today’s equity gains could also come under pressure again.
6. Earnings Season: This Week Is the Real Test for the AI Rally
This week’s earnings releases are not simply about confirming quarterly results.
They are a key turning point for the next phase of the AI rally.
Last week, Microsoft and Amazon showed that AI demand is translating into cloud revenue growth.
By contrast, Apple and Meta were hit because their AI investment recovery plans remained unclear.
The market is now shifting from asking how much companies invest in AI to asking how much they earn from it.
That is the central theme of this earnings season.
7. Pre-Market Earnings: Marriott and Mitsubishi UFJ Signal Different Parts of the Economy
Before the open today, Marriott and Mitsubishi UFJ reported earnings.
Marriott is a key barometer for global travel demand.
Earnings per share came in at $3.19, above expectations.
Revenue, however, was $7.07 billion, below consensus.
The company protected margins through cost control, but revenue growth was weaker than expected.
That suggests consumers are still traveling, but the pace of spending growth in hotels and leisure may be slowing.
Mitsubishi UFJ is Japan’s largest bank.
Earnings per share rose about 40% year over year to $0.45.
Revenue also increased about 11%, beating expectations.
The results show that Bank of Japan rate hikes are supporting bank net interest income.
At the same time, higher Japanese government bond yields can increase mark-to-market losses on bond portfolios.
For banks, rising rates are both a tailwind and a risk.
8. Key Earnings This Week: Palantir, AMD, Eli Lilly, AppLovin, Berkshire, and More
This is one of the most important earnings weeks of the U.S. reporting season.
It covers AI, semiconductors, cloud, healthcare, consumer demand, travel, and portfolio allocation.
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Monday after the close: Palantir
Palantir is a leading AI analytics platform provider for government and enterprise clients.
The key issue is whether enterprise AI platform demand is expanding in a way that supports durable revenue growth.
Management guidance will also be closely watched.
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Tuesday after the close: AMD
AMD is a major AI semiconductor competitor to Nvidia.
Investors will focus on AI GPU sales and the pace of data center growth.
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Wednesday before the open: Eli Lilly, Novo Nordisk
Both companies are central to the global obesity-treatment market.
Key questions include prescription growth for Wegovy and Mounjaro, and whether production can keep pace with demand.
Investors will also watch how each company frames its full-year outlook amid intensifying competition.
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Wednesday before the open: Disney, Uber
Disney is a key indicator of consumer spending on travel and leisure through theme parks and streaming.
Uber offers insight into mobility and delivery demand across everyday consumer activity.
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Wednesday after the close: AppLovin
AppLovin has drawn attention as an AI-driven advertising platform.
Investors will focus on whether advertising growth and AI ad technology are translating into earnings.
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Thursday: Cloudflare, Datadog, Airbnb
Cloudflare and Datadog provide signals on cloud infrastructure demand tied to AI adoption.
Airbnb offers a view of summer travel demand and lodging spending.
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Friday: Berkshire Hathaway
For Berkshire, operating profit matters, but investors are likely to focus more on cash holdings and portfolio changes.
A larger cash balance would suggest Warren Buffett views current equity valuations as unattractive.
New investment activity would indicate which sectors he sees positively.
9. Economic Data Calendar: Friday’s Employment Report Will Shape the Week
The key macro event this week is Friday’s employment report.
Federal Reserve policy expectations, Treasury yields, the dollar, and U.S. equities may all move on the release.
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Monday: ISM Manufacturing PMI
This is a leading indicator for the U.S. manufacturing sector.
Investors will watch new orders, production, employment, and input price pressures.
Strong manufacturing data with elevated price pressure could revive concern about additional Fed tightening.
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Tuesday: JOLTS Job Openings, Trade Balance
JOLTS shows how aggressively firms are still trying to hire.
Excessively high openings can sustain wage pressure.
The trade balance will help assess export and import trends as well as the effect of dollar strength.
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Wednesday: ADP Private Payrolls, ISM Services PMI
ADP payrolls are often treated as a preview of Friday’s nonfarm payroll report.
ISM Services is especially important because services account for the bulk of the U.S. economy.
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Thursday: Initial Jobless Claims
This is one of the fastest indicators of labor market changes.
Rising claims would point to more layoffs and a softer labor market.
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Friday: Nonfarm Payrolls
The report includes payroll growth, the unemployment rate, and average hourly earnings.
The market’s preferred outcome is stable employment growth with moderate wage deceleration.
If employment and wages remain too strong, the U.S. economy could still be interpreted as overheated.
That would bring back expectations of further Fed tightening and could lift Treasury yields and the dollar.
If employment slows too sharply, the rate burden would ease, but recession risk would rise.
The key question this week is whether the U.S. economy can sustain employment while reducing inflation pressure.
10. AI Rally Round Two: It Is Now a Matter of Proof, Not Expectation
Last week’s megacap earnings clearly showed that the market’s valuation framework for AI has changed.
Microsoft rose about 16% the day after its report.
Its market capitalization increased by about $450 billion in a single day, a record for a U.S. company.
Amazon also gained about 15% in one day as cloud growth confirmed AI demand.
The market viewed this as evidence that AI demand is feeding AWS revenue growth.
By contrast, Apple fell more than 7% after its September-quarter outlook missed expectations.
Meta dropped nearly 8% as investors worried that AI data center spending could reduce free cash flow.
The reason for the divergent reaction is clear.
Companies that are monetizing AI through revenue growth and profits are being rewarded, while those with unclear payback structures are being questioned.
Round one of the AI rally was driven by announcements of AI investment alone.
Round two requires evidence that AI investment is generating earnings.
11. Why Higher Long-Term Yields Are a Headwind for AI Technology Stocks
Another critical variable is long-term interest rates.
Last week, the Federal Reserve left rates unchanged, but the market interpreted the decision as hawkish.
The 30-year Treasury yield touched 5.27%, and the 10-year yield also reached its highest level in roughly 18 months.
When long-term yields rise, corporate borrowing costs increase.
The discount rate used to value future earnings also rises.
That makes valuations more difficult for AI and other growth stocks, where a large share of expected profits lies far in the future.
Two forces are therefore operating at the same time.
On one side, AI winners with visible monetization are supporting the indices.
On the other side, higher long-term yields are weighing on technology valuations.
The current U.S. market is less a broad recessionary decline than a selective re-rating of AI-related companies.
12. SpaceX’s First Earnings Release: The Message Matters More Than the Numbers
Another major event this week is SpaceX’s first quarterly earnings release.
The report is scheduled after the close on U.S. Eastern time.
SpaceX is still primarily in an expansion and investment phase rather than a mature cash-generation stage.
Accordingly, the report is unlikely to show exceptionally strong net income or free cash flow.
Investor attention will focus more on Elon Musk’s strategic comments than on the headline numbers.
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Progress on Starship development
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Availability of semiconductors needed for AI data center build-out
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The scale of capital spending plans for AI infrastructure
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Specifics on future monetization
The most sensitive issue for investors is capital expenditure, or CAPEX.
Market estimates suggest SpaceX’s quarterly CAPEX may reach about $13.2 billion, or roughly $46 billion annually.
Some projections place next year’s spending as high as $187 billion.
At that scale, free cash flow is likely to remain negative for some time.
However, investors may not view this as a simple negative.
In the AI infrastructure race, the ability to secure facilities and data centers quickly may determine long-term competitiveness.
13. A Short-Term Volatility Factor for SpaceX: Lockup Expiration
Another item to monitor after the SpaceX report is the lockup expiration.
Two days after the release, about 910 million shares that were subject to IPO lockup restrictions may begin to enter the market in stages.
If substantial supply is released, share-price volatility could increase.
As a result, the report, Musk’s comments, investment plans, and the lockup overhang may all affect the stock at the same time.
SpaceX has a strong long-term growth narrative.
In the near term, however, the stock may face a conflict between the growth story and the risk of large share supply.
14. The Most Important Point Hidden in the Broader News Flow
The key takeaway from this market is that AI, oil, and the yen are not moving independently.
They are all linked through a single axis: U.S. long-term interest rates.
First, lower oil prices reduce inflation pressure and ease upward pressure on long-term yields.
That is supportive for U.S. equities.
Second, if Japan sells U.S. Treasuries to defend the yen, long-term yields could rise further.
That is why the U.S. and Japan intervened together in the currency market, in part to reduce pressure on Treasuries.
Third, AI companies continue to require large amounts of capital for infrastructure investment.
Higher long-term yields increase both the cost of that investment and valuation pressure.
In other words, the real issue is not AI growth alone.
The key question is whether rates and liquidity are supportive enough to sustain that growth.
From that perspective, this week’s Palantir, AMD, and SpaceX results are not isolated events.
They are tests of whether the AI industry can prove itself in a high-rate environment.
15. Investor Checklist for the Week
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Determine whether Palantir is converting AI platform demand into revenue growth.
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Assess how effectively AMD is narrowing the gap with Nvidia in AI chips.
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Focus on companies such as Microsoft and Amazon, where AI monetization is already visible in cloud revenue.
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Remain cautious on Apple and Meta, where the AI return profile is still unclear.
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Watch whether wage growth in Friday’s employment report continues to ease.
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Monitor whether crude oil stabilizes or resumes its decline.
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Track whether USD/JPY remains near 155 or moves back into the 160s.
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Watch for renewed increases in the 10-year and 30-year Treasury yields, which could set the direction for technology stocks.
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Check whether SpaceX’s post-report lockup expiration creates actual selling pressure.
< Summary >
This week marks the start of Round Two for the AI rally.
The market is now demanding evidence of revenue, earnings, and cash flow rather than investment scale alone.
Microsoft and Amazon strengthened on AI monetization, while Apple and Meta weakened on concerns about payback.
The joint U.S.-Japan currency intervention should be viewed not only as yen defense but also as support for the U.S. Treasury market.
The sharp drop in oil prices eased inflation pressure and supported U.S. equities.
Palantir, AMD, and SpaceX earnings, together with Friday’s employment report, are likely to shape the next move in U.S. markets.
The key issue is whether AI companies can prove their case in an environment of elevated long-term rates.
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*Source: [ Maeil Business Newspaper ]
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