WTI plunges 7% and 10-year yields slide to 4.9% on U.S.-Iran diplomatic expectations
AI financing concerns linger; domestic market focuses on semiconductor earnings and pension fund flows
Major Market Trends
① U.S.-Iran negotiations expected: Oil prices plunge 7%
U.S. equities finished mixed as easing Middle East tensions drove down oil prices and bond yields, offsetting weakness in artificial intelligence-related shares.
U.S. Secretary of State Marco Rubio indicated a preference for diplomacy over war, followed by remarks from President Trump stating that Iran desires a deal and that negotiations are feasible. In Iran, President Masoud Pezeshkian confirmed he has received authorization from the Supreme Leader to pursue dialogue, signaling a commitment to a diplomatic resolution. Consequently, West Texas Intermediate (WTI) crude plummeted more than 7% to settle in the $96-per-barrel range, while the yield on the 10-year U.S. Treasury note retreated to around 4.9%.
Despite the recent sharp correction in technology shares, the broader market has not collapsed. Since October 6, the aggregate market capitalization of AI-related stocks has shrunk by approximately $5 trillion, while the remaining 625 companies in the benchmark have seen their combined market capitalization expand by $1.3 trillion. Even during last week's index decline, nine out of eleven market sectors managed to finish higher.
② Oracle, Alphabet, and Meta: AI funding concerns persist
Cautious sentiment toward AI-related equities persisted as investors scrutinized how companies plan to finance massive capital expenditures and translate them into sustainable revenues.
Oracle unveiled plans for a $20 billion capital raise via equity and corporate bond issuance, while Alphabet issued €6 billion in bonds. Bloomberg reported that Meta is also moving forward with plans for a $20 billion debt offering.
Anthropic’s recent financial disclosures further fueled market anxiety. Although third-quarter revenue surged to $16.9 billion, the company posted an operating loss alongside massive new AI-related purchase commitments. Investors are increasingly questioning whether cash generation can keep pace with aggressive investment timelines.
Adding to the headwinds, S&P lowered its credit rating outlook for Meta from 'stable' to 'negative'. Market scrutiny remains sharply focused on capital expenditure and cash flow dynamics rather than the fundamental growth trajectory of AI enterprises alone.
Conversely, dissenting voices point out that robust growth in core cloud computing units—such as AWS and Google Cloud—suggests the recent pullback is a healthy normalization of lofty expectations rather than a fundamental impairment. Deutsche Bank recently upgraded its weighting on the technology sector back to overweight.
③ Only AI retreats: Market breadth shows divergence
A defining characteristic of the recent market adjustment has been the heavy concentration of selling pressure within AI-themed equities.
While AI-related market capitalization contracted sharply, capital rotated into alternative sectors. Seven sectors advanced—led by consumer discretionary, materials, and financials—while only four sectors, including energy, technology, and communication services, finished lower.
The October ISM Manufacturing Index came in at 55.5, outperforming the consensus forecast of 54.5. Against a backdrop of resilient macroeconomic indicators, the simultaneous decline in international crude prices and bond yields provides a highly supportive overarching environment for equities.
Market Strategist's Perspective
In the previous session, the domestic market recouped its intraday losses, cushioned by steady institutional and pension fund buying despite negative spillover from Wall Street. As AI-related headwinds recur with frequency, the marginal impact of such news headlines is gradually diminishing.
Domestic semiconductor heavyweights warrant a perspective distinct from U.S. tech stocks. Intel's subdued earnings guidance was heavily influenced by factory fires and supply bottlenecks, while its downwardly revised PC outlook is directly tied to ongoing memory supply shortages—factors that paradoxically underscore the underlying pricing power and strength of the memory cycle.
October semiconductor exports surged 260% year-on-year, signaling a clear earnings recovery trajectory heading into the fourth quarter. Furthermore, aggressive net buying by pension funds in Samsung Electronics and SK hynix since late last week has established a firm technical floor for large-cap shares.
Valuations have also contracted significantly. Based on current-year earnings projections, the price-to-earnings (P/E) ratio stands at approximately 4.9x for Samsung Electronics and 4.0x for SK hynix, dropping further to 3.1x and 2.7x, respectively, using next year's estimates. Even when applying highly conservative earnings models, recent corrections have largely neutralized valuation burdens.
While calling a definitive short-term bottom remains premature—especially given potential early-session pressures stemming from weak U.S. semiconductor stocks—the critical variables will be whether pension fund accumulation persists and how foreign capital flows evolve. In an environment bolstered by retreating oil prices and bond yields, investors should selectively distinguish between fundamentally sound names experiencing excessive pullbacks and structural laggards.
Key Watchlist
Semiconductors: Early trading reactions in Samsung Electronics and SK hynix following overnight weakness in U.S. chip stocks
Pension Funds: Continuation of recent net buying trends in Samsung Electronics and SK hynix
Foreign Investors: Potential shifts in semiconductor supply-demand dynamics following early selling
Oil & Yields: Macroeconomic impact of WTI retreating to the $96 range and the U.S. 10-year yield easing to 4.9%
AI Financials: Whether heavy corporate bond issuance and cash flow concerns translate into extended liquidation
Key Indicators
Dollar Index: 101.77 (-0.1%)
Dubai/Brent Crude: $96.46 (-7.26%)
Volatility Index (VIX): 21.15 (+8.91%)
U.S. 10-Year Treasury Yield: 4.90%
MSCI Korea Index: -0.71%
Night Futures: -3.84%
Source: Market Strategist's Stock Story (t.me/shmstory)
YouTube: Market Strategist TV (www.youtube.com/@blueoak1004)
This report has been restructured from a Telegram post by 'Market Strategist's Stock Story' with the author's consent. All content is subject to potential errors and does not constitute a recommendation to buy or sell securities, nor should it be used as a legal basis for investment decisions under any circumstances.
