Markets Update - 8/25/26

Quick Summary

• US equity indices opened higher Tuesday as Treasury yields and crude prices both eased for a second session. They would slip from their early peaks but grind back higher through the afternoon. At day’s end, the Nasdaq Composite led +0.7%, the Russell 2000 gained 0.5%, and the S&P 500 and Dow Jones Industrial Average both rose 0.3%.
• Support came from a continued reversal in two of last week’s major pressure points. Treasury yields fell sharply across the curve, with the 2, 10, and 30-year yields all falling around 7 basis points in part on easing Fed rate hike bets as WTI crude dropped more than 3% to around $82 as hopes rose that Pakistan could help revive talks around the US-Iran conflict and reopening the Strait of Hormuz.
• Indices were also supported by chip stocks rebounding ahead of Nvidia’s Wednesday earnings report. The PHLX Semiconductor Index rose +1.4%, Nvidia snapped a seven-session losing streak, and AMD, Micron, and Super Micro Computer also moved higher after recent weakness.
• The gains came despite another soft consumer read and renewed housing weakness. Consumer confidence fell more than expected as the Expectations Index deteriorated (even as the present conditions index improved), while July new-home sales saw the largest drop since weather-impacted January to second-lowest annualized sales rate since November 2023 boosting supply at that sales pace to the highest since January and before that last May.
• Retail also lagged, with Dick’s Sporting Goods seeing its worst session on record to 2002 after disappointing results with Walmart, Target, Nike, Deckers, and Lululemon falling in sympathy. Canada’s retaliatory tariffs added another trade-war concern, but lower oil, lower yields, and the semiconductor rebound carried the day.
• Attention now turns to Wednesday’s PCE inflation data and Nvidia earnings.

US equity indices opened higher but fell from their early peaks before spending the afternoon grinding back higher to finish with solid to modest gains led by the Nasdaq +0.7%. RUT +0.5%, SPX/DJIA +0.3%.

“The story at the end of July was that speculative excess in tech had been flushed out, with retail investors reducing risk and a significant deleveraging taking place. The more recent rebound in positioning suggests the market is moving beyond those downside concerns, while capital remains on the sidelines ready to be deployed.” — Skylar Montgomery Koning, macro strategist.

“So far, corporate conference calls have talked about a resilient consumer, so while the vibes may be sour, the spending has held up — and spending, not sentiment, is what shows up in corporate earnings. Markets can look past a bad mood. They can’t look past a consumer who actually stops spending,” said Bret Kenwell, eToro US investment analyst. “Investors won’t have to wait long for the next update, with tomorrow’s GDP and PCE inflation reports shedding further light on the economy.”

Investors are awaiting key events “that could define the direction of markets heading into September,” said Laura Cooper, global investment strategist at Nuveen. “From clarity on the Fed’s reaction function and the potential need for a September hike to whether AI earnings can revive tech enthusiasm, there is plenty for investors to digest.”

Nvidia

“Nvidia is operating on all cylinders and they’re doing absolutely everything correctly at this point,” said Mark Malek at Siebert Financial. “We’re anticipating good news here, but so is everybody.” Malek notes that good news is not good enough anymore, and any kind of misread or misstep this Wednesday could be a big challenge. “But for investors it could be an opportunity,” he added.

“Nvidia needs to give investors a reason to raise forward numbers,” said Amanda Lyons at Energy Group Capital. “The fundamental debate has shifted from whether AI demand exists to whether the extraordinary infrastructure buildout can continue generating sufficient economic returns.”

Fed Chair Warsh

“We believe that Mr. Warsh is more likely to stick to his guns,” said Matt Maley at Miller Tabak. “If he does, it’s going to be important that Nvidia has seen a much more positive reaction to its earnings/guidance than most of the other chip stocks have seen this earnings season.”

Bonds get a special callout because I feature the commentary from former boss to both Chair Warsh and Secretary Bessent in hedge fund legend Stan Druckenmiller who wrote what can only be described as a surprising op ed in the WSJ entitled “Let the Bond Market Speak” criticizing Bessent’s interventions. Some excerpts (the full piece is here)

I have spent five decades trading on a simple premise: Markets aggregate information no committee possesses, and prices are how that information reaches decision makers. The long-term Treasury yield is the most important price in the world. It is also the only fiscal disciplinarian the U.S. has left. Neither party will run on entitlement reform. Both have spent the past decade expanding commitments while ignoring arithmetic. Democracies don’t repair their finances because a budget office publishes a table. They repair them only when the cost of inaction becomes visible and immediate, when mortgage rates bite, when auctions tail, when the political price of a rising long bond finally exceeds the political price of touching spending.

Every basis point of artificial yield suppression is a subsidy to procrastination. Suppressed long rates sugarcoat the interest-cost projections, shrink the apparent urgency, and let incumbents assure voters the debt is someone else’s problem. If Congress and the administration are unlikely to touch entitlements even with the market’s signal, they are certain not to touch them without one. Whatever this operation saves in basis points, it will cost multiples in delay.

…

Once markets believe Treasury is defending a price, every rise in yields becomes a test of official resolve, and the operations must grow to survive the tests.

…

Buying back long bonds while funding the purchases with bills shifts duration, or long-term interest-rate risk, out of public hands—economically, a small dose of quantitative easing run out of the Treasury rather than the Fed, easing financial conditions while inflation sits above target.

…

What should happen instead is straightforward. Return buybacks to their stated purpose: small, scheduled, off-the-run liquidity operations announced at quarterly refundings, never off-cycle responses to yield levels. Term out the debt honestly and pay the price the market sets. If the 30-year must trade at 5.5% to clear, that isn’t a crisis. It is an invoice. Then do the only thing that durably lowers long-term yields: address the primary deficit. Reform entitlements gradually and honestly, through means testing, indexing changes, eligibility adjustments phased in over decades—so that the burden is shared across generations instead of dumped on the youngest.

The reward is enormous: A credible fiscal package would do more for the long end of the curve than a buyback program

In today’s Markets Update

• A deeper look at Tuesday’s stock and sector breakdown, including the Tech-led rebound, semiconductor strength ahead of Nvidia earnings, Nvidia snapping its seven-session losing streak, Super Micro’s move on Cisco’s expanded Nvidia partnership, and Energy’s decline as crude fell.
• A review of broader market participation, including sector breadth, large SPX winners and losers, the day’s heatmap, Dick’s Sporting Goods’ record decline, and the associated weakness in retail and athletic apparel names.
• A look at Nvidia-related setup posts, including CBOE on Nvidia options sentiment and expected move, CNBC/Barclays on Nvidia and Jackson Hole event risk, and MarketWatch/Mott Capital on the SMH “put wall.”
• A look at selected Bloomberg corporate headlines, including OpenAI’s Jalapeno chips, SpaceX’s planned Louisiana Starship launch site, Apple’s upgraded Mac mini and Mac Studio, Lambda’s potential funding round, and Dick’s Sporting Goods’ Foot Locker-related weakness.
• Updated technical charts across the SPX, Nasdaq, Russell 2000, and equal-weighted SPX.
• A look at current market structure, including low trading volumes, the sector-rotation story beneath the surface, HostileCharts/DailyChartbook on leadership concentration, and Liz Thomas on compressed intraday volatility.
• A look at the rates and Fed backdrop, including the rally in Treasuries, the 2-year auction, updated Fed hike expectations, Boston Fed President Collins, the move in 10-year and 30-year yields, and JPM on why Treasury’s long-end actions may prove temporary without fiscal consolidation.
• A look at volatility, including VIX, VVIX, and 1-day VIX ahead of Nvidia entering the next-day window.
• A review of cross-asset trends, including WTI crude, the dollar, SocGen/MarketWatch on EUR/USD fair value, gold, copper, natural gas, bitcoin, and spot bitcoin ETF inflows.
• A look at broader valuation and AI-related posts, including Mike Santoli on S&P 500 price/free-cash-flow valuation and Christophe Barraud on the “stealth” Ox Alpha AI model.
• A wrap-up on the Tech bounce ahead of Nvidia earnings, the still-constructive non-Tech backdrop, and the setup into Wednesday’s catalysts.
• A look ahead to Wednesday’s calendar, including US economic data, Fed speakers, Treasury auctions, SPX earnings, and ex-US highlights.

Stock and sector breakdown

As the down session on the SPX Monday was mostly a Tech story, the up session Tuesday was also led by Tech finishing +1% (after -1.6% Monday, which was its 7th straight down session, something it hadn’t done since February 2020). That said, there were still a total of 7 of 11 sectors higher (down one from Monday). But none were up over 1% (vs four Monday) and one was down more than that much (although smaller Energy which remains very volatile).

[BRIEFING.COM] Chip stocks provided the clearest source of leadership after coming under considerable pressure over the past several sessions. The PHLX Semiconductor Index gained 1.4%, lifting the information technology sector (+1.0%) to the top of the sector standings. NVIDIA (NVDA 212.95, +4.47, +2.14%) broke a seven-session losing streak ahead of its earnings report Wednesday after the close, while Super Micro Computer (SMCI 38.45, +3.28, +9.33%) ranked among the best-performing S&P 500 components after Cisco (CSCO 111.11, +0.88, +0.80%) expanded its NVIDIA AI partnership to include Supermicro rack-scale systems in its Secure AI Factory.

Strength among large chipmakers also helped the Vanguard Mega Cap Growth ETF rise 0.6%, although performance among mega-cap stocks outside of the semiconductor trade was less consistent. SpaceX (SPCX 137.97, +2.97, +2.20%) was a notable standout after confirming that construction of its Starbase launch facility in Louisiana will begin in 2027, while Meta Platforms (META 570.05, +11.03, +1.97%) provided support for the communication services sector (+0.5%).

The health care sector (+0.3%) also edged higher, with Moderna (MRNA 158.83, +19.94, +14.36%) again standing out. The stock continued its volatile stretch following last week’s triple-digit surge on positive melanoma vaccine results, rebounding sharply after some recent profit-taking.

The positive finish for the major averages contrasted with weakness across several areas that had performed better recently. Retail stocks generally struggled, contributing to a 0.9% decline in the consumer staples sector and a 0.3% loss in the consumer discretionary sector. Athletic apparel stocks were a particularly weak pocket following Dick’s Sporting Good’s (DKS 124.31, -55.02, -30.68%) earnings report, which featured disappointing results from Foot Locker, sending shares to their worst day on record. NIKE (NKE 39.48, -1.28, -3.13%) finished as the worst-performing DJIA component, while Deckers Outdoor (DECK 88.74, -3.34, -3.63%) and lululemon athletica (LULU 118.33, -4.45, -3.62%) were also notable S&P 500 laggards as the results weighed on sentiment across the group.

WTI crude settled cash trading $2.69 lower (-3.2%) at $82.29 per barrel amid a relatively quiet day of geopolitical headlines, sending the energy sector (-1.7%) to the bottom of the sector standings.

[Note: % changes above may differ from chart as chart uses futures.]

CBOE: Options sentiment for NVDA leans slightly bearish with NVDA put skew steepening into its Weds earnings. Options mkt expected move = 6.5-7%.

Nvidia and Jackson Hole event risk

CNBC: “S&P options are assigning remarkably similar risk to both events, pricing implied moves of 67 [basis points] for NVDA earnings and 65bp for Jackson Hole,” wrote Barclays strategist Stefano Pascale. One basis point equals 0.01%, or 1/100th of a percent.

“NVDA’s current implied earnings move exceeds four of its last five realized moves. The risk is a large surprise recouples NVDA with the market, possibly compounded by a Warsh disappointment Friday,” Bank of America strategist Meriem Hafid wrote.

NVDA shares fell after the last four earnings releases.

Barclays’ Pascale notes that small cap stocks have shown “particularly pronounced sensitivity” to Jackson Hole.

“Since 2018, the Russell 2000 has moved more than 3% in roughly half of all Jackson Hole episodes, including gains of 3.2% and 3.0% following the last two editions. By contrast, IWM options currently imply only a 1.0% move for this year’s event, slightly more than one-third of the average realized move observed in recent years, suggesting attractive value in owning optionality,” he wrote.

MarketWatch: The SMH semiconductor ETF was down four of five sessions coming into Tuesday, but is higher along with Nvidia.

Michael Kramer at Mott Capital Management notes that the SMH bounced off a "put wall" at $545 on Monday (a specific strike price in an options chain where there is a large concentration of put option open interest).

However, should SMH selling take the price meaningfully below the put wall level then dealers’ buying support will turn to selling accelerating a downside move toward $500, according to Kramer.

Dick’s Sporting Goods Inc. sank the most on record after reporting that the Foot Locker chain it acquired last year continues to struggle. Shares ended the day down over 30%.

“We're going to go through some pain,” Dick’s Chairman Ed Stack said on a call with analysts.

Despite the weaker sector breadth the number of large SPX winners (up over 3%) doubled to ~30 from 16 Monday back to Friday levels (but still relatively low). Large losers (down over 3%) did the opposite falling to 17 from ~30.

After-hours movers

None today, here were the mid-day movers:

Dynatrace — The AI-powered observability platform moved 3% higher on the back of an upgrade to overweight at Morgan Stanley. The investment bank believes demand should help propel growth of at least 20% and margin expansion for Dynatrace over the next couple of years.

Shift4 Payments — Shares were up nearly 4% after Wells Fargo upgraded Shift4 Payments to overweight from equal weight on Tuesday, citing “improved set up” after the second quarter. Wells Fargo noted that the company, which provides software and payment processing solutions, has multiple opportunities for expansion.

Moderna — The biotech giant rallied 13%, building on its strong gains from last week — when shares more than doubled in value. On Tuesday, Wolfe Research upgraded the stock to peer perform, citing its outperformance last week on the positive trial results for a joint cancer vaccine developed with Merck. “We suspect MRNA will trade largely around intismeran narrative in the near-term and see excitement and momentum from specialist, generalist & retail investors alike to continue,” Wolfe analyst Alexandria Hammond wrote.

Marvell Technology – Shares of the semiconductor producer jumped 5% after a couple of Wall Street firms raised their price targets. Susquehanna boosted its price target to $265 from $230, noting that the “longer-term ‘custom XPU’ story is also brightening amid an expanded partnership with Google.” Rosenblatt also raised its price target to $300 from $240. Marvell is expected to report earnings on Thursday.

Advanced Micro Devices — The chip stock gained 5% after Raymond James upgraded the semiconductor company to strong buy from outperform, with a new $641 price target that implied 40% upside from Monday’s close. The analyst expects AMD will overtake Intel in the central processing unit market.

Semiconductors — Chip stocks rose as a group, with Intel advancing more than 1% along with Nvidia. The VanEck Semiconductor ETF (SMH) gained more than 1%.

Kura Oncology — The biotech stock climbed almost 10% after CEO Troy Wilson disclosed buying up 100,000 shares of common stock in a regulatory filing.

Navitas Semiconductor — Shares jumped 5% after Navitas Semiconductor said it will power management solutions company Claros in a deal valued at $232.8 million in cash and shares.

Other corporate news

OpenAI said its new Jalapeno chips performed better than Nvidia’s current lineup during testing, underscoring progress developing AI processors in-house.

SpaceX plans to build a new $100 billion launch site for its Starship rocket on the southern coast of Louisiana, allowing the company to expand operations of the behemoth vehicle that’s critical to its future.

Apple Inc. announced upgraded Mac mini and Mac Studio desktop computers, giving the in-demand machines major processor upgrades.

Lambda Inc., an AI cloud-computing provider backed by Nvidia, is in talks to raise as much as $3 billion in a round that could tee it up to go public next year, according to people familiar with the efforts.

Dick’s Sporting Goods Inc. sank the most on record after the Foot Locker chain it acquired last year continued to struggle, raising doubts about the broader sneaker market.

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, another tight range for the SPX which edged higher following the rising 20-DMA. As noted Thursday though the SPX along with the other three indices below have seen their MACD cross over to “sell longs” positioning.

I mentioned the low volume nearly two weeks ago, and BBG with a chart showing it continued since then. The "spike" was the day of the Treasury buyback announcement.

Sector rotation and compressed intraday volatility

As we saw Monday that push/pull between sectors (lately Tech vs Health Care, Energy, Financials, etc.) is reflected in a pair of charts from the @dailychartbook nightly email.

As @LizThomasStrat notes (second chart) SPX intraday volatility is around the least of Trump 2.0 which masks the rotation under the surface seen in @HostileCharts' chart of near 52-week highs which reflects the same dispersion.

19. SPX vs. leadership. "The S&P 500 doesn't own leadership ... This is a sector rotation story."

20. Intraday ranges. "Intraday volatility has narrowed significantly after the Fed meeting volatility and is now hovering at the lowest levels of the 2nd Trump administration."

Nasdaq remains just below its 20-DMA to its 50-DMA.

The Russell 2000 (RUT) also right on its 20-DMA.

The equal-weighted SPX little changed again just off all-time highs above all support levels.

Treasury yields fell across the curve for a third session Tuesday:

Two-year Treasury yields gave almost all of last week’s gain falling seven basis points to 4.17% following a strong 2-year auction as well as a paring back of Fed rate rate hike expectations. They are 26 basis points below the peak close July 23rd, which was the highest since February of last year.

They are ~51 basis points above the Effective Fed Funds rate (red line), continuing to call for rate hikes.

Given all the drama in the Treasury market of late, I wanted to do a quick write-up on the very solid 2-year Treasury auction today. If there was a question whether foreign buyers were going to step away from US sovereign paper, at least on the short end the answer seems to be a clear “no.”

The $69bn sale came at a clearing yield of 4.204%, stopping through (below expectations) by -0.4bps, the third consecutive stop-through, and much better than the 6-mth avg of +0.2bps.

Overall demand (bid/cover) slipped to 2.60, the lowest since March, from 2.66 in July and just under the 6-mth avg of 2.61 — the one soft spot.

But indirect (mostly foreign) demand jumped to 66.0%, the highest since March 2025, from 56.6% in July and way above the 6-mth avg of 56.9%.

Direct (domestic) bidders fell to 23.1%, the lowest since March, from 34.1% in July and well below the 6-mth avg of 30.1% — largely crowded out by the foreign bid.

That left dealers with just 10.9%, up from 9.4% in July but well below the 6-mth avg of 13.0%.

@investingLive’s Greg Michalowski gave it a B+ , noting the domestic shortfall was more than made up for by much stronger than average international demand.

ZeroHedge called it “a stellar 2Y auction,” adding that “one would hardly have guessed that the bond market had gone through the most turmoil of 2026 just a few days earlier.”

The 5-year and 7-year follow Wednesday and Thursday.

Chances for a September hike fell back to 34%, one this year to 68%.

Boston Fed President Collins on policy

Boston Fed President Collins (not an FOMC voter until 2028) in a blog post on the bank's website echoes the majority position from the July FOMC minutes saying that her modal (most likely) outcome is that inflation is durably returning to 2 percent consistent with "mildly restrictive" interest rates, but leaving rates unchanged "will require continued evidence that inflation is indeed coming down."

In that event, "should evidence of sustained inflation progress not materialize, I believe it will be appropriate to tighten policy soon to ensure we deliver price stability in a reasonable time frame."

Her expectations are grounded in "the pass-through to prices of previous tariffs should largely have played out by now, and the impact of high energy costs should begin to wane."

In addition, "a balanced labor market, with economic activity growing near trend, should not be a source of additional price pressures,... mildly restrictive monetary policy, together with the recent rise in longer-term interest rates, should mitigate, at least to some extent, a possible re-acceleration in household and business spending... And third, solid productivity growth - if it continues — should put some downward pressure on prices."

She also notes upside risks to inflation from both additional adverse supply shocks and a stronger-than-expected pace of economic activity, including that "the AI build-out appears to be putting upward pressure on core goods inflation."

10-year yields also down seven basis points to 4.63% the lowest close since Aug 5th.

30-year yields also down seven basis points to 5.16%, the lowest close since July.

JPM says they think Bessent's moves to calm 30-year Treasury yields may, in fact, actually exacerbate the situation after some short term relief.

Strategists Jay Barry and Jason Hunter say the moves will push up term premiums (risk premium for holding longer duration Treasuries): without “real fiscal consolidation” markets could “view this action as lacking credibility.”

They note in the UK the government’s debt-management office tried to lower long-term bond yields by decreasing the amount of supply in the market. While that worked well initially in 2022, at the time of a minibudget crisis, a string of successive announcements over time had increasingly less impact with long-term gilts currently hovering near multidecade highs.

“Accordingly, we believe [Wednesday’s] actions are likely to have a fleeting impact on long-end yields unless action is taken to reduce the debt,” the strategists said.

VIX fell slightly to 15.5. The indicator is in its “normal” range post-GFC, consistent with ~0.97% average daily moves in the SPX over the next 30 days.

The VVIX (VIX of the VIX) also fell back to 85.7, the lowest close of the year.

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.

The 1-day VIX remains remarkably subdued easing to 8.4, again the second lowest reading (after last week’s) since the first week of January, consistent with a move of 0.53% in the SPX next session. This will jump tomorrow as NVDA earnings after Wednesday’s close enter the “next day” window.

WTI dropped another -4.6% to the middle of its range over the past month.

The DXY dollar index (which is fixed weighted with a heavy (57%) weighting vs the euro), made it to the 200-DMA area before falling back to finish slightly lower on the session.

The daily MACD as noted three weeks ago flipped to quite negative while the RSI was under 40 (and is again, was actually under 30 Wednesday the most oversold since January). As noted Thursday, the path lower from here is the easier one, but it’s been holding in remarkably well.

MarketWatch: Fair value for the euro vs. the dollar, according to SocGen’s macro strategist Kit Juckes, “should be around $1.12” as opposed to the current market rate of $1.17.

“The Trump presidency keeps on enjoying a weaker dollar than it deserves.” Treasury Secretary Bessent is “keeping the market cost of money cheaper than the economy warrants,” Juckes opines, citing Druckenmiller’s criticism of the bond market maneuvers in his Wall St Journal oped that went out Monday. 10-year yields are below the country’s nominal growth rate, despite near enough full employment, a 6% budget deficit and above-target inflation.

That said, Juckes acknowledges that in terms of the direction of interest-rate differential, and relative growth revisions on the European economy, a higher euro is warranted. For now, the dollar will stay below its fair value until U.S. domestic data turn more positive and Warsh feels compelled to tighten, he says.

Gold futures (/GC) little changed, taking a break from their run higher over the past week. As noted at the start of the month “still has a good technical setup with positive daily MACD and RSI,” and that remains the case.

US copper futures (/HG) jumped +1.7% to just under an all-time closing high, remaining in its uptrend from March (in addition to its longer term uptrend running to February 2020). I said a week ago, the “supportive technicals I’ve been touting for the last month are now less positive,” but that is changing rapidly.

US natural gas futures (/NG) little changed remaining in their range over the past three weeks. The daily MACD as noted two weeks ago flipped to more bullish and the RSI is just under 50. That said, as I have mentioned for the past month it has layers and layers of resistance above.

Bitcoin futures like gold took a break from their six-day streak where they gained over 25%. Daily technicals remain strongly positive.

Probably no surprise that inflows into spot Bitcoin ETFs in August are the most this year.

Misc

Mike Santoli: "The way earnings growth has outraced rising stock prices in recent quarters has allowed bullish voices to celebrate valuation compression done the easy way."

“This is true if focusing on the standard price-to-earnings ratio, which has ebbed from 23 to 20 in the past 10 months. But, as we know, the biggest earners are reinvesting furiously to bankroll the AI buildout. Now what’s scarce, along with memory chips and gas turbines, is free cash flow."

"Here we see the S&P 500 price-to-free-cash-flow ratio, using projected FCF, sitting just under 30, a multi-decade high."

"another way to express this: Stocks have a free cash flow yield of 3.4% as 10-year Treasuries sit at 4.74%."

Christophe Barraud on Ox Alpha

From @C_Barraud's Tuesday Brief is a post with his thoughts on the mysterious new artificial intelligence model called Ox Alpha which appeared on AI marketplace OpenRouter last week under the label “stealth model.”

BBG: "Ox Alpha offers a roughly 1 million-token context window that can process text, image and video input, according to OpenRouter. Stripe Inc. Chief Executive Officer Patrick Collison described it in a post on X as ‘very impressive,’ while users have shared positive reviews on YouTube and Reddit."

Christophe: "I think Ox Alpha is probably being underestimated because it may be another sign that the technological frontier is becoming increasingly crowded and that the cost of producing highly capable intelligence is falling much faster than expected."

“If we eventually find out that Ox Alpha is Chinese, uses materially less compute than comparable Western models and operates at extremely low inference costs, then it would be fair to ask whether the US AI industry is spending hundreds of billions of dollars building something whose economic rents are being commoditized far faster than anticipated. At that point, it would no longer be just a technology story as we would need to start reconsidering how value is distributed across the entire AI value chain.”

Wrap-up

I mentioned Monday that the Tech sector had seen the longest losing streak since the early days of Covid, and so it’s not a huge surprise that we saw a bounce. The question remains whether it is just that or something more. It will be hard to get a good feel for that tomorrow with Nvidia earnings looming after the close, but that should serve as a clearing event one way or the other.

But as I also said in the Week Ahead “the broader strength Friday was good to see and hopefully continues into the upcoming week,” and noted Monday “despite some major catalysts for the non-tech trade this week, we saw just that consistent with my overall conclusion that ‘otherwise, things remain tilted positively.’” We’ll see if that trade can continue into Wednesday as well. The morning data (particularly the personal income and spending along with PCE prices) will likely have some influence.

The Day Ahead

Things heat up Wednesday.

In US economic data we’ll get July personal income and spending which contains PCE prices, the Fed’s current preferred inflation metric, along with the second revision of Q2 GDP and July durable goods (lasting >3 years) orders in addition to weekly mortgage applications and US petroleum inventories.

In terms of Fed speakers, just Richmond Fed President Barkin (who spoke twice today as well) on the calendar as we await Jackson Hole starting Thursday.

In non-Bill (>1yr maturity) US Treasury auctions we’ll get 5-years.

In terms of SPX Q2 earnings we’ll get our highlight of the week in Nvidia along with eight other SPX components including CRWD and CRM.

Ex-US highlights are Japan PPI and Australia CPI.

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Wednesday August 26

Wednesday August 26 Data: US July PCE, personal income, personal spending, durable goods orders, Japan July PPI services, Australia July CPI. Central banks: ECB's Cipollone speaks. Earnings: NVIDIA, Crowdstrike, Salesforce, Synopsys, Agilent, Veeva, HP, Okta. Auctions: US 2-yr FRN (reopening, $28bn), 5-yr Notes ($70bn).

From Christophe Barraud

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