Markets Update - 8/4/26
A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow
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.
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.
