Markets Update - 8/4/26

Quick Summary

• US equity indices opened higher Tuesday led by technology shares, boosted by a jump in Palantir Technologies and a continued rebound in semiconductors, along with strong gains in other sectors such as Industrials following Caterpillar’s earnings beat, as we went through in the morning update.
• Equities were also boosted by a continued drop in oil prices after Qatar announced that a potential agreement to revive talks between the US and Iran has been circulated. President Donald Trump discussed efforts to deescalate US-Iran tensions with Qatar’s Emir Sheikh Tamim Bin Hamad Al-Thani in a call on Tuesday, according to the Gulf state’s government. A White House official confirmed the call, but didn’t offer additional details. In a potential climbdown that could form part of a potential deal, Iran is considering allowing European nations to remove mines from the Strait of Hormuz, according to diplomats familiar with the matter.
• Indices would rally into mid-afternoon before flattening out late, extending Monday’s broad risk-on move as earnings reports, a sharp rebound in semiconductors, and the drop in oil prices which brought down Treasury yields continued to support equities. The Nasdaq Composite led again, gaining +2.6%, while the Russell 2000, S&P 500, and Dow Jones Industrial Average all rose roughly +1.7% to +1.9%. The S&P 500 and Dow both closed at fresh record highs, while the S&P 500 also closed above 7,700 for the first time.
• The two-day move has been powerful, with the S&P 500 seeing its second-best two-day gain since April 2025 and the Nasdaq its second-best since May 2025, with both only trailing the early-April rebound. Coming out of its worst month since 2008, the SOX semiconductor index is now on pace for its best four-day stretch since the Covid bottom in 2020.
• While Technology led the market Tuesday, participation remained relatively broad, with the equal-weighted S&P 500, small caps, and mid caps all posting solid gains.
• The economic data also pointed to a still-solid backdrop. June JOLTS showed job openings easing back, but the ratio of openings to unemployed workers improved to its best level since January 2025. Hires and quits both rose, with quits posting their biggest increase in a year, while layoffs were flat, suggesting labor demand remains solid.
• Attention turns to another batch of earnings and data Wednesday as covered in the subscriber section.

US equity indices opened higher and rallied into mid-afternoon before flattening out to end with another day of solid gains again led by the Nasdaq +2.6%.

SPX, DJIA, and RUT all up 1.71% to 1.85%.

Some market commentary

“The combination of resilient economic growth, strong corporate earnings and AI-driven investment continues to provide a favorable backdrop for equities,” said Jeff Buchbinder, chief equity strategist at LPL Financial. “While investors are right to scrutinize elevated capital spending by hyperscalers and monitor developments in the Middle East, we believe these risks will be offset by the powerful earnings tailwind.”

“A retail washout and resilient earnings have left equities on a firmer footing. Last week saw the biggest week of retail equity selling since 2022. That suggests a meaningful positioning reset, reducing the risk of further position-driven selling and leaving scope for a rebound. Early signs of renewed risk appetite are also emerging.” —Skylar Montgomery Koning, macro strategist

“Animal spirits are buoyant to begin the month,” said Jose Torres, senior economist at Interactive Brokers. He noted that the latest manufacturing and services sector data released Monday and “recent earnings calls boost confidence that capital return prospects could impress amid valuations that have become substantially cheaper during the deep tech selloff.”

“From watching the stock market zoom higher over the past three sessions, you wouldn’t think there’s anything wrong with the world,” said Thierry Wizman, global FX & rates strategist at Macquarie Group. “After all, even the semiconductor makers have recovered from their big skid in July after some AI hyperscalers managed to quell analysts’ fears about whether their data center investments are excessively eating into cash-flow. And so far, U.S. quarterly earnings reports haven’t disappointed, in aggregate.”

“AI is obviously a key driver of earnings expectations and earnings upside, but there's also an improvement earnings story that is less AI centric, and that we believe is a healthy dynamic for the stock market,” Josh Jamner, senior investment strategy analyst at ClearBridge Investments told MarketWatch via phone on Tuesday.

“Markets are reacting to the possibility that a reopening of the Strait of Hormuz could help normalize global oil supplies and reduce near-term energy price pressures,” said Tony Miano at Wells Fargo Investment Institute. “Lower oil prices can ease inflation concerns.”

“That said, investors have seen similar headlines before,” Miano added. “Negotiations with Iran have historically been fragile, and a signed agreement would not necessarily translate into an immediate or sustained increase in oil flows.”

In today’s Markets Update

• A deeper look at Tuesday’s stock and sector breakdown, including the Tech-led rally, cyclical strength in Materials and Industrials, and the weaker performance from Energy, Consumer Discretionary, Utilities, Health Care, and Real Estate.
• A look at after-hours reactions from AMD and SpaceX, plus selected corporate updates including Palantir, Caterpillar, Wayfair, Jefferies/Sapphire Minmetals, and Chipotle’s jalapeño-linked salmonella issue.
• Updated technical charts across the SPX, Nasdaq, Russell 2000, and equal-weighted SPX.
• A review of market breadth and participation, including large individual winners and losers, speculative Nasdaq trading activity, the Dow’s path to 54,000, and the continued improvement beyond the largest index weights.
• A look at the rates and Fed backdrop, including the moves in 2-year, 10-year, and 30-year Treasury yields, Philadelphia Fed President Paulson’s policy framework, and Morgan Stanley’s Gapen on financial conditions.
• A look at volatility and market structure, including VIX, VVIX, 1-day VIX, and the “spot up, vol up” dynamic.
• A review of cross-asset trends, including WTI crude, the dollar, gold, copper, natural gas, and bitcoin.
• Deutsche Bank on semi and software fund flows, Goldman’s Callahan on SOX positioning versus its 200-DMA, MarketWatch/BTIG’s Jonathan Krinsky on the SOX rebound, Goldman’s Tony Pasquariello on Energy positioning, Citadel’s Rubner on the technical reset, Yardeni on the summer stall and credit conditions, CFRA’s Sam Stovall on Nasdaq-100 correction recoveries, BoA on July auto sales, Goldman on JOLTS/factory orders and Q3 GDP tracking, and the Atlanta Fed’s updated GDPNow tracker.
• A wrap-up on the AI trade staying “on,” broader participation, cleaner positioning, lower yields, systematic-flow risks, and the near-term market setup.
• A look ahead to Wednesday’s calendar, including US economic data, Fed speakers, Treasury refunding details, SPX earnings, and ex-US highlights.

Stock and sector breakdown (in part from Briefing.com)

While not as broad as Monday’s rally where we saw 8 of 11 sectors higher (and five up over 1%), still were 6 sectors higher Tuesday and three up over 1%, but the better index performance was fueled by the ultra-heavyweight Tech sector (nearly 40% of market cap) which jumped over 4%. Materials and Industrials were also up nearly 2%. And no sector down more than -0.6% (Utilities).

Corporate earnings continued to shape leadership across the market, with investors rewarding strong results while rotating back into many of the technology names that struggled throughout July. The information technology sector climbed 4.1% as the PHLX Semiconductor Index surged 6.6%, extending yesterday’s reversal with another broad-based advance. Marvell (MRVL 218.59, +24.82, +12.81%), Intel (INTC 100.94, +9.94, +10.92%), and Sandisk (SNDK 1427.62, +139.59, +10.84%) were among the group’s standout performers, while software stocks also enjoyed another strong session. Palantir Technologies (PLTR 162.61, +36.96, +29.42%) finished as the S&P 500’s top performer following its blowout earnings report, lifting the iShares Expanded Tech-Software Sector ETF (IGV) 4.7%.

The market’s largest technology companies also remained a major source of strength. Microsoft (MSFT 492.81, +5.16, +1.06%) and NVIDIA (NVDA 211.94, +5.30, +2.56%) added to Monday’s gains, while the broader rebound across semiconductor stocks helped reinforce the technology sector’s leadership after a difficult July.

Outside of technology, several cyclical sectors also contributed meaningfully to the advance. The materials sector (+2.0%) benefited from continued strength in Freeport-McMoRan (FCX) as precious metals prices climbed, while the industrials sector (+1.8%) drew support from gains in electrical equipment stocks and a strong post-earnings rally in Caterpillar (CAT 876.54, +46.51, +5.60%) after the company delivered a beat-and-raise quarter.

The financials sector (+0.9%) also finished firmly higher, with Goldman Sachs (GS 1052.98, +25.92, +2.52%) and JPMorgan Chase (JPM 357.52, +4.88, +1.38%) helping lift the DJIA to another record close.

Although technology once again accounted for much of the index-level advance, participation broadened noticeably throughout the day. The S&P 500 Equal Weight Index climbed 1.4% after trailing the market-weighted index by a wider margin for most of the session. The strong gains in the Russell 2000 and S&P MidCap 400 further underscored investors’ willingness to move beyond the market’s largest companies.

Five S&P 500 sectors nevertheless finished lower as investors rotated away from more defensive areas of the market. The utilities (-0.6%) and health care (-0.1%) sectors lagged amid today’s risk-on tone, with NRG Energy (NRG 117.04, -21.43, -15.48%) weighing on the former after missing earnings expectations.

The energy sector (-0.5%) also finished lower as WTI crude oil futures settled down, and the consumer discretionary (-0.5%) faced pressure as Amazon (AMZN 277.42, -6.60, -2.32%) gave back a portion of yesterday’s post-earnings gain. Aptiv (APTV 47.72, -9.51, -16.62%) slumped following a revenue miss, while Chipotle Mexican Grill (CMG 33.83, -3.64, -9.70%) sold off intraday after reports of a possible salmonella outbreak.

Elsewhere, the real estate sector (-0.1%) posted a modest decline as Alexandria RE (ARE 48.87, -4.16, -7.84%) weakened following its quarterly results.

Attention now turns to another busy stretch of technology earnings, with Advanced Micro Devices (AMD 518.58, +33.94, +7.00%) and SpaceX (SPCX 126.06, +11.53, +10.07%) set to report after the bell, providing the next important test of whether mega-cap tech leadership can continue through the early stages of August (both are lower as noted below).

$SPCX SpaceX trading lower by over 5% despite beating on the top and bottom lines.

Overall revenue came in at $7.81 billion vs. $6.93 billion expected. By operating division:

• Space: $962 million vs. $835 million expected, according to StreetAccount
• Connectivity: $4.29 billion vs. $3.83 billion expected, according to StreetAccount
• AI: $2.56 billion vs. $2.18 billion expected, according to StreetAccount

The operating loss for the space unit was $542 million, while the AI unit lost $1.26 billion well under the consensus for a loss of $2.39 billion. Connectivity remained profitable, with operating income in the period of $1.66 billion.

One blemish was SpaceX said subscribers in its Starlink satellite-internet service — its only profitable business — reached 12 million by the second quarter, lower than the 12.19 million expected by analysts.

SpaceX said capital expenditures reached $18.37 billion, less than the $18.58 billion in the quarter analysts forecast.

$AMD shares also down over 5% despite a beat and raise as apparently investors were looking for more than the $500 million beat to guidance for current quarter revenues ($13B vs $12.5B street estimate).

AMD’s second-quarter sales rose 50% to $11.5 billion. Profit, minus certain items, was $1.66 a share. Analysts had estimated $11.3 billion in revenue and a profit of $1.62 a share.

Sales at AMD’s data center business more than doubled to $6.7 billion. Analysts had predicted $6.6 billion on average. Personal computer and gaming-related sales rose 6% to $3.8 billion.

DB also sees no letup in inflows to Semis which they say dominated Tech inflows coming into the week, although ex-semis and software has started to lift recently.

Coming out of the worst month since 2008 in June, the $SOX semiconductor ETF is on track for its best 4-day stretch since the Covid bottom.

Goldman (Callahan): Semis: refresh on a chart we've sent around before - Semis (SOX) vs its 200-dma ( .. one way we look at 'excitement' in the space .. ); after the SOX traded nearly -80% above its own 200-dma in June, we are back to the SOX being -20% above it's own 200-dma ..

MarketWatch: BTIG's Jonathan Krinsky who was a little early on his call for a pullback but nailed the bottom in the $SOX says he sees it continuing to rally another few percent to the 50-DMA but then falling back:

“This could coincide with a gap-up Thursday morning following two marquee earnings reports Wednesday after market close: Sandisk and Western Digital,” he said in a Tuesday client note.

“We think the rally likely fails because there are many participants still feeling pain from July's unwind,” Krinsky added. “They are likely to not want to feel that burn twice, and thus become opportunistic sellers as prices rebound back into resistance.”

Goldman's Tony Pasquariello:

energy stocks. I find it a little interesting that this has been the single best sector of the market -- up 33% YTD, on a great Sharpe ratio -- and folks barely talk about it.

given that GS PB reports seven straight weeks of net buying, it appears this is a show-don't-tell dynamic.

With the Dow about to close over 54,000 how did it get there?

MarketWatch with a handy table if you care.

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And the number of large SPX winners (up over 3%) rose to ~110 Tuesday from ~80 Monday, ~20 Friday, though still under the ~120 a week ago, while large losers (down over 3%) remained scarce at just 12 from 10 Monday, ~20 Friday.

Speculation on the Nasdaq eased back for a second day, with the top three stocks by volume (again all penny stocks) trading ~1.15B shares, down from ~2.5B Monday and ~3B Friday, although still over double what we were seeing a couple of weeks ago. And fourteen were over 100M, one of the highest readings on that metric this year.

横向滑动查看完整图表

Biggest after-hours movers from CNBC:

SpaceX — The Elon Musk-led rocket company fell 7% after releasing its first quarterly report since going public in June. SpaceX reported second-quarter revenue of $7.81 billion, topping an LSEG consensus of $6.93 billion. It also lost 9 cents per share, though it wasn’t clear if that was comparable to an estimate of a 26 cent-per-share loss.

Arista Networks — Shares gained 11% after second quarter results surpassed estimates. Adjusted earnings came in at $1.02 per share on revenue of $3.04 billion, versus the LSEG consensus estimate of 88 cents a share and $2.82 billion. Non-GAAP operating margins also beat estimates, as did third quarter guidance for profit and revenue.

AMD — The chipmaker plunged 8% after the bell on the back of second-quarter results that failed to impress investors. The company earned an adjusted $1.66 per share on revenue of $11.54 billion. To be sure, those numbers were slightly ahead of LSEG consensus estimates. Q3 revenue guidance was about in line with expectations at $13 billion.

Wynn Resorts — The casino operator saw shares jump 7%. Second quarter adjusted earnings came in at $1.24 per share on revenue of $1.86 billion, beating the LSEG consensus call for $1.11 per share and $1.84 billion.

Astera Labs — The semiconductor company wiped earlier gains and was last trading lower by 4%. The decline came even as third quarter guidance beat Wall Street’s estimates. Astera sees adjusted earnings ranging from $1.16 to $1.21 per share and revenue of $540 million to $560 million. Analysts polled by FactSet were looking for 81 cents per share and $417 million. The company also beat on the top and bottom lines in the latest quarter.

Kratos Defense & Security Solutions — The maker of unmanned systems for the military rose as much as 8% postmarket before paring that advance. Second-quarter revenue beat Wall Street analysts’ estimates in all segments.

Pinterest — The image-sharing platform slid 8% after guidance failed to impress traders. Third quarter revenue is expected to range between $1.19 billion and $1.21 billion, inclusive of the FactSet consensus estimate of $1.2 billion. Second quarter results beat estimates on the top and bottom lines, however.

DaVita — Shares fell over 6% despite the kidney dialysis provider reporting better-than-expected results for the second quarter. Full-year earnings guidance ranged from $14.10 to $15.20 per share on an adjusted basis, compared to the FactSet consensus call for $14.88 per share.

Teradata — The cloud data analytics provider slumped 17% after third-quarter earnings guidance of 55 to 59 cents per share excluding one-time items trailed a Wall Street consensus estimate of 62 cents, according to FactSet data.

Booking Holdings — The online travel site advanced more than 5% after second quarter gross bookings came in at $51 billion, surpassing the Street’s estimate of $49.35 billion. Adjusted earnings of $2.54 per share and revenue of $7.35 billion topped the LSEG consensus call for $2.45 per share and $7.19 billion.

— CNBC’s Ananya Chetia and Scott Schnipper contributed reporting.

Some other corporate news from BBG

• Palantir Technologies Inc. soared after the company boosted full-year revenue and income forecasts, describing commercial demand for its data analytics tools as “otherworldly.”
• Caterpillar Inc. crushed Wall Street’s second-quarter expectations and raised its sales outlook, easing concerns that demand for power-generation equipment used in data centers was beginning to cool.
• Wayfair Inc. surged after the home furnishings retailer said sales in the US grew at their fastest clip since 2021, helped by a growing number of brick-and-mortar stores and demand for its higher-end brands.
• Jefferies Financial Group Inc. has been told that some of the invoices underpinning its financing to an iron ore trader called Sapphire Minmetals Corp. are not genuine, according to people familiar with the matter.
• Chipotle Mexican Grill Inc. removed jalapeños from multiple stores in Minnesota after learning the peppers may be linked to a salmonella outbreak in the state that’s sickened 110 people.

Note on all charts the colored lines are moving averages (the average price over the lookback period (days on the daily charts, weeks on the weekly charts)):

• 20 = green
• 50 = purple
• 100 = blue
• 200 = brown

Exception is monthly charts where blue is 10-month moving average and brown is 20-month moving average.

MACD = Moving average convergence/divergence line, a measure of momentum that compares longer term and shorter term momentum to gauge if a move is strengthening or weakening. This is probably my favorite individual indicator (it’s also the favorite of Katie Stockton, a very fine technician).

RSI = Relative Strength Index (basically what it sounds like) = measures the strength of the move comparing gains to losses over the given lookback window (I use the standard 14 periods).

Turning to the charts, the SPX did push through its prior all-time closing high and shot higher from there, completing its second-best two-day gain (after the start of April) since April 2025. Daily MACD pushed even more positive, and the RSI is at a 2-month high, so as I said Monday “some momentum behind it.”

Nasdaq a similar story but didn’t get to its all-time high (instead breaking over its 50-DMA and downtrend line from the highs consistent with Monday’s note (“I’d bet on it clearing that line”). Its daily MACD and RSI also pushed more positive, and like the SPX the best day since April and second-best in its case since May 2025.

The Russell 2000 (RUT) did make it to a new all-time closing high though. And the daily MACD flipped to a “go long” reading, while its RSI is back over 60, so as I said Monday “a much improved chart from Friday.”

The equal-weighted SPX also a new all-time high. The daily MACD and RSI like the SPX pushed further positive (these had never turned negative here).

Yields eased across the curve again Tuesday:

Two-year Treasury yields down for the seventh session in eight to 4.19%, now down 16 basis points from last Thursday’s close which was the highest since February of last year, and edging back under the nearly three year downtrend line so not giving up on it quite yet.

They are ~54 basis points above the Effective Fed Funds rate (red line), continuing to call for rate hikes but a little less strongly now.

Philadelphia Fed President Paulson, an #FOMC voter this year, and one of the most dovish on the committee shows the high bar to rate cuts in her essay today where she notes that with inflation "elevated for a long time" and the labor market "stable," the "two plausible scenarios" she sees are between holding rates steady vs hiking them.

According to her estimate, stripping out tariffs and energy impacts "underlying inflation is running somewhere between 2.4 and 2.8 percent."

In her base case scenario where rates are "mildly restrictive" and "will bring inflation to 2 percent in an acceptable time frame."

In her alternative scenario though, "current policy is not restrictive enough," which would require further tightening. "If ... underlying inflation remains stubbornly elevated, the passage of time without progress would itself signal that more restrictive policy is needed."

Notably, also, Paulson has pivoted away from her stance from last year that AI is deflationary saying "While AI's productivity benefits may eventually help moderate inflation, those gains appear further off, while the inflationary pressures from the buildout are more immediate. Even if supply shocks fade and no new shocks hit, this information suggests policy might need to be more restrictive to achieve the Fed's target."

Implications for Monetary Policy

I am keeping an open mind about where policy goes from here. As I've outlined, I see two plausible scenarios for how current policy is affecting inflation, and the incoming evidence will clarify which path we're on and what adjustments, if any, may be needed.

How will I assess which path we're on? By watching how the evidence accumulates. If policy is appropriately calibrated, I would expect to see growing signs that inflation is coming down — more months of improving inflation data; reports from those making pricing and hiring decisions that align with a gradual return to 2 percent; signs that pressures from tariffs, energy, and AI are contained rather than intensifying; and inflation expectations that are well-anchored and consistent with 2 percent. If instead underlying inflation remains stubbornly elevated, the passage of time without progress would itself signal that more restrictive policy is needed.

There will almost always be a range of interpretations about what is happening in the economy. That is why I am committed to keeping an open mind as I assess the evidence and determine the appropriate path for policy. My highest priority is delivering 2 percent inflation while sustaining full employment.

MS (Gapen): As of the July 30 market close, financial conditions remained meaningfully tighter than before the recent escalation in the Middle East, although they were broadly unchanged relative to pre-July FOMC levels.

Since the June FOMC meeting, financial conditions have tightened by almost 30bp, primarily driven by higher 10-year Treasury yields and U.S. dollar appreciation.

Since hostilities in the Middle East began on February 28, the tightening in financial conditions is equivalent to about a 47bp rise in the federal funds rate. This has reversed the easing seen earlier in the year, most of which was driven by a weaker U.S. dollar.

10-year yields eased back six basis points (the most since June 24th) to 4.62%, down now ten basis points from the highest close since January 2025 on Friday.

30-year yields similarly down five basis points to 5.17% now down nine basis points from the highest level since 2007 on Friday.

The VIX moved higher to 16.5 from a two-week low, giving us one of those “spot up, vol up” days that indicate upside buying pressure but that are also not uncommon when hitting new all-time highs according to Tier1Alpha (as new call strikes are created).

The indicator remains in its “normal” range post-GFC, consistent with ~1.03% average daily moves in the SPX over the next 30 days.

The VVIX (VIX of the VIX) similarly up to 92.6

The current level is consistent with “moderate” daily moves in the VIX over the next 30 days (historically, normal is 80-100, but we’ve been above 90 most of the time since July ‘24). Above 100 is the level flagged by Charlie McElligott as indicating higher stress.

And interestingly the 1-day VIX also jumped in its case to 13.9 from 9.4, which was the lowest since July 6th and second lowest since June 2nd, perhaps in part due to the SpaceX and AMD earnings after the close. The reading is consistent with a move of 0.88% in the SPX next session.

WTI fell back another 6%, now down 18% from last week’s high, and at the 200-DMA. While technicals are secondary here, worth noting I guess that the daily MACD has crossed over to a “sell longs” reading and the RSI is under 50.

The DXY dollar index (which is fixed weighted with a heavy (57%) vs the euro) was up for a second session early but gave that back to finish down slightly, still though holding its 100-DMA and trendline from the 2026 lows.

The daily MACD as noted Wednesday has flipped to quite negative while the RSI is under 40. I said Wednesday “still too early to call an end to the uptrend,” but as I said Thursday “a break of those levels would make that call much closer.” As I said Monday, “held for now. Clearly at least a consolidation though, and with speculators and CTAs still quite long the dollar, continued declines from here could really build.”

Gold futures (/GC) still not able to extend after crossing the downtrend line from the March highs last week. As I’ve mentioned for now four weeks “the technicals remain much better than the price action.” Really needs to get over that 50-DMA (purple line).

US copper futures (/HG) continue to move in step with the AI trade pushing through the downtrend line from the highs although not extending yet. It continues to have “supportive technicals,” with the RSI now at a 2-month high.

US natural gas futures (/NG) fell over 3% to give back all of last week’s gains now just above last week’s low. The daily MACD and RSI remain negative.

Bitcoin futures continue to do a lot of nothing, ending at the same levels they were at in early June. As I mentioned three weeks ago, “the daily technicals continue to look better than the price action, so maybe there’s a chance?” So far that hasn’t translated into more than a modest move higher, and the technicals are now tipping negative.

Other stuff

Citadel's Rubner:

Today, we believe much of the global technical reset is behind us. Importantly, the reset occurred through rotation, deleveraging, and stronger fundamentals, not through a deterioration in the macroeconomic backdrop.

The excesses that defined the early summer have largely been unwound. Retail investors reduced risk (more below), leverage normalized, market concentration declined, and many of the market’s largest technical headwinds have begun to fade. As a result, we believe investors can once again focus on fundamentals and the path of corporate earnings.

What stands out most is the magnitude of the retail reset. Last week marked the largest weekly equity outflow from retail investors since 2022, a clear signal that speculative excess has been meaningfully reduced. This type of washout typically leaves markets on firmer footing, reducing the risk of further forced selling and creating room for a more durable rebound.

Yardeni: Like [Ethan Hunt in Mission: Impossible], President Donald Trump, Fed Chair Kevin Warsh, and Treasury Secretary Scott Bessent have clear missions. Their plans for accomplishing these missions are less clear.

Despite these uncertainties, the S&P 500 rose [Monday] to 7,600.50, nearly matching its June 2 record high. It's been a tug-of-war this summer between FEMO (fabulous earnings momentum) and these uncertainties.

The S&P 500 has been fluctuating around 7,500 since May 14. We aren't concerned that a summer stall in the bull market will turn into a serious correction anytime soon. There are no signs of a credit crunch. Just the opposite is the case as the bond yield spread between high-yield corporate bonds and the 10-year Treasury bond remains near a record low.

CFRA's Chief Investment Strategist Sam Stovall gives the stats after the Nasdaq-100 fell into correction territory last week:

“Following such a sharp one-day decline, its subsequent single-day surge was not unusual, as slumps of more than 2% since the index’s inception in 1985 have typically been followed by next day price gains 55% of the time and five-day advances 58% of the time.

“What is more, if July 29 were the end to this sub-15% correction, history says (but does not guarantee) that it would take a median of 45 days to fully recover and that the median subsequent gain would be 13% over the following year.”

BofA on July auto sales:

July US light vehicle sales decreased ~1.8% YoY (selling day adjusted) to a 16.3mm SAAR, a step down from 16.6mm in June... July brings YTD SAAR to 16.0mm, still below the 16.4mm level in FY25.

Despite the sequential decrease from June, we think July SAAR continues to suggest underlying demand is holding up better than expected, supported by resilience among higher-income consumers and gas accounting for a smaller portion of disposable income relative to historical averages.

Following this morning's data, Goldman boosts their Q3 GDP estimate to +2.7%

The Atlanta Fed’s Q3 real GDP tracker has jumped another +0.91% to +5.86% as of August 4th from its +4.95% initiation on July 30th, with the gain led by the contribution from consumption (to +2.85% from +2.29%), along with a smaller pickup in nonresidential fixed investment (+1.06% from +0.85%) and smaller changes elsewhere.

Remember though the caveat that both Q1 and Q2 started very strong before falling sharply in the last month before those initial reads.

The reading remains well above the blue chip consensus of +1.5% and the Atlanta Fed’s own nowcast is still described as an early read that can move sharply with incoming data.

Wrap-up

As I wrote Sunday:

As mentioned in the Markets Updates this week, we saw the “on again, off again” nature of the AI-trade, which spent much of July “off” (leading to the worst month for one broad semiconductor index since 2022 as noted in the Friday Markets Update), flip back to “on again” Thursday and Friday.

I had mentioned all month that “we have seen pullbacks several times previously in the AI trade over the past year, and they have all resolved relatively quickly to the upside. It would be a meaningful change in character if that did not happen this time as well,” and last week said while we had seen one of the sharpest pullbacks in the trade to date, it certainly wasn’t unprecedented (see DB’s note in the Flows section), and the momentum/Tech may be turning back up “on schedule.”

Given the weight of the components of that trade (semiconductors are 19% of the SPX by market cap, with Tech over a third in total) plus the leverage employed, (as noted by Tier1Alpha also in the Flows section) it will make a big difference in where the market cap indices go.

Of course, there are many other ways to play the market beyond buying the SPX and throughout July we saw broad strength which though seemed to fizzle out the last two days just as AI saw a resurgence. Hopefully we are not returning to the “either/or” market we saw at times earlier this year, but it all remains to be seen.

As mentioned Friday and in the Flows section, the deleveraging we have seen puts us in a much better position from a positioning standpoint than we were coming into the month, with BofA flipping to a net positive base case for the upcoming week, and DB becoming more constructive as well (in addition to JPM, Goldman, etc., per posts this week and several that will be in the Monday note (be sure to check the “Other Stuff” area tomorrow).

One thing we will need to keep an eye on is long-end yields. As I mentioned Wednesday “until long-end yields stabilize, it will keep pressure on the ‘elsewhere’ stocks.” Hopefully we see buyers come in next week to at least stabilize rates.

And as I said Monday:

wouldn’t you know it, but we ticked just about every box. The AI trade (after some early weakness) continued but we also got many of the “elsewhere” stocks participating as well, helped by yields stabilizing, which pushes us further away from systematic sell levels.

The one quibble is things might have been too good as a 1.5% move is not going to help systematics re-engage. That said, as noted in the Week Ahead, our most volatility sensitive systematic, vol-control, already de-risked as DB noted, so that is less concerning that it would be a couple of weeks ago.

And really things just continued on in similar fashion, although the gains were a little more concentrated today in the Tech space, but not yet the “either/or” market we have seen frequently during Tech rallies.

While it might impact at the margin, I don’t think ADP or the services PMIs are going to move things too much, so unless something material changes with the Iran situation, no particular reason to think this rally stops tomorrow.

So, as I said wrapped up Sunday:

I think I’m a little more constructive this week in large part due to the cleaner positioning as well as still robust earnings growth with DB notes is not fully reflected in equity prices. It seems investors are back to being a little more comfortable with AI/Tech cash flows coming around post AI-buildout, and discretionary buybacks are returning, although retail flows remain subdued.

While gamma looks to start the week relatively low, that means there is room for larger moves in both directions, and a deal with Iran as anticipated by President Trump, if it happens, may mean that large move is to the upside.

As noted in the Week Ahead, this week is packed with US economic data. Wednesday brings the July ADP employment report and services PMIs along with weekly mortgage applications and US petroleum inventories.

The Day Ahead

In terms of Fed speakers, tonight (8.15pm) we have Kansas City Fed President Schmid. I’d imagine he’ll say like Musalem over the weekend he would have voted for a hike if he was on the FOMC this year. Then Wednesday we have Governor Cook (who has drifted more hawkish but considered part of the center of the Fed) and San Francisco President Daly who is a dove at heart but has drifted more neutral along with the other doves due to the persistent inflation.

While there are no Treasury auctions this week, tomorrow morning we’ll get the specific borrowing amounts by maturity for the next three months as well as a forward looking statement on whether those might change in upcoming quarters. As noted in the Week Ahead: “With 10-year yields the highest in 18 months and 30-years the highest since 2007, I’m sure Scott Bessent is loathe to add fuel to the fire by increasing auction amounts or tipping a coming increase in long-end supply with the forward looking statement, even as most expect that to come at some point.” The shortfall indicated in the borrowing amount released Monday (see post below) will therefore likely be filled mostly by increased sales of T-Bills (less than 1 year in maturity).

Q2 earnings season continues with 42 SPX components reporting Wednesday with seven >$100bn market cap (LLY, SNDK, WDC, DIS, UBER, APP, CVS in order of earnings weight).

Ex-US we’ll get global services PMIs, Japan Wage data, BoJ minutes, and policy decisions in India and Brazil.

The first part of our two-part act regarding third quarter Treasury borrowing completed this afternoon with the Treasury giving the borrowing forecast for the quarter raising it to $739 billion, an $68 billion increase from its May projection.

Lower projected cash flows from government operations were the main reason for the higher borrowing need (likely related to tariff refunds).

The more important part (for markets) comes Wednesday morning when specific borrowing amounts by maturity are announced for the next three months as well as a forward looking statement on whether those might change.

During the July–September 2026 quarter, Treasury expects to borrow $739 billion in privately-held net marketable debt, assuming an end-of-September cash balance of $950 billion. The borrowing estimate is $68 billion higher than announced in May 2026, primarily due to lower projected net cash flows, partially offset by the higher-than-assumed beginning-of-quarter cash balance.

During the October–December 2026 quarter, Treasury expects to borrow $628 billion in privately-held net marketable debt, assuming an end-of-December cash balance of $850 billion.

Additional financing details relating to Treasury's Quarterly Refunding will be released at 8:30 a.m. on Wednesday, August 5, 2026.

Wednesday, August 5 data and speakers highlighted by Goldman:

• 08:15 AM ADP employment change, July (GS +65k, consensus +68k, last +98k)
• 09:45 AM S&P Global US services PMI, July final (consensus 53.6, last 53.6)
• 10:00 AM ISM services index, July (GS 55.0, consensus 54.5, last 54.0)
• 04:05 PM Fed Governor Cook speaks

We estimate that the ISM services index increased by 1.0pt to 55.0 in July, reflecting the increase in our non-manufacturing survey tracker (+1.5pt to 54.4).

Large SPX names reporting Wednesday:

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