Last week was a reminder that the market’s next move is somewhere at the intersection of inflation, interest rates, and AI spending. Cooler-than-expected PPI helped ease fears of a near-term rate hike, shorter duration yields backed off their recent highs, and the SPX finished near record levels despite oil remaining elevated. At the same time, the semiconductor volatility that dominated much of the summer has “normalized” to some extent, allowing leadership in tech to broaden beyond just one corner of the AI trade.
On Friday we did get a reminder that the consumer still matters, with disappointing Retail Sales and Consumer Sentiment numbers bookending the prior week’s disappointing Jobs Number. The focus remains on the consumer this week, with many of the big box store names reporting.
The SPX remains in in a multi-week consolidation since the DRAM lows, but with a slow grind higher bias:
US 20-Year Bond Sale to Test Demand as Yield Curve Steepens. Yields on the 20-year bond traded around 5.25% on Friday as the yield curve steepened.
The upcoming auction follows last week’s 30-year and 10-year debt sales. The former commanded the highest interest rate in a quarter century and the latter logged the highest yield for that tenor since 2007. - Bloomberg
The VIX enters the week near its lowest levels of 2026. Additionally, the recent collapse in dispersion can really be seen in the NDX/QQQ expected move below. Not only is that 1.6% expected move nearly half what it was a few weeks ago, its relationship to the SPX is now much more typical:
SPX/SPY: 1.1% (7700-7875)
NDX/QQQ: 1.6%
RUT/IWM: 1.4%
SMH: 3.6%
TLT: 1.1%
USO: 4.8%
One of the main factors in the NDX nomalization can be seen in SMH, with a 3.6% expected move for the week, that was no atypical of expected moves for individual days a month ago.
It’s a lighter week than the recent run of labor and inflation data but there are still a few events worth watching including the FOMC Minutes from the July meeting and then the PMIs on Friday. Other reports include housing-related data throughout the week, including builder sentiment, housing starts, and existing-home activity
Tuesday
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%
Wednesday
2:00 PM - FOMC Minutes
Friday
9:45 AM - S&P Global Manufacturing PMI, Prev: 53.9
9:45 AM - S&P Global Services PMI, Prev: 54.6
Retail earnings like HD and WMT will be the headline stories of the week after last week’s Retail Sales number, but we also have reports from BABA and DE:
Tue, Aug 18
HD - Home Depot, Inc. (The) - BMO, Exp. Move 4.2%, Est: $4.73
Wed, Aug 19
ADI - Analog Devices, Inc. - BMO, Exp. Move 6.3%, Est: $3.33
LOW - Lowe’s Companies, Inc. - BMO, Exp. Move 5.1%, Est: $4.23
TGT - Target Corporation - BMO, Exp. Move 6.9%, Est: $2.33
TJX - TJX Companies, Inc. (The) - BMO, Exp. Move 4.2%, Est: $1.19
Thu, Aug 20
BABA - Alibaba Group Holding Limited - BMO - Exp. Move 7.0%, Est: $10.72
WMT - Walmart Inc. - BMO, Exp. Move 4.9%, Est: $0.74
DE - Deere & Company - BMO, Exp. Move 5.4%, Est: $4.67
ROST - Ross Stores, Inc. - AMC, Exp. Move 7.2%, Est: $1.93
The odds of a September hike have fallen significantly since the weak NFP and last week’s inflation data. For the September meeting, just a 33% chance being priced for a hike:
Also interesting is how things look into December where odds are still of a hike between now and then, but a growing 32% odds of no hike by year end:
We’ll see if that holds through this week’s FOMC Minutes, but Jackson Hole may prove to be more important given the data of the past two weeks.
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