Markets Update - 8/28/26

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Quick Summary

• US equity indices were little changed into Chair Warsh’s Jackson Hole speech Friday, which as I mentioned in last night’s update “suffice to say expectations are modest although on balance very few are looking for a dovish outcome with some looking for a hawkish speech to gain control of the long end of the yield curve.”
• And we saw exactly that as detailed in my Warsh + NFP revision piece (see here) with Warsh saying “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” and stating that he didn’t see much progress from the July inflation reports, that rates did not show much evidence of being restrictive, and the breadth of inflation was concerning among other items discussed in the linked piece (which I’ll expand a bit on in the Week Ahead).
• Following the release of the speech bets on rate hikes jumped with September odds moving to 58% from 35% Thursday and two hikes priced in by March. This saw the 2-year Treasury yield surge 12 basis points in what was the largest 2-year yield move following a Jackson Hole Fed Chair speech this century according to JP Morgan data. While the 30-year yield initially fell, it would reverse course seeing the entire curve rise. The DXY dollar index also jumped now back to levels that followed last week’s Treasury buyback announcement.
• After the speech equity indices parted ways as large caps initially lifted while small caps fell. Large caps though would turn lower soon thereafter led to the downside by Tech giving back some of Thursday’s rally. At day’s end, the Russell 2000 led declines at -1.4%, the Nasdaq Composite lost 0.5%, the S&P 500 fell 0.3%, and the Dow Jones Industrial Average finished roughly flat.
• The index-level weakness was cushioned by strength in non-semiconductor megacap stocks, with Amazon, Alphabet, Apple, and Microsoft helping Consumer Discretionary and Communication Services finish at the top of the sector standings.
• But semiconductors were a drag. The PHLX Semiconductor Index fell 3.5%, as Nvidia gave back a sizable portion of Thursday’s post-earnings surge, and Marvell lagged after its report.
• For the week, the Russell 2000 never really got going and fell -1.5%, while Thursday’s Tech-led rally allowed the Nasdaq Composite and S&P 500 to hold weekly gains of +0.9% and +0.5%, respectively. The Dow Jones Industrial Average also gained +0.5% after trading in a narrow range all week.
• Attention now turns to next week where we’ll get a flurry of reports culminating in Friday’s Employment Situation report, a key input into the Fed’s September policy decision-making.

US equity indices were little changed into Warsh's speech (circle) then parted ways with large caps lifting while small caps fell.

Large caps would turn lower led by the Nasdaq on Tech weakness but finish well above the -1.4% for the RUT w/Nasdaq -0.5%, SPX -0.3%, DJIA flat.

For the week, the RUT never really saw any green ending -1.5%, but the Nasdaq & SPX made enough headway Thursday to hold gains of +0.9% & +0.5% respectively.

The DJIA in contrast surfed through the week in a narrow 1% band also ending +0.5%.

Market commentary

US equities

“It’s all about artificial intelligence,” said Dave Sekera, chief U.S. market strategist at Morningstar. “And I think that’s going to continue through next week as well as everyone’s trying to reorient where they want to position their AI plays.”

FOMC

“I would say Warsh was successful in reestablishing confidence,” said Larry Holzenthaler at Catalyst Funds. “He came across as very focused on inflation and bringing it back in line with the Fed’s 2% target. The market seems to be reacting exactly the way the Fed wants.”

“I believe he did a very good job of laying out a pathway, a framework, a playbook and the rules of his road on what he’s watching out for and what will guide him in terms of properly calibrating monetary policy as best he can,” said Peter Boockvar, author of The Boock Report.

“Although we expect incoming data to improve, the risk of a September hike has increased,” said Seema Shah at Principal Asset Management. “The positive market reaction highlights that investors place a premium on policy clarity, even when that clarity carries a more hawkish message.”

“The caveat is that we think the remaining data likely will show some further incremental progress and suspect Warsh may well also hope that this is the case,” said Krishna Guha at Evercore. “So we hold back from moving odds-on for September at this juncture and instead view this as close to a coin toss.”

“Warsh’s comments boosted rate-hike odds and terminal-rate pricing, though markets may have overreacted given the Fed’s September decision remains highly dependent on upcoming payrolls and inflation data,” said Oscar Munoz at TD Securities.

“I found this speech in particular to be a very strong kind of message, both a message to the market but also just a kind of message in general that the way the Fed has done business for maybe the last 40 years in some ways has not been as rigorous as it could be,” said Bill Birmingham, managing director at REX Financial. Birmingham added that Warsh’s comments about the composition of CPI in particular signal “that he is very much looking for consensus internally to raise rates,” he added.

“I agree with the analysis that the chairman put forth that we’ve been above the target. It was going the wrong way. We’ve gotten a couple of months of more benign readings, but that certainly doesn’t feel like out of the woods,” Chicago Federal Reserve President Austan Goolsbee said in a CNBC interview from the Fed’s symposium in Jackson Hole, Wyo. Though Goolsbee did not commit to a policy path, he said “all eyes got to be for Fed action.”

Stock and sector breakdown

Tech giveth on Thursday and taketh away on Friday leading six sectors to the downside after soaring +3.4% on Thursday. Utilities also closed down more than 1%. The Tech weakness overpowered the strength in fellow growth sectors Consumer Discretionary and Communication Services which both finished up over 1%.

BRIEFING.COM The consumer discretionary (+1.7%) and communication services (+1.6%) sectors were lifted by solid gains in Amazon (AMZN 266.43, +10.17, +3.97%) and Alphabet (GOOG 342.88, +5.17, +1.53%) .

Apple (AAPL 319.70, +5.12, +1.63%) and Microsoft (MSFT 513.53, +8.47, +1.68%) also advanced, providing some support for the major averages despite weakness elsewhere in the information technology sector (-1.3%).

Semiconductor stocks were the largest source of pressure, sending the PHLX Semiconductor Index down 3.5%. NVIDIA (NVDA 217.48, -10.50, -4.61%) gave back a sizable portion of yesterday’s post-earnings surge, while Marvell (MRVL 216.62, -24.83, -10.28%) was a notable laggard following its quarterly report.

Software stocks also surrendered some of yesterday’s earnings-driven gains, although the selling was considerably less pronounced. The iShares Expanded Tech-Software Sector ETF declined 0.7%, with Workday (WDAY 204.72, +11.15, +5.76%) standing out on the upside following its earnings report.

Six S&P 500 sectors ultimately finished lower. In addition to the information technology sector, the utilities (-1.1%) and industrials (-1.0%) sectors were among the main laggards.

While the financial sector (+0.3%) notched a modest gain, PayPal (PYPL 53.66, -7.81, -12.71%) finished as the worst-performing S&P 500 component after Bloomberg reported that the Advent/Stripe consortium abandoned its planned leveraged buyout valued at more than $50 billion, although the companies could resume discussions at a later date.

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

Number of large SPX winners (up over 3%) fell to just 14 from ~30 Thursday, 18 Wednesday continuing to remain very subdued (they haven’t been above 30 in over a week). Large losers (down over 3%) had been even less volatile, but jumped to 45 Friday from 20 Thursday, 7 Wednesday, 17 Tuesday, but still a far cry from elevated levels.

While nothing like what we’ve seen at times earlier this year, speculation edged back into the Nasdaq with our first stock trading 1 billion+ shares in a couple of weeks and a couple more near 300 million.

After-hours movers

None today, here were the mid-day movers:

Workday — Shares jumped 6% after the enterprise artificial intelligence platform posted second-quarter results that topped estimates.

Salesforce — The software company’s stock continued its post-earnings rally. Shares gained 3% on Friday, adding to the stock’s advance of more than 22% from a day earlier.

Nvidia — Shares of the chip giant dropped more than 3%.

Amazon — Shares of the e-commerce giant popped nearly 4% after Evercore ISI hiked its price target on the stock to $355 from $315.

Strategy, Coinbase — The crypto stocks fell 7% and 6%, respectively, as bitcoin prices pulled back.

ServiceNow — The enterprise software platform’s stock popped 3%, heading for a second straight winning day after Finance chief Gina Mastantuono spoke at Deutsche Bank’s technology conference this week and said that ServiceNow’s AI business is on track for its full-year target of $1.5 billion.

Affirm — Shares jumped 5% after the buy now, pay later company reported revenue and guidance also above estimates.

Gap — Shares popped nearly 13% after the retail company announced Michael Francis will take the helm at Old Navy, starting Nov. 2.

Elastic N.V. – Shares jumped over 17% for the data analytics company after full-year guidance topped analysts’ expectations.

Marvell Technology — Shares dropped 10% after Marvell called for current quarter adjusted earnings of $1.10 per share, plus or minus 5 cents, while analysts polled by LSEG anticipated $1.07 per share.

Rubrik — Shares dropped over 11% for the security and AI operations company.

Autodesk — Shares dropped 4% for the maker of 3D design software after its earnings projections failed to beat estimates.

Other corporate news

A consortium of buyout firm Advent and payment processor Stripe has decided to abandon its pursuit of fintech pioneer PayPal Holdings Inc., a potential deal that would have ranked as one of the biggest-ever leveraged buyouts, according to people familiar with the matter.

Gap Inc. named a retail industry veteran to head Old Navy while profit outpaced estimates, offsetting a sales decline at the value chain and lower sales guidance.

Rivian Automotive Inc. announced that Chief Financial Officer Claire McDonough would step down from the electric-vehicle manufacturer in the coming months to take the same role at turbine maker GE Vernova Inc.

Eli Lilly & Co.’s blockbuster diabetes drug Mounjaro won US approval to reduce the risk of serious cardiovascular problems, broadening the medicine’s reach beyond controlling blood sugar and strengthening its position in the increasingly competitive market for GLP-1 drugs.

BioNTech SE and Roche Holding AG abandoned a trial of a personalized cancer vaccine, dashing hopes that had been raised by a rival drugmaker’s recent success in the field.

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, SPX fell back to its rising 20-DMA, just a little more than 1% away from an all-time closing high. As noted a week ago though the SPX along with the other three indices below have seen their MACD cross over to “sell longs” positioning. RSIs remain in better shape so technicals are inconclusive, but nothing yet to turn bearish.

Nasdaq Composite also on its 20-DMA. It remains further from all-time high territory.

The Russell 2000 (RUT) slightly more concerning falling under its 50- DMA, but not something we haven’t seen as recently as the start of the month.

The equal-weighted SPX also on its 20-DMA.

Weekly charts overall not in bad shape but a preference for the SPXE and SPX as the Nasdaq and RUT have seen their weekly MACDs slip negative.

Treasury yields rose across the curve for a third day Friday in a big “bear flattening” meaning shorter maturity yields rose more than longer maturities (bearish because it’s associated with Fed rate hikes):

I said yesterday “if Chair Warsh does tip his hand about the likelihood of rate hikes this could see a big move tomorrow.” And while he didn’t really do that I don’t think, he most certainly was more hawkish than expected, and the two-year Treasury yield reacted jumping over 12 basis points (the largest move post-Jackson Hole Fed Chair speech this century) to 4.38%, the highest close since January 2025.

They are ~73 basis points above the Effective Fed Funds rate (red line), now yelling for rate hikes.

That’s the furthest above the EFFR since November 2022.

And with that sort of move in the 2-year as you would expect Fed rate hike bets jumped according to the CME’s Fedwatch tool with the chance of a September hike now 57% from 34% Thursday and a hike this year at 89% from 75%. Two hikes are 51% priced this year and 100% priced by March.

From @C_Barraud's as normal packed morning Brief is a post from former Fed Whisperer Nick Timiraos (it appears that role has for now been moved to the FT, as Nick to his great credit has not sugarcoated his coverage of the Fed to the apparent dismay of the administration) who notes that the administration's focus on bringing long end rates lower runs in direct conflict with the numerous Fed members that want to see more restrictive financial conditions as well as Warsh's own statement at the July press conference implying that raising rates was less necessary when the markets were tightening financial conditions on their own.

This obviously puts Warsh in an uncomfortable position. “Bessent’s words and actions are a real pain for Warsh,” given broader concerns that monetary policy could be subordinated to financing the government at a time of elevated inflation, said Jon Faust, an adviser to the last three Fed chairs. “Doing it now, just before Jackson Hole, strikes me as pretty inconsiderate if not a slap in the face.”

10-year yields up five basis points to 4.73% the second highest close this year.

30-year yields reversed from early losses to finish up two basis points at 5.21%, well off the highs but also in their uptrend since October.

Fed watchers at JPMorgan, Apollo Global, and Morgan Stanley are among a number of analysts calling for a hawkish Warsh.

A “spot down-vol down” day with the VIX easing back to 14.4. The indicator is at the bottom of its “normal” range post-GFC, consistent with ~0.90% average daily moves in the SPX over the next 30 days.

The VVIX (VIX of the VIX) bounced from the lows of the year to 86.6.

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.

Even adding the extra weekend day the 1-day VIX fell back to 10.2, continuing the streak of low Friday closes since early August. The current reading is consistent with a move of 0.65% in the SPX next session.

WTI little changed remaining in 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), took advantage of the Warsh speech to finally push through the 200-DMA and from there run higher to the 100- DMA now recovering all of the losses post-Treasury buyback announcement.

The daily MACD also flipped positive while the RSI is just about to 50, so it has some technical momentum vs the not unsubstantial resistance above.

Gold futures (/GC) fell back to levels from last Wednesday as they continue their consolidation. Technicals are also starting to deteriorate with the daily MACD close to crossing more negative and the RSI falling from over to well under 70, a signal of a potential consolidation. If they are lower on Monday I will likely exit my position or at least the add from when they cleared the 50-DMA.

US copper futures (/HG) eased back to just over the 20-DMA, remaining in the uptrend from March (in addition to the longer term uptrend running to February 2020). Technicals are mixed, but no reason to sell.

Another weekly all-time high for copper, and its technicals continue to look solid.

US natural gas futures (/NG) fell back after taking a shot above the 50/100-DMA confluence Thursday. As I said then, “if they actually can close above, a run up towards the 200-DMA is not unlikely.” The daily MACD as noted two weeks ago flipped to more bullish and the RSI is over 50.

Bitcoin futures gave back most of this week’s gains. Daily technicals remain solid for now but the RSI is close to falling from well over to under 70, a signal of a potential consolidation. I’ll stay long as long as it stays above the 200-DMA (and will add there if it holds).

Rejected at the 50-week moving average but the weekly MACD and RSI are solid.

Misc

Three-month intra-stock correlation in the S&P 500 has fallen to 0.1, the lowest level in data going back to 1990, according to Truist Wealth.

29. Anthropic growth. "Anthropic Y/Y spend growth decelerated in July as user growth slows. Total customer spend with Anthropic was up ~2,800% Y/Y but decelerated for the first time, while customer growth also decelerated for the 2nd consecutive month."

Wrap-up

I said yesterday:

We’ll get our last “clearing event” (at least until next week) in the Chair Warsh speech tomorrow morning (which comes alongside the NFP benchmark revision). I have no better idea than anyone else what he’s going to say, but if the FT piece earlier this month is any indication, it’s likely to be more of the same with perhaps some clarification on some points.

And while that was broadly accurate, that “clarification” came in a much more hawkish than expected fashion with Warsh hewing to the Fed consensus that if inflation doesn’t moderate appreciably in due course rate hikes or other policy moves are forthcoming. But as discussed in the piece today, and as I’ll expand on this weekend, Warsh went beyond that to hawk territory saying he didn’t see much progress from the July inflation reports, that rates did not show much evidence of being restrictive, and the breadth of inflation was concerning.

That said, overall we remain where we were with the August payrolls report next week and CPI the week after the determining factors in whether we get a rate hike in September.

Given the sharp move in short-term rates and reversal in longer-term rates equities broadly hung in fairly well keeping me optimistic for next week, but I want to go through all the indicators this weekend to see where things stand with positioning, etc.

So, more this weekend.

The Week Ahead

Unfortunately for traders wanting one last pre-Labor Day vacation, next week is not particularly conducive as Tuesday we start September and a flurry of reports culminating the week with one of the critical inputs to the Fed’s September rate decision calculus in the August Employment Situation report.

In addition, we’ll get August ADP monthly employment, Challenger job cuts, PMIs, and auto sales, July JOLTS, construction spending, and factory orders, as well as the standard weekly reports (jobless claims, mortgage applications, and US petroleum inventories (not ADP though with the monthly report this week)).

I don’t have a good calendar of Fed speakers at this point, but we will hear (again) from regional Fed presidents Hammack and Goolsbee. We’ll also get the Beige Book for the September meeting Wednesday.

In terms of non-Bill (>1yr in maturity) US Treasury auctions, we’re off next week.

In terms of earnings, we continue to wrap up Q2 earnings season with 10 SPX components reporting including the last of our top 20 in market cap with Broadcom (AVGO). But there are three other components >$100B in market cap in DELL, MDT, PANW.

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