August 19th Market Overview

Happy Wednesday

Treasury said it will buy back twice as much old long-term debt, and yields fell on the news. Stocks, gold and bitcoin all went up with it. Chip stocks went the other way after a report that OpenAI is losing money faster than it earns it.

Let’s dig in...

Today's Big Picture

1. Treasury Steps Into The Long End

The Treasury will at least double its buybacks of older long-dated bonds, to $4 billion per operation. The 30-year yield came back to about 5.20 after touching a 19-year high on Tuesday. Gold hit an eleven week high, bitcoin cleared $68,000, and the dollar had its weakest close since May. This fixes plumbing, not the deficit, but plumbing was the problem this week.

2. One Trial Result Lifts All Of Biotech

Moderna and Merck said their personalized melanoma vaccine worked in a study of more than 1,100 patients. Moderna stock more than doubled. What stood out is that the entire biotech and pharma complex went along for the ride. One company's trial data almost never does that, and traders are reading it as proof the pipeline still delivers.

3. Money Moved a bit From AI Hardware And Bought Value

Chip names sold off after the report that OpenAI's losses are growing faster than its revenue. Broadcom $AVGO and AMD $AMD took the worst of it. Lower yields sent that money into value and rate-sensitive names instead. Massimo Santicchia at Procyon said the value bid tells you the earnings cycle is still healthy.

Market Overview

Index Performance

Stock spotlight

Target $TGT ( ▲ 5.11% )  
hit a 52-week high after beating estimates and raising full-year guidance. A $752 million tariff refund added $1.65 a share to the quarter.

Estee Lauder $EL ( ▲ 16.57% )  
beat on both lines and narrowed its losses. It guided fiscal 2027 earnings to $3.10 to $3.35 a share.

Coinbase $COIN ( ▲ 7.72% )  
led the crypto names as bitcoin cleared $68,000. Crypto executives met with President Trump at the White House this afternoon.

Cerebras $CBRS ( ▼ 4.1% )  
launched its CS-4 system, built on three wafer-sized chips. The company claims 30 times the output per user of graphics-chip systems.

Big name updates

Nvidia $NVDA ( ▼ 0.55% )  
trades at a steep discount to its AI peers on the cash it generates. Bank of America's Vivek Arya says the market is pricing OpenAI risk into the wrong stock.

Oracle $ORCL ( ▲ 0.67% )  
slipped on the OpenAI report. Its cloud story runs straight through OpenAI honoring some very large commitments.

Lowe's $LOW ( ▲ 2.32% )  
tempered its full-year outlook and finished higher anyway. Lower yields did that.

TJX $TJX ( ▼ 4.04% )  
raised its full-year profit outlook but missed on the quarter. It keeps taking share from shoppers trading down.

Other notable company news

Analog Devices $ADI ( ▼ 1.1% )  
beat on the quarter and guided above, with better gross margins than a year ago.

Honeywell Aerospace $HONA ( ▲ 6.46% )  
got a Morgan Stanley upgrade and a $205 target after a rough first month on its own.

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

Klarna $KLAR ( ▼ 2.96% )  
was cut to neutral at JPMorgan on slower European spending, target down to $18. (Horrendous company)

Kinross Gold $KGC ( ▲ 10.36% )  
and Agnico Eagle $AEM had their best sessions in years as gold hit an eleven week high.

La-Z-Boy $LZB ( ▼ 16.43% )  
swung to a quarterly loss on an unexpected drop in sales.

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Sector Watch

Bond market

Treasury sold $18.06 billion of 20-year bonds in the middle of all this. Investors bid $2.53 for every dollar offered, slightly below the average of the last six months. The bonds sold at 5.204%, the highest yield for that maturity since October 2023. The dollar had its weakest close since May.

The question now is whether long yields stay down after the news wears off.

Policy watch

Fed

The July meeting minutes showed a real split inside the Fed.

• Three officials voted to raise rates at that meeting.

• Many said another increase may be needed if inflation stays where it is.

So Treasury is trying to push long-term rates down while some people at the Fed want to push short-term rates up. Nobody should assume the next move is a cut.

Fiscal and trade

President Trump said the U.S. and Canada are close to a trade deal, with tariffs on American farm exports going to zero. He pushed back the tariffs he threatened on Canadian goods by three days. What the U.S. gives up in return is still unclear.

International

Washington and Tehran still disagree about whether the Strait of Hormuz is open.

• Gulf countries are shipping 9.2 million barrels of oil a day this month, down from 18 million before the war.

• Brent is back above $92, and natural gas in Europe is near its highest price since early 2023.

What to Watch

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

Walmart Earnings Tomorrow Morning

Target and Lowe's gave us two halves of the consumer picture. Walmart tells us where the middle is going. Alibaba, Deere and Ross Stores report the same day.

Nvidia on August 26

The whole AI trade reports next Wednesday. Watch the gross margin line more than the revenue beat, since memory costs are the live debate.

Thanks for reading - you are now the more informed 🙂

- John

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