August 14th Market Overview

Happy Friday

Small red to end the week, but we're still closing out a third winning week in a row on the S&P. Consumers told the University of Michigan they're feeling worse about the economy, retail sales came in soft, and oil moved up again on Iran headlines. Add mid-August volume where half of Wall Street is at the beach and ye, no wonder it’s slow. I hope you enjoy the weekend.

Let’s dig in...

Today's Big Picture

1. The Consumer Took A Breather In July

Retail sales fell to $763.6 billion, the biggest monthly drop since May 2025. Sentiment followed, printing 51 for August against 55.2 in July. Fewer than one in ten Americans expect their pay to beat prices next year, down from nearly one in five in December 2024. Soft spending on top of this week's cool inflation reads means the Fed almost certainly holds in September.

2. Hyperscaler Spending Passes The Rest Of The Index

Bank of America expects the five hyperscalers to spend $1.072 trillion on capital projects next year. The other 495 companies in the S&P 500 will spend about $1.066 trillion combined. Three years ago the hyperscalers were a sixth of index capex. Apollo says the funding is shifting toward private lenders now that public bond markets are filling up.

3. The Record Earnings Season Has An Asterisk

Seaport's Jonathan Golub says second quarter earnings grew more than half from a year ago, against a historical median near a tenth. Seven of every ten dollars of Alphabet's profit came from other income, mostly marking up private stakes in SpaceX and Anthropic. Amazon booked about two thirds the same way. Strip those gains out and Golub still calls it the strongest season outside a recession rebound.

Market Overview

Index Performance

Stock spotlight

Applied Materials $AMAT ( ▼ 5.19% )  
guided above estimates and the stock fell anyway, with earnings of $3.50 a share on $9.12 billion in revenue. The stock has more than doubled this year, so solid was never going to be enough.

Sandisk $SNDK ( ▲ 6.28% )  
got an upgrade to overweight from JPMorgan with a $2,250 target. Harlan Sur says the company is set up for the memory demand coming out of AI inference work.

Micron $MU ( ▲ 1.52% )  
picked up a buy rating from NewStreet Research with a $1,250 target. It closed Thursday at $949.83.

Workday $WDAY ( ▼ 4.01% )  
gave back part of Thursday's move, its best day since 2016, after Reuters reported Silver Lake has held early talks about buying it. Evercore's Kirk Materne reads the interest as proof the market has overdone the AI threat to big software.

Big name updates

Meta $META ( ▼ 0.69% )  
is down for the year and Bank of America thinks that is wrong. Justin Post says the street is missing what Meta can charge other companies for access to its computing capacity and its models.

Cisco $CSCO ( ▼ 1.44% )  
fell after HSBC cut it to hold and took the target to $120 from $137. Abhishek Shukla sees growth slowing from early next fiscal year.

Marathon Petroleum $MPC ( ▼ 0.2% )  
and Valero $VLO were the week's standouts. The Iran war and Ukrainian strikes on Russian refineries have pulled gasoline and diesel off the market faster than crude, which widens what refiners make on every barrel.

Other notable company news

Reddit $RDDT ( ▲ 11.48% )  
joins the S&P 500 before Monday's open, taking the spot AvalonBay leaves behind once Equity Residential buys it.

Innventure $INV ( ▼ 55.14% )  
lost about half its value after pulling guidance for Accelsius, its data center liquid cooling business.

Intuitive Machines $LUNR ( ▲ 8.17% )  
said its order backlog reached $1.55 billion on June 30, and Stifel moved the stock to buy with a $26 target.

Madison Square Garden Sports $MSGS ( ▼ 1.55% )  
is having its best week since May after the Knicks' playoff run brought in $20.2 million a game.

Wayfair $W ( ▲ 0.49% )  
rose on a Bernstein upgrade to outperform, with the firm noting it is growing US revenue in a furniture market that is not growing at all.

Blue Chip Stocks
MarketBeat names and lists “7 Blue-Chip Stocks to Add To Your Forever Portfolio”

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Sector Watch

Bond market

Yields rose again even after the weak retail sales number, which tells you the bond market is still watching inflation and not growth. The 10-year sits near 4.7 and the 30-year is above 5.2. Sam Goldfarb at the Journal traces the recent climb back to Kevin Warsh's July 29 press conference, when investors started questioning how hard the Fed chair will push on prices. German 10-year yields rose more than ours did today.

Policy watch

Fed

The market now expects a hold in September instead of a hike. Two cool inflation prints this week did most of that work and today's data did the rest.

• Bret Kenwell at eToro framed the tradeoff well: a weaker economy is a steep price to pay to dodge a quarter point hike.

Trade

Trump put tariffs on imported drones heavier than 25 kilograms, on any drone with thermal imaging, and on some components. Smaller drones get a lower rate.

• The White House also plans an onshoring program for companies that build drones here.

• Unusual Machines $UMAC and Red Cat $RCAT led the domestic drone names higher.

Iran

• Defense Secretary Pete Hegseth said the Navy can hold the blockade of Iranian ports indefinitely, rotating ships as needed.

• Treasury Secretary Scott Bessent told Newsmax that new financial measures land next week.

• A tanker leaving the Persian Gulf took minor damage from a drone, according to a UK naval agency that tracks shipping incidents. Nobody has claimed it.

What to Watch

The AI Infrastructure's Backbone
10 Stocks Powering the AI Buildout

Retail Earnings Next Week

Walmart $WMT, Target $TGT, Home Depot $HD and Lowe's $LOW all report. Guidance matters more than the quarter here. Listen for whether shoppers are trading down or simply buying less.

New Iran Measures

Bessent said they arrive next week. Oil has already had a strong week, so the reaction will tell you how much of this is priced in.

Thanks for reading - you are now the more informed 🙂

- John

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