Woofun AI reports that the global financial landscape entered a period of intense volatility on the afternoon of June 23, when South Korea's KOSPI index plummeted by 10%, forcing the activation of a circuit breaker. This regional shockwave extended across the Pacific by the evening of the same day, causing the U.S. chip index to crash by 7.9%. Although the KOSPI managed a 4% rebound on June 24, the market instability persisted, culminating in a highly consequential sequence of four major events scheduled to unfold within a single night starting at 00:00 Beijing time on June 25. The first event involves NVIDIA holding its annual shareholders' meeting precisely at midnight, followed by a speech from Federal Reserve Governor Janet Yellen at 02:00 during a small business seminar organized by the Cleveland Federal Reserve. Subsequently, after the close of U.S. stock markets, Micron is set to release its most anticipated earnings report of the year, a disclosure critical given the stock has surged more than 300% year-to-date. The final pillar of this night's agenda is the 04:00 announcement by the Federal Reserve regarding the annual stress test results for 32 large banks, designed to evaluate systemic resilience under extreme conditions such as a 10% unemployment rate and the collapse of commercial real estate and corporate bonds.

Per Woofun AI, while these four events appear structurally distinct on the surface, they are inextricably linked by a singular market narrative that has gained traction amidst recent turbulence: the "Powell put option." This concept encapsulates the pervasive expectation that Jerome Powell, the new Federal Reserve chairman, will intervene to stabilize markets during sharp declines, mirroring the actions of his predecessors. The historical precedent is clear: following the Black Monday crash in 1987, Alan Greenspan cut interest rates; after the 2008 collapse of Lehman Brothers, Ben Bernanke initiated quantitative easing; and in March 2020, Powell executed two urgent rate cuts within a half-month period. Each of these historical crises reinforced the belief that a central bank safety net exists.

However, the current market dynamic is testing whether this belief remains valid or if Powell is actively dismantling it. The simultaneous occurrence of tonight's events serves as a litmus test for this hypothesis, pitting the potential fragility of AI-driven asset valuations against the proven robustness of the banking sector.

The notion of the "Fed put option" has permeated Wall Street for decades, suggesting that severe market declines inevitably trigger Federal Reserve intervention through rate cuts, quantitative easing, or other stabilizing tools. Since Powell assumed office, the market has instinctively associated him with this expectation, a sentiment that has been amplified by financial media in both Chinese and English-speaking countries since May 25. Yet, equating Powell with Greenspan represents a fundamental misunderstanding of the current policy trajectory. Just one week ago, on June 17, Powell presided over his first FOMC meeting, where several critical deviations from historical norms emerged. First, it is highly probable that Powell did not submit his own predictions regarding the interest rate path. Economists at Goldman Sachs and Bank of America posit that given Powell's long-standing criticism of forward guidance—explicitly stating during his Senate confirmation hearing that 'unlike many of my Fed colleagues, I do not believe in forward guidance tied to economic data'—he likely did not participate in developing this year's dot plot. Second, in his apparent absence, the FOMC took the most hawkish action possible: the median value in the dot plot removed the only remaining indication of a rate cut in 2026. Three months prior, the dot plot implied a 25-basis-point rate cut; now, that option has been completely eliminated. Third, at least three FOMC members with voting rights predicted a rate hike in 2026, a stance driven by inflation levels of 4.2% for CPI and 6.5% for PPI, which render a rate cut practically impossible. Fourth, the wording of the statement itself suggests a shift; economists at JPMorgan Sachs argue the FOMC should replace the current 'accommodative tone' with a more neutral approach or refrain from providing forward guidance entirely. These actions indicate that Powell is not merely withholding intervention but is systematically dismantling the "Fed signal safety net" that the market has relied upon for two decades, forcing a re-establishment of market discipline.

Woofun AI analysis suggests that the results of tonight's stress tests are almost certainly not going to be negative, a fact that further complicates the "Powell put" narrative. In last year's tests, all large banks performed well, and the stocks of the six largest banks increased by more than 25% that year. This year, the Federal Reserve has maintained a policy of freezing capital buffers until 2027, meaning that even if a specific bank performs poorly, its capital requirements will not increase. The capital buffers of Bank of America, JPMorgan, and Wells Fargo were already reduced to the minimum level of 2.5% last year, ensuring their ability to pay dividends and conduct buybacks remains unaffected by tonight's results. A crucial detail largely overlooked by analysts on the day of the chip stock crash on June 23 was that the regional bank ETF (KRE) actually rose against the trend. While funds were withdrawing from the AI and semiconductor sectors, they were not flowing into cash but rather into banks. This indicates that the banking system itself is not the source of the problem. If all 32 banks pass the stress tests and demonstrate sufficient capital even under extreme scenarios, this provides Powell with the strongest logical reason not to intervene. The traditional logic of the "Fed put option" relies on the premise that market problems could threaten the banking system, necessitating Federal Reserve support.

However, if stress tests prove the banking system remains robust even in the face of an AI crisis and a 10% unemployment rate, this logical chain is broken. The decline in asset prices becomes a matter intrinsic to those assets, not a systemic failure requiring central bank rescue.

The divergence between Powell and Greenspan extends beyond policy tools to the very nature of their ambiguity. Greenspan was known for saying, 'If you think you understand what I am saying, it means I didn't explain it clearly enough,' a strategy designed to leave room for market action without prior commitments, essentially signaling, 'I won't tell you whether I will intervene, but I might.' Powell, conversely, operates under the belief that central banks should 'learn to operate in an environment without applause or an audience sitting on the edge of their seats.' His ambiguity is aimed at dispelling market illusions rather than creating them. He refuses to submit the dot plot, suggests reducing the frequency of FOMC meetings from eight times a year to four, and indicates that press conferences may no longer follow every meeting. In essence, his message is, 'I won't tell you in advance what I think, and you shouldn't assume that I will intervene.' The critical difference lies in the underlying commitment: behind Greenspan's ambiguity lay an implicit promise of support, whereas behind Powell's ambiguity, there is no such commitment. This distinction is further highlighted by a survey of 34 former Federal Reserve officials and staff members conducted before the June FOMC meeting, where 32 provided predictions. Seventeen believed a rate hike in 2026 would be appropriate, while 14 thought it should not happen, representing a deep division that Powell must manage rather than catering to market sentiment.

Returning to the immediate timeline of tonight, the simultaneous occurrence of these four events confines the market within a narrow information framework where the interplay of outcomes will define the next phase of market behavior. If Micron's earnings exceed expectations and NVIDIA's shareholders' meeting delivers a hawkish message, chip stocks may continue the rebound seen in South Korea on June 24, temporarily masking the issues surrounding the "Powell put option." Conversely, if Micron's performance falls short of expectations or its guidance is weak, chip stocks may face renewed pressure, and the "positive results" of the stress tests will merely serve as evidence that the Federal Reserve will remain inactive. At 02:00 Beijing time on June 25, Janet Yellen will deliver a video speech at the small business seminar organized by the Cleveland Federal Reserve. Her topic will focus on small business lending rather than financial stability.

However, in the current environment of global stock market fluctuations driven by AI, any mention of 'credit tightening' or 'financing conditions worsening' by a Federal Reserve official will be interpreted as a significant market signal. Last December, Yellen's remarks about being 'alert to overly high asset valuations' led to temporary speculation that she was shifting towards a hawkish stance, illustrating how sensitive the market remains to such cues.

What will truly define tonight may not be the outcomes of these events in isolation, but the gap between them. If the stress tests yield positive results, Micron's performance is strong, and NVIDIA's outlook is optimistic, it implies that there is no fundamental problem with AI infrastructure. In this scenario, what the market needs to rebuild is confidence in the leverage structure, not faith in AI-related transactions themselves. The rollercoaster ride on June 23-24 was more of a process of deflating bubbles than of them bursting.

However, if the stress tests are successful but Micron's performance is weak and NVIDIA's outlook is cautious, the market faces a more complex situation: signs of weakness in AI fundamentals coexist with a strong banking system. This creates dual pressure where asset prices must adjust while the system does not require Federal Reserve intervention. Three specific factors will drive this dynamic. First, NVIDIA's guidance on the production timeline for its next-generation AI systems based on HBM4 is the most direct factor behind SK Hynix's decision to slow down the expansion of its HBM4 production capacity. If NVIDIA confirms this adjustment, it signifies that the entire supply chain is recalibrating, not just SK Hynix. Second, Micron's assessment of the demand prospects for HBM is critical; as the world's third-largest supplier of HBM, its quarterly earnings call provides insights into whether AI storage demand is continuing to grow or has peaked. The speculation sparked by SK Hynix's decision needs to be verified or refuted by Micron's statements. Third, and most importantly, is the timing of the public debate surrounding the next FOMC meeting, expected in late July. If the removal of rate-cut expectations from this year's dot plot was just the first step, and the July statement begins to discuss the possibility of a rate hike, all fantasies surrounding the "Powell put option" will come to an end. This will occur not because of any specific action by Powell, but because the market's expectations have been shattered by reality. During his Senate hearing in April, Powell stated, 'Central banks should learn to operate in an environment without applause.' Tonight, these four events combined will mark the first night in which the market will have to learn to price assets once again in the absence of such applause, signaling a definitive shift in the era of central bank dependency. This marks the third such incident this year where market psychology has been forced to confront the reality of a changing monetary regime.