Late at night, the US stock market opened with a huge jolt!

On May 19th, the US stock market opened and dropped rapidly. The Nasdaq and the S&P 500 both fell by more than 1% at one point, and the Dow Jones Industrial Average dropped by more than 0.7% at one point. Subsequently, the three major indices rose sharply, with the Dow Jones Industrial Average turning red at one point, but it turned green again as of the time of publication. The US dollar and US Treasuries declined. The yield on the 10-year US Treasury note rose by 7 basis points, once again breaking through the crucial 4.5% mark. U.S. Treasuries approached recent lows in early trading on Monday, continuing the decline following Moody's downgrade of the highest credit rating held by the U.S. government at the end of last Friday. The 30-year Treasury bond led the decline, with the yield breaking through 5%, steepening the yield curve. European government bond yields also rose, while stock index futures came under pressure ahead of the opening of the spot market.

Behind the huge opening rally of the US stock market late at night, there are often multiple complex factors intertwined, and it will also bring complex and multi-faceted impacts to the financial sector. One is the influence of market sentiment and investors. A major earthquake can easily trigger panic among investors, causing them to worry about further asset shrinkage and thus sell their stocks. This kind of panic may spread rapidly in the market, forming a vicious circle and intensifying the fluctuations of the stock market. A huge earthquake will cause investors to reevaluate risks and reduce their risk appetite. They may be more inclined to transfer funds from the stock market to relatively safe assets such as bonds and gold to avoid potential risks. A major stock market earthquake may lead to a large amount of capital flowing out of the stock market and seeking other investment channels, affecting the supply of funds in the stock market. It may also have a negative impact on the business and profits of related financial institutions. A huge earthquake may trigger a tight market liquidity. When investors panic sell, the buying orders in the market may be insufficient, leading to difficulties in stock trading and an expansion of the bid-ask spread.

The second is the impact on the financial system. A major shake-up at the opening of the US stock market is often accompanied by the spread of market panic, which undermines investor confidence and leads to further fluctuations in the stock market. This kind of fluctuation is not limited to the US stock market. It may also trigger a chain reaction in the stock markets of other countries through the linkage effect of the global financial market. If the major shock is triggered by factors such as weak economic data and policy uncertainty, it may enhance market expectations of an economic recession and further intensify market uncertainty. It may also spread to other banks, causing a sharp drop in stock prices and raising market concerns about the spread of bank risk contagion. Such concerns may affect the financing costs and credit supply of financial institutions, and thereby have a negative impact on the real economy.

The third aspect is the impact on monetary policy and financial regulation. A major shakeout in the US stock market may exert pressure on central banks such as the Federal Reserve to adjust their monetary policies. If weak economic data and huge stock market fluctuations trigger expectations of an economic recession, the central bank may face the predicament of cutting interest rates too late. Amid the increasing uncertainty in the trade situation and the rising risk aversion among investors, the US dollar may be sold off, leading to a significant decline in the US dollar index. While the US dollar is falling, currencies such as the Swiss franc and the Japanese yen may rise across the board. A huge earthquake may draw the attention of financial regulatory authorities, which in turn will strengthen market supervision and prevent systemic risks. Regulatory authorities may take measures to stabilize market sentiment and protect the interests of investors.

The fourth is the impact on the linkage of the international financial market. The US stock market is one of the largest stock markets in the world, and its fluctuations often have a chain reaction on the stock markets of other countries. A huge shock at the opening of the US stock market may lead to varying degrees of decline in global stock markets at the opening of the next day, triggering turmoil in the global financial market. A major stock market shock may trigger changes in investors' demand for currency, leading to intensified fluctuations in exchange rates. For instance, when the US stock market declines, investors may withdraw their funds from the United States and exchange them for other currencies, thereby causing the US dollar to depreciate and other currencies to appreciate.

To sum up, the huge opening shock of the US stock market was like a sudden storm, causing multi-dimensional and far-reaching impacts on the financial system. Financial institutions need to adhere to the principle of prudent operation. Investors should remain rational and calm. Regulators should strengthen their sense of responsibility and commitment. The international community should join hands and cooperate to jointly deal with it.