Quick Summary:
US equity indices opened higher Friday despite Treasury yields and crude prices pushing higher again.
After a choppy morning, the indices would finish with solid gains led by the Dow Jones Industrial Average and Russell 2000 with gains of 1% and 0.9% respectively, while the S&P 500 and Nasdaq Composite both rose 0.4%. The Nasdaq-100 (+0.3%) snapped a five-day losing streak, its longest since December 2024 even as the S&P 500 Tech sector lost ground for a sixth straight session, the longest streak since September 2022.
The action underneath the surface looked better than the headline S&P 500 gain suggested. SPX sector breadth improved to 7 of 11 sectors higher from just two Thursday, with three sectors up more than 1% and five up roughly 0.9% or more. Utilities was the only substantial decliner, falling more than 2%. The equal-weighted S&P 500 was +0.7%.
Friday’s gains were not enough though to avoid a down week. The Dow Jones Industrial Average fell 0.9%, the S&P 500 -1.4%, the Russell 2000 -1.7%, and the Nasdaq Composite -2.1%.
Attention now turns to a number of market moving catalysts next week including July’s personal income and spending report containing PCE inflation data, Nvidia’s earnings (both Wednesday), and Chair Warsh’s highly anticipated Jackson Hole speech Friday.
Some market commentary:
US equities:
“Equity markets are vacillating between concerns about the tech sector and rising bond yields, though today, both seem to have declined,” said Joachim Klement, a strategist at Panmure Liberum. “Fact is that the US Treasury can do little if anything to turn the trend in long-term bond yields for good.”
“We don’t currently see bond market turbulence as a reason to reduce equity market exposure,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office. “It does, however, reinforce the case for diversified equity exposure across sectors and regions, with a balance of cyclical, tech, and defensive stocks.”
“The selloff was triggered by growing concern over debt issuance and interest rates, signals of a stressed consumer, and frustration over stalled progress in negotiations with Iran. There is rising skepticism on the AI buildout, driven by growing reliance on debt and public resistance to data center builds,” wrote Mark Hackett, chief market strategist at Nationwide, in commentary shared with MarketWatch.
“The takeaway from this week: there is no universal safe haven. In a world of competing risks, your defences need to be diversified too.”
— Skylar Montgomery Koning, macro strategist.
Bonds:
“Equity markets are vacillating between concerns about the tech sector and rising bond yields, though today, both seem to have declined,” said Joachim Klement, a strategist at Panmure Liberum. “Fact is that the US Treasury can do little if anything to turn the trend in long-term bond yields for good.”
“We suspect long-dated Treasury yields will stabilize over the next few weeks as some calm is restored following the recent bout of volatility in global sovereign bond markets,” said Joe Maher at Capital Economics.
“Perhaps the silver lining is that for savers, or for those in retirement or near retirement or just looking for income, higher Treasury yields may provide that income opportunity,” said Mona Mahajan, head of investment strategy at Edward Jones. “In addition, from the perspective of the Federal Reserve, higher yields also mean that the market is doing some form of tightening for the Fed,” she added.
Next week:
Allspring Global Investments’ Ann Miletti said Wall Street has more to worry about from the Jackson Hole economic symposium than earnings from Nvidia.
“The thing that we try to stay focused on with all the craziness going on is what you can control,” said Miletti. “Looking at companies from a bottom-up perspective, really understanding what companies have the balance sheet and the flexibility to kind of get through any environment — that’s really where we’re focused, and that’s what we have control of.”
The Treasury chief’s efforts to keep down the long-end of the yield curve provided a clear signaling mechanism, said Stephen Brown at Capital Economics. He’ll presumably be hoping Federal Reserve Chair Kevin Warsh “doesn’t undo his work during his Jackson Hole speech next week,” Brown added.
In today’s Markets Update:
A deeper look at Friday’s stock and sector breakdown, including the broad rebound, but another soft session for Technology.
A review of market breadth and participation, including large SPX winners and losers and Goldman’s prime desk on August selling in Industrials versus buying in Financials.
A look at selected CNBC midday movers and Bloomberg corporate headlines, including crypto names, Ross Stores, Citadel/Situational Awareness, Anthropic’s chip ambitions, Nvidia/Poolside, Apple job cuts, and Nscale’s IPO plans.
Updated daily and weekly technical charts across the SPX, Nasdaq, Russell 2000, and equal-weighted SPX, including the Nasdaq-100 snapping its losing streak and the weekly charts across the major indices.
A look at the rates and Fed backdrop, including Treasury yields, updated Fed hike expectations, Goldman on the FOMC minutes, Strategas on the 10-year yield, BoA on the Treasury buyback surprise, and Hartnett on the policy stakes around the long end.
A look at volatility and market structure, including VIX, VVIX, and 1-day VIX.
A review of cross-asset trends, including WTI crude, the dollar, gold, gold miners, copper, natural gas, and bitcoin with selected weekly charts.
A look at the latest gold-related positioning/sentiment note from BoA’s Fund Manager Survey and the Daily Chartbook/NDR dividend-yield versus Treasury-yield chart.
A wrap-up on the week’s risk-asset pullback but Friday bounce and next week’s PCE, Nvidia, and Jackson Hole catalysts.
A look ahead to next week’s calendar, including US economic data, Jackson Hole, Treasury auctions, and SPX earnings.
