August 18th Pre-Market Brief

Good Morning

Rough open. Not a market falling apart.

Housing starts fell twice as much as expected this morning. Folks are worried about a rate increase all while oil and war headlines keep trending up.

Let's dig in...

Today's Big Picture

1. Fund Managers Made Two Bets That Cannot Both Win
Bank of America surveyed 203 managers running $581 billion through last Thursday. A record 56 percent expect no landing, meaning growth and inflation both keep running, and 72 percent expect no rate hike before the November elections. Those two calls fight each other, because strong growth alongside hot inflation is the exact setup that has forced the Fed to move in the past. Equity allocation is the highest since November 2021, which leaves little room if either one breaks.

2. The Workaround Is Why This Standoff Drags
Brent is near $91 and West Texas above $85 after a cargo ship took a projectile five miles off Oman overnight. Prices are high but nowhere near panic, because Saudi Arabia now sells cargoes from outside the strait and buyers have rerouted around it. That adaptation cuts both ways, and Eurasia Group says pressure on Washington to reopen Hormuz has eased. Trump said Monday he is not in a hurry, which makes $90 oil a base case for the rest of the year rather than a spike to fade.

3. Nvidia Is Financing Its Own Customers
Nvidia committed up to $105 billion behind OpenAI's Ohio data center Monday, a week after lining up $500 billion with Wall Street to fund chip purchases. It holds the option to backstop a quarter of every one of those loans. Barclays says what changed this year is how long-dated AI debt has become, most of it maturing past ten years, which puts it head to head with Treasurys for the same buyers. Nvidia's order book now runs on cheap credit, and the thirty-year at 2007 levels says credit is getting expensive.

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Stock Spotlight (pre-market)

Home Depot $HD ( ▼ 0.29% )  
Beat on both lines with comparable sales up 1.7 percent against 0.9 expected, the best comp since fiscal 2022. Guidance was reaffirmed rather than raised, and it leans on tariff refunds to cover unplanned fuel and energy costs. Lowe's reports tomorrow morning into that number.

Klarna $KLAR ( ▼ 19.17% )  
Down hard after cutting full-year volume guidance to a range topping out near $151 billion from $155 billion. The quarter itself was fine, with a penny of profit against an expected loss and revenue up 27 percent. The cut is to how much its customers plan to buy, which makes this a demand call rather than a company problem.

Western Digital $WDC ( ▲ 5.35% )  
Led the memory group lower, down close to seven percent, with Sandisk $SNDK, Marvell $MRVL and Seagate $STX each off more than six and Micron $MU and SK Hynix $SKHY down more than four. Korean retail bought roughly $840 million of SK Hynix US receipts in July at about a tenth above the Seoul price. Leveraged semiconductor funds reset daily, which adds selling into the close.

Meta $META ( ▼ 3.54% )  
Down more than three percent as its trial opened this morning. Damages sought run as high as $1.4 trillion by one count, close to the entire company, though the states themselves have argued a far smaller number is realistic. Meta draws nearly all its revenue from ads and is funding its AI build out of that cash flow.

Fabrinet $FN ( ▲ 4.97% )  
Beat on fourth quarter earnings and revenue and guided above expectations, and fell nine percent anyway. The cause was a single line about normal first quarter expense seasonality creating a temporary margin headwind in fiscal 2027. Analysts now mark down one quarter of margin on a report where everything else came in high.

BHP Group $BHP ( ▲ 1.83% )  
Two-month high on record copper prices and its biggest dividend in four years. Copper delivered 54 percent of underlying earnings, the largest share of any BHP business for the first time. Part of that price move is buyers pulling purchases forward ahead of possible US tariffs on refined copper, which puts a clock on it.

What to Watch

Want to Know about this years upcoming IPO’s?
MarketBeat did an excellent job on this free IPO guide on IPO’s happening this year

Fed Minutes (Wednesday, 2 PM ET)
The July meeting happened when a September hike looked close to certain, and the minutes show how live that debate really was. Here is the part that runs backward from instinct: since the Fed started cutting in September 2024 it has taken its rate down about a point and three quarters while the thirty-year rose roughly a point and a third. A Fed that moves on inflation is what pulls the long end down, so the hike everyone is relieved about avoiding is the one thing that would help bonds.

Target, Lowe's And TJX Wednesday, Walmart Thursday
Lowe's is the clean comparison against Home Depot's number this morning. Walmart is the wider read on whether hesitation means trading down or just waiting. If both show the same pattern, the consumer story is about rates rather than income.

- John

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