Whatever you do this morning, don’t look at the KOSPI Index.
South Korea’s blue-chip index, the world’s hottest stock market over the past year, is rattling Wall Street nerves again with a sharp overnight tech selloff. It suggests mounting concerns for the market’s biggest driver heading into a crucial stretch of the second-quarter earnings season.
The KOSPI fell the most since early spring, dragging the benchmark to its worst monthly performance since the Asian financial crisis of 1997, on reports of a China-based firm ramping production of a high-end chipmaking machine.
Japan’s Nikkei 225 also slumped—taking it deeper into correction territory and now marked 13.8% south of its late June levels—on concerns tied to valuations, debt, and circular financing in the global tech sector.
It doesn’t bode well for U.S. stocks on Tuesday.
A deeper pullback in global crude prices and reports of more detailed talks between the U.S. and Iran haven’t even been able to offset the broader tech concerns, which have weighed on markets for several weeks.
Nvidia shares are in focus following a big leap in debt protection costs tied to the chip maker’s financing of around $1 billion in chip and AI computing deals.
The setup for markets is worrying ahead of Wednesday’s massive slate of tech earnings, as well as a Federal Reserve rate decision, as stocks struggle to escape their monthslong stall.
Traders continue to expect the Fed to hold rates steady at between 3.5% and 3.75%, but a sizable 33% bet on a summer rate hike remains and the odds of a move higher in September are pegged at nearly 80%.
The next few days will be crucial—and that’s an understatement.
—Martin Baccardax
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Chinese Memory Chip Maker’s IPO Adds to Crowded Market
Sometimes three’s a crowd. But when it comes to the memory boom, there’s room, and plenty of demand, for more chip makers—including China’s ChangXin Memory Technologies, which debuted as a publicly traded stock on Monday, bringing one of Micron Technology’s competitors public.
The IPO surged 466% in Shanghai on Monday, giving it a market value of $484 billion. It’s already the most valuable company listed in mainland China. Only Tencent, at $513 billion, sits above it on the Hong Kong market. The debut underlines the strength of the memory-chip boom.Shares of the three memory-chip giants, Micron, Samsung, and SK Hynix, have enjoyed bumper gains over the past year. Micron’s stock price is up more than 700% over the past 12 months through Friday’s close, SK Hynix is up 580%, and Samsung has risen 285%.CXMT’s IPO comes as Apple has been pushing to use the chip maker’s products in devices sold in China. Apple has been lobbying the Trump administration to ensure that CXMT doesn’t end up on a trade blacklist, The Wall Street Journal reported. Apple didn’t respond to a request for comment.News that a Chinese company is producing immersion deep ultraviolet lithography machines, a type of machinery used in making chips, weighed on chip stocks. Morgan Stanley analysts Laura Wang and Vicky Wu say China is “well on track” to become a primary innovation center for artificial intelligence by 2030.
What’s Next: There’s another new Chinese memory stock coming, too. Yangtze Memory Technologies, or YMTC, is expected to make its IPO this year. It remains to be seen what impact the existence of five publicly listed memory chip makers, up from three, will have on Micron, Samsung, and SK Hynix.
—Callum Keown
Ford Motors Wants to Build an Army Truck as It Branches Out
Neither Ford Motor nor General Motors want to be just car companies—for good reason. Both have been trying to morph beyond the industry, as in their reported race to build a new tactical truck for the Army. Both are also getting into energy storage for utility-scale power solutions.
The news about the competition to build an Army truck was reported by The Wall Street Journal. GM is also branching out into defense, bidding on the truck and recently signing a deal with Lockheed Martin to leverage GM’s high-volume manufacturing expertise in the lower-volume defense sector.GM Defense was a compelling growth opportunity for the company, said CEO Mary Barra on GM’s July second-quarter earnings conference call, pointing to the Chevrolet Colorado-based Infantry Squad Vehicle. Assuming Congress appropriates the funds, the Army wants more than 10,000 ISVs, Barra said.That’s the use case Ford is bidding on, too, as the government looks for lower-cost commercial suppliers. Auto makers have struggled with growth, but the power business alone is seen boosting Ford’s operating profit by roughly $500 million by the end of the decade, analysts say.General Dynamics’ Combat Systems business, which makes the Abrams tank, generates $10 billion in annual revenue and more than $1 billion in operating profit. GM and Ford combined generate more than $360 billion in annual sales, and are expected to generate $24 billion in combined operating profit.
What’s Next: The potential for Ford and GM defense operating profit is likely measured in the hundreds of millions of dollars, if both auto makers are successful in selling more into the defense arena. Ford reports second-quarter earnings later today.
—Al Root
Another Shipping Crisis on This Waterway Threatens Global Prices
Traffic through two of the world’s most critical shipping lanes has been snarled by the Iran war, and now a third passageway is reducing capacity because of weather, with the potential to get worse. That could drive up prices for everything from oil and liquefied natural gas to home goods.
The Panama Canal authority has warned that the chances of an El Niño system, which can cause severe drought and other extreme weather, had risen to 81% from 25%. Capacity in the canal linking the Caribbean Sea to the Pacific Ocean is 34 vessels a day, from 36 previously.But more severe restrictions could be coming, given the history of how an El Niño affects the Panama Canal. The last time one hit in 2023 and 2024, transports were sometimes cut in half to 18 a day—and this one could be more extreme.The canal is sensitive to droughts because it is fed by freshwater lakes whose levels vary depending on rainfall. Navigating the canal during severe droughts with lower water levels becomes much trickier, and the authority limits how many ships can pass.About 12% of U.S. goods traverse the Panama Canal by volume, according to the United Nations. When transit routes are squeezed, consumers often have to pay the higher costs, or wait much longer for products.
What’s Next: Ships that can’t take European goods from the Red Sea’s Bab al-Mandab Strait to Asia must go around Africa, adding weeks of time and millions more in fuel costs. Ships from Asia that can’t use the Panama Canal must unload on the West Coast and pay for truck transport, or find another route.
—Avi Salzman and Janet H. Cho
What Strategy Did Instead of Touching Its Bitcoin Stash
Strategy, the world’s largest corporate holder of Bitcoin, kept its crypto stash of $55 billion Bitcoin horde untouched for the third straight week. Its latest actions signal that it is doubling down on its new financial plan and that common equity remains a key funding source.
The software company-turned-crypto whale disclosed on Monday that it didn’t buy or sell any Bitcoin between July 20 and 26. It currently holds 843,775 Bitcoin purchased at an average of $75,476 each.Strategy instead opted to sell roughly five million shares of common stock, for $544.5 million. Strategy last month said it would opportunistically buy and sell its own shares rather than issuing them continuously. Shares jumped 7.6% on Monday, snapping a three-day losing streak.Its “Stretch” preferred stock, which trades under the ticker STRC, had been its go-to method for funding Bitcoin acquisitions, but that engine stalled amid Bitcoin’s price decline and concerns over Strategy’s ability to cover its dividends. It repurchased 288,930 shares of STRC preferred last week.Strategy’s U.S. dollar reserve balance to meet dividend and interest commitments stood at $3.75 billion on Sunday. Chairman Michael Saylor reiterated that share buybacks would be funded outside the reserve, and said the objective is for STRC to trade near $100. It won’t issue below that.
What’s Next: Strategy’s board has authorized up to $1.25 billion in Bitcoin sales to bolster the fund. Under the updated framework, Strategy has $975 million available to continue buying back preferred shares from the market and an additional $1 billion for common stock.
—Mackenzie Tatananni and Janet H. Cho
—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner