August 21st Market Overview

Happy Friday

Wow, green screens look a lot better than yesterday's close. Some of today's buying traces back to Citadel finishing the Situational Awareness cleanup.

That was Leopold Aschenbrenner's AI fund, running about $45 billion at the start of July before margin calls on leveraged chip stock bets forced it to sell its entire stock book to Citadel overnight. Citadel now says it has pushed most of that risk back out through nearly 100 block trades worth more than $4 billion.

Three weeks of forced selling in AI names is finished.

Let’s dig in...

Today's Big Picture

1. Treasury's Bond Fix Lasted One Day

The Treasury said Wednesday it will at least double the amount of long-term bonds it buys back, starting September 9 and running through November 4. Adding a buyer that size was supposed to bring yields down. Yields fell for about a day, then climbed back to their highest levels in more than a decade, and that is what pressured stocks all week. Lawrence Gillum at LPL Financial called the plan a Band-Aid that does not fix the problem.

2. Bitcoin Is Back Above $77,000

Bitcoin is heading for its best week in almost three years and got close to $80,000 this morning. The move came from two places. Trump asked Congress this week to pass crypto legislation, and the Treasury's bond announcement knocked the dollar to its weakest level since May. Funds that hold bitcoin directly pulled in $1.6 billion Monday through Thursday, their best stretch this year.

3. Oil Climbs Again On Iran

Brent crude closed higher for a fifth day in a row and sits near $94. The Strait of Hormuz, the channel that carries a large share of the world's oil, is still closed, with 10 to 20 ships a day getting through against roughly 130 before the war. Scott Bessent lays out Monday exactly how Washington plans to cut Iran off from the global economy. Sanctions do not reopen the strait, so oil stays up here until the shipping does.

Market Overview

Index Performance

Stock Spotlight

Apple $AAPL ( ▼ 0.48% )  
named John Ternus its next CEO. Bank of America's Wamsi Mohan put Tim Cook's record in one number: Apple's market value grew about $32 million an hour for nearly 15 years.

Nvidia $NVDA ( ▼ 0.84% )  
plans to ship an AI chip built for China by year end, according to The Information.

BJ's Wholesale Club $BJ ( ▲ 5.4% )  
earned $1.36 per share on $6.09 billion in revenue and beat on both. CEO Robert Eddy said higher income members are still driving most of the growth.

Big Name Updates

Walmart $WMT ( ▼ 0.81% )  
kept JPMorgan's buy rating the day after its worst session in four years. Christopher Horvers cut his target to $125 and told clients the washout is finished.

SpaceX $SPCX ( ▲ 2.21% )  
stayed under pressure all week. Higher borrowing costs hit the capital-hungry names hardest.

Ross Stores $ROST ( ▲ 4.73% )  
earned $2.06 per share on $6.26 billion in revenue and raised its full-year outlook. Off-price is winning the value shopper right now.

Other Notable Company News

Strategy $MSTR ( ▲ 5.87% )  
and Robinhood $HOOD led the crypto names higher after this week's White House meeting.

Coinbase $COIN ( ▲ 7.85% )  
sat in that same meeting, where Trump pushed Congress to move on crypto rules.

Advance Auto Parts $AAP ( ▲ 1.6% )  
is finishing its worst week since 2023 after earnings.

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

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Sector Watch

Bond Market

Long-dated yields moved up again Today, the second day in a row.

• The 10-year and the 30-year each added about three basis points.

Leo Kelly at Verdence Capital says the market has already adjusted to a 10-year between 4 and 5. A run toward 6 is where it gets ugly, and we are nowhere near that.

Policy Watch

Fed

• No meeting this month, so nothing changes on rates until September.

• Minutes showed more officials open to hikes, while July hiring came in soft and inflation cooled.

• Trump pushed Congress to pass the Clarity Act after meeting crypto executives, which is what lit the fuse under bitcoin.

Tom Lee at Fundstrat thinks the quiet stretch gives stocks room to work back toward the highs before month end.

Fiscal & Trade

• Federal debt hit $40 trillion for the first time.

• Bessent says a bigger push on cutting the deficit is coming in the next few days.

James Sullivan at JPMorgan pointed out that Treasury is buying back long bonds while issuing more short-term bills. That moves the problem down the road.

International

Japan's headline inflation reached its highest level this year in July as energy costs climbed. The US has been helping Tokyo prop up the yen, and that is part of why the dollar keeps drifting lower.

What to Watch

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

Growth And Inflation, August 26

Economic growth and the Fed's preferred inflation gauge both land Wednesday morning. With the long end this touchy, the inflation print is the one that matters.

Nvidia Earnings, August 26

$NVDA reports after Wednesday's close. China shipments and AI demand will set the tone for the whole chip complex.

Jackson Hole, August 27 Through 29

Kevin Warsh's first symposium as Fed chairman. Listen for his read on inflation and on central bank independence.

Thanks for reading - you are now the more informed 🙂

- John

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