Stocks started the week lower, with a steady drift downward for the last few hours of the session, ending on the lows of the day. The primary headwinds were higher oil and rising yields as the Iran MOU expired with no clear path toward.
The move in rates continues to be felt most on the longer end of the curve, with the 2s/10s spread widening again, while the 30YY reaching its highest level since 2007.
Oil - Crude continued higher to $84.70, its highest level of the month as the Iran MOU expired.
Yields - Rates moved higher again, particularly on the long end. US10YY: 4.72% US2YY: higher, but by a much smaller amount. September rate-cut odds not moving significantly.
Dollar - Little changed with DXY: 99.60. DXY continues to trade sideways just below the 100 level, where it has spent most of the past month.
Gold - Higher to 4475. Traded near 4500 intraday before backing off
Volatility - The VIX rose with the SPX lower with a bit of weekend effect coming off as well. At 15.20 the VIX is still quite low.
Energy higher alongside crude.
Technology finished slightly green, mostly due to strength in names like MU, AMAT, and LRCX.
META and DIS dragged Communication Services lower.
Dan - You see more lines going from Open AI and Nvidia, at some point there’s going to be a deal that goes bad.Guy - There seems to be a re-awakening to TGT stock, and maybe this new management has figured it out.
Peter Boockvar - Because the AI cap-ex spend doesn’t care if oil is 80, 90 or 100.. And it’s not just the direct beneficiaries of the AI spend, the money center banks benefit from capital raises for AI… everything is dependent on the AI buildout, it is an all in trade.
Peter Boockvar - This is the biggest story of the next few years, that US AI models are now in a price war with China [AI models]
Articles Mentioned:
S&P 500 falls as oil prices rise amid Iran tensions (CNBC)
‘Don’t get too comfortable’: Wall Street’s ‘fear gauge’ hits 2026 low — here’s why it’s unlikely to last (CNBC)
US Bond Selloff Drives 30-Year Yields to Highest Since 2007 (Bloomberg)
Microsoft-Tied ‘Project Odyssey’ Bond Lures Buyers at Junk Yield (Bloomberg)
Why Big Tech’s AI Spending Is $3 Trillion Higher Than It Seems (WSJ)
Nvidia backing $105 billion in financing for OpenAI data center in Ohio (CNBC)
Private credit under strain as troubled loans swell (FT)
The next China shock will come from open-source AI (FT)
The global stakes of China’s slowdown (Axios)
Tomorrow brings Housing Starts / Building Permits in the morning as well as earnings from Home Depot (HD) before the open
The broader themes remain the same, oil and long-end yields are beginning to create a bit of a headwind for equities with a recent rebound in the AI/semiconductor keeping things from getting too volatile. Both of those stories will get more clarity the final week of August during the Jackson Hole symposium as well as NVDA’s numbers.
Short duration vol remains extremely low with a 0.5% expected move in SPX:
Tuesday, August 18th
HD - Home Depot - Exp. Move 4%, Est: $4.73
8:15 AM - ADP Employment Change 4-week average, Prev: 8.25
8:30 AM - Building Permits (MoM), Exp: 1.37, Prev: 1.367
8:30 AM - Housing Starts (MoM), Exp: 1.35, Prev: 1.427
9:15 AM - Industrial Production (MoM), Exp: 0.3%, Prev: 0.1%
10:00 AM - Pending Home Sales (MoM), Exp: 0.5%, Prev: -5.4%
SPX Expected Move: 0.5%
Analysis - US10YY, SOXX, MU, TGT, Crude, XLE, HD
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Dan Nathan and Guy Adami are joined by Peter Boockvar, CIO at OnePoint BFG Wealth Partners and The Boock Report, to unpack recent inflation data and why yields remain resilient, with the curve steepening as the two-year dips while the 10-year remains. Peter argues the Fed must weigh PPI alongside CPI, noting persistent producer pressures and limited pass-through that squeezes margins and hiring, contributing to weak consumer confidence and “running to stand still” wages.
They discuss why the S&P 500 continues to levitate, attributing much of earnings and market leadership to massive AI CapEx spending and its spillovers into financials. The conversation previews key retail earnings (Home Depot, Lowe’s, Target, TJ Maxx, Walmart) and highlights strong energy stocks amid high gasoline prices and inventory drawdown risks. They also debate U.S.-China AI competition, pressure on OpenAI/Anthropic business models, and Japan’s yen intervention, rising odds of a BOJ rate hike, and potential repatriation flows.
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