1. Market Overview: S&P 500 Falls for Second Day, Steepening Yield Curve Dominates Sentiment
In overnight trading on August 3, 2026, all three major US indices closed in the red, ending a brief rebound. The Dow Jones Industrial Average fell 0.8%, the S&P 500 dropped 1.2%, and the tech-heavy Nasdaq Composite was the hardest hit, tumbling 1.8%. The trigger for this decline was not corporate earnings or a single economic data point, but violent swings in the US Treasury market. The 10-year Treasury yield briefly breached the 4.5% mark intraday, hitting a near six-month high. More alarmingly for the market, the spread between long- and short-dated Treasury yields widened significantly, a phenomenon known as a "steepening yield curve."
Typically, a steepening yield curve occurs when the market anticipates accelerating future economic growth or rising inflation expectations. However, against the current backdrop of an uncertain Fed rate-cut path, the rapid climb in long-end yields more reflects concerns about a widening US fiscal deficit and increased Treasury supply. This directly led to capital fleeing high-valuation growth stocks, especially tech giants reliant on discounting future cash flows, and rotating into safer havens.
Two: Sector and Capital Flows: Nasdaq's Seven Tech Giants Bleed Capital, Defensive Assets Favored
Overnight capital flows exhibited an extreme "seesaw effect." According to data tracked by JPMorgan, the technology sector recorded its largest single-day net outflow in nearly two months, while the financial, energy, and utility sectors saw massive inflows.
Specifically, the Nasdaq's seven tech giants were routed across the board. Apple fell 2.1% after analysts lowered expectations for its upcoming quarterly earnings report; persistent concerns over slowing cloud business growth at Microsoft and Amazon sent them down 1.9% and 2.5%, respectively. Nvidia, the core of AI computing power, despite still-strong fundamentals, did not escape the violent sector rotation, plunging 3.2%, demonstrating the determination of capital to take profits on extremely high-valuation stocks amid rising market uncertainty. Google and Meta fell 1.7% and 2.8%, respectively, on a dimming outlook for their advertising businesses.
In stark contrast were the financial and energy sectors. JPMorgan Chase and Goldman Sachs rose against the trend, as rising yields directly improved profit expectations for bank lending. Meanwhile, with geopolitical risks persisting, energy giants like ExxonMobil and Chevron also became destinations for capital seeking safety. This marks a temporary shift in market logic from "AI mania" back to traditional pricing models based on macroeconomic cycles and interest rate sensitivity.
Three: China-Concept Stock Overnight Performance: Divergence Amid Broad Market Decline, NEV Deliveries Act as Anchor
Against the backdrop of overall pressure on US stocks, China-concept stocks showed divergence overnight but demonstrated relative resilience by resisting the decline. The Nasdaq Golden Dragon China Index slipped only 0.3%.
E-commerce and live-streaming platform stocks were dragged down by broad market sentiment, with Alibaba and Pinduoduo both posting slight declines. However, the China-concept NEV sector became the brightest star in overnight trading. NIO's stock price surged 5.1% against the trend, XPeng rose 4.2%, and Li Auto also gained 2.8%. This bullish momentum primarily stemmed from the July delivery data these automakers released before the market open. The data showed that despite fierce competition in China's domestic auto market, deliveries for leading new power brands all hit record highs for the same period, significantly exceeding market expectations. This not only eased investor concerns about inventory buildup but also strengthened confidence in the success of the "volume-for-price" strategy. This counter-trend strength among China-concept automakers injected a shot of confidence into the next day's Asia-Pacific market open, particularly expected to boost the early trading performance of Hong Kong's auto sector.
Four: Asia-Pacific Market Open Sentiment and Risk Outlook
Looking ahead to today's Asia-Pacific market open, the overnight tech sell-off in US stocks will exert direct pressure on markets with a high weighting of semiconductor stocks, such as Japan, Taiwan, and South Korea. Nikkei index futures and Taiwan index futures both fell in overnight trading, suggesting a potential gap-down open. However, the expectation of financial stock gains driven by the steepening Treasury yield curve may provide some support for the Hang Seng Index, which holds a large amount of bank assets.
Investors should closely monitor two key risks: first, whether US Treasury yields continue to surge; if the 10-year yield breaks through 4.5%, it could trigger a new round of global asset repricing. Second, whether the delivery-driven rally in China-concept NEVs can be sustained; their gross margin performance during earnings season will be key in determining whether capital continues to flow in. Overall, the market is in a painful transition from the "AI narrative" to a "macro-rate narrative," and capital games will intensify. Investors are advised to moderately reduce holdings in high-valuation tech stocks and increase allocation to financial and energy sectors that benefit from a steepening yield curve.
