Narrowing Breadth in US Stocks, Slowing ETF Inflows; Direction of Risk Assets Still Depends on Interest Rates

On September 29, Chloe, a columnist for HTX DeepThink and a researcher at HTX Research, analyzed that the core focus for the next seven days is whether the market can digest higher funding costs. The Federal Reserve raised interest rates by 25 basis points to 3.75% - 4% on September 16, and this week's data will directly impact the magnitude and duration of future rate hikes. The baseline judgment is that risk assets are experiencing weak fluctuations and continued internal differentiation; a sustained rebound will require the bond market to first relieve pressure.

The vulnerability of US stocks lies in the concentration of gains. As of September 25, the S&P 500 was less than 1% away from its all-time high, while the equal-weight index had already fallen by about 4% this month, indicating that most stocks are bearing the pressure of interest rates, with the index primarily relying on a few tech heavyweights for support. If yields continue to rise, earnings expectations will need to improve further to offset valuation compression; even if the index rebounds, if the equal-weight index does not recover simultaneously, it will be difficult to confirm a comprehensive rebound in risk appetite.

Key tests include the PCE on September 30, non-farm payrolls on October 2, and the manufacturing and services PMI released on October 1 and 5. The most favorable combination would be cooling core inflation, moderate job growth, and easing wage pressures; a sharp drop in employment could trigger concerns about earnings. It is particularly worth observing whether long-term yields can decline following softer data. If short-term yields fall while long-term yields remain high, it indicates that improved policy expectations are still insufficient to alleviate long-term financing pressures, and the rebound potential for tech stocks will remain limited.

The crypto market has support from spot funds, but the inflow is slowing down. From September 21 to 25, the cumulative net inflow of US spot BTC ETFs was approximately $2.386 billion, but the daily inflow decreased from $999 million to $135 million, and the changes over five trading days are not enough to confirm a trend reversal. If ETF inflows continue and the dollar and yields stabilize, BTC is expected to be more resilient than small-cap tokens; however, if inflows turn negative while contract positions continue to expand, declines will be more easily magnified by liquidations. In the next seven days, the US stock market will look at breadth of gains, while the crypto market will focus on spot support, with the overall direction still depending on interest rate trends.

Note: The content of this article does not constitute investment advice and does not represent any offer, solicitation, or recommendation for investment products.