August 20th Market Overview

Happy Wednesday

Tech's having its second bad day. Profit taking is spreading through the AI names that pretty much carried us all year. The Fed minutes didn't help, turns out they're more divided than we thought, with two governors actually wanting rate cuts back in July.

Retail earnings are all over the map with Lowe's crushing and Target…well not crushing.

Let's dig in...

Today's Big Picture

Tech selling continued 
The semi conductor ETF $SMH ( ▲ 2.15% ) heading for worst week since May as profit-taking has hit AI names. OpenAI CEO comments about AI bubble characteristics sparked fresh selling.

Retail split on consumer health 
Lowe's beat Q2 estimates and acquired Foundation Building Materials for $8.8 billion to expand contractor business. Target reported 11th consecutive quarter of declining comps (down 1.9%) with transactions falling 1.3%. Michael Fiddelke takes CEO role February 1st.

Fed revealed rare division 
Christopher Waller and Michelle Bowman dissenting on July rate hold - first dual governor split since 1993. Minutes showed officials divided on tariff timing effects on inflation. Powell speaks Friday at Jackson Hole with September cut still expected.

Government eyes chip equity stakes 
Intel $INTC ( ▲ 5.53% ) and other CHIPS Act recipients in exchange for funding. SoftBank investing $2 billion in Intel provided some support as policy uncertainty weighs on sector.

Market Overview

U.S. Stock Indexes, Past Three Sessions

Stock Spotlight

Target $TGT ( ▲ 2.25% ) 
Posted its 11th straight quarter of declining comparable sales, down 1.9% with consumer transactions falling 1.3%. COO Michael Fiddelke replaces Brian Cornell as CEO February 1st.

Lowe's $LOW ( ▲ 3.16% ) 
Beat Q2 earnings expectations and raised full-year outlook while announcing the $8.8 billion acquisition of Foundation Building Materials. The deal strengthens Lowe's professional contractor segment, which has been a growth driver as DIY spending softens.

Palantir Technologies $PLTR ( ▲ 1.64% ) 
Extended losses for a sixth consecutive session, down over 17% this week despite trading above 200 times forward earnings. The defense tech company became the S&P 500's worst performer as OpenAI CEO Sam Altman's bubble comments sparked AI valuation concerns.

Novavax $NVAX ( ▲ 2.75% ) 
Dropped after Bank of America cut to underperform from neutral, citing the recent run-up and murky revenue outlook. Analysts noted significant commercialization hurdles for the COVID-19 shot as competition intensifies in the vaccine space.

Big Name Updates

Apple $AAPL ( ▲ 1.27% ) 
Amazon $AMZN ( ▲ 3.1% ) 
Alphabet $GOOGL ( ▲ 3.17% ) 
all declined as the trillion-dollar tech cohort shed $385 billion in market cap. The selling wasn't company-specific but broad profit-taking after massive year-to-date gains.

VanEck Semiconductor ETF $SMH ( ▲ 2.15% ) 
headed for its worst week since May on valuation concerns.

JPMorgan Chase $JPM ( ▲ 1.64% ) stands to win big acquiring Goldman Sachs roughly $19 billion Apple Card portfolio. Wells Fargo analysts called it a win-win - JPM gets massive consumer data for better underwriting while Goldman exits a struggling business.

Intel $INTC ( ▲ 5.53% ) and Micron Technology $MU ( ▲ 1.63% ) 
faced extra pressure beyond the sector selloff. Reports the U.S. government may take equity stakes in CHIPS Act recipients added policy uncertainty on top of valuation concerns.

Other Notable Company News

Hertz $HTZ ( ▲ 8.57% ) 
Jumped on its Amazon Autos partnership to sell pre-owned rental vehicles directly to consumers. The deal provides new visibility and higher-margin sales channels, helping the company monetize its fleet more effectively.

TJX Companies $TJX ( ▼ 0.71% ) 
Gained after Q2 earnings and revenue beat estimates as consumers flocked to T.J. Maxx and other discount banners. The results highlight shifting spending patterns toward value retailers amid economic uncertainty.

Estée Lauder $EL ( ▲ 4.0% ) 
Fell after fiscal 2026 guidance missed analyst expectations, with the beauty giant warning of roughly $100 million profit hit from tariff headwinds. Subdued North American consumer confidence led some retailers to tighten inventory levels.

Avis Budget $CAR ( ▲ 3.46% ) 
Declined following Bank of America's downgrade to underperform. Analysts said current fundamentals and the broader macroeconomic environment don't support the stock price at these levels.

Sector Watch

Bond Market

The 10-year Treasury yield held just below 4.287% as Fed uncertainty kept bonds volatile. Capital Economics highlighted a structural shift → central banks reducing balance sheets removed a key buyer of government debt. This demand gap could drive yields higher without genuine fiscal reform, pressuring equity valuations that depend on lower discount rates.

Policy Watch

Fed Division Deepens
July meeting minutes exposed rare cracks in central bank unity. Christopher Waller and Michelle Bowman dissented on rate holds - the first dual governor opposition since 1993. The split signals growing debate over policy direction as officials weigh inflation risks against employment weakness.

Tariff Timeline Tensions 
Fed officials remain divided on tariff timing effects. Some want to "watch and learn" how import costs flow through to broader prices, while others warned against waiting for complete clarity before adjusting policy. This disagreement directly impacts September rate cut probabilities.

Federal Reserve Independence Challenged
President Trump called for the resignation of Fed Governor Lisa Cook, escalating a direct political attack on the central bank. The demand followed accusations of mortgage fraud against the Biden appointee by housing-finance chief Bill Pulte.

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What to Watch

Powell's Jackson Hole Speech Friday (know this is getting old)
Fed Chair speaks at the annual symposium with markets parsing every word for September rate cut signals. Given the dual dissent from Waller and Bowman, any hawkish tone could sink rate-sensitive tech stocks further while a dovish lean might spark relief rallies.

Critical Inflation Data Coming
PCE on August 29 is the Fed's preferred gauge - core could hit 2.9% annually, well above target. Producer Price Index September 10 and Consumer Price Index September 11 complete the trilogy. These three readings will determine if the Fed's inflation hawks or employment doves win the September 17 debate.

Tech Rotation Reality Check 
Two-day selloff tests whether this is profit-taking or genuine sector rotation. Watch for money flows into previous laggards like UnitedHealth $UNH, Salesforce $CRM, and Merck $MRK. If defensive names start outperforming, the AI bubble narrative gains credibility.

Chip Tariff Wildcard
Trump teased chip levy announcements this week after Intel and Micron already faced government equity stake concerns. Any details on scope, timing, or exemptions will move the entire semiconductor complex and could accelerate or reverse the current tech rotation.

Thanks for reading 🙂

- John

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