August 26th Market Overview

Happy Tuesday

Markets pushed higher today despite Trump's move to fire Fed Governor Lisa Cook, traders are more focused on the potential for easier money than constitutional drama.

For the record: I think the Fed independence is crucial for efficient and objective monetary policy.

Really though, tomorrow's the day that matters. Nvidia earnings could either restart the AI party or send everyone back to reality. Either way, it's going to be interesting.

Let's dig in...

Today's Big Picture

Fed Fight  
Trump fired Governor Lisa Cook. She's suing to keep her job. Markets think Trump wins eventually and rates come down - that's why the yield curve steepened and small caps led today.

Markets Up  
All major indexes finished higher. Small caps outran large caps as traders bet on easier money. Consumer confidence hit 97.4 (vs 96.5 expected) and durable goods orders fell just 2.8% (vs 4.1% expected).

Big Deals  
AT&T $T ( ▼ 0.63% ) is buying $23 billion of spectrum from EchoStar $SATS. Eli Lilly $LLY reported its obesity pill helped patients lose 10.5% of body weight vs 2.2% for placebo - filing for approval this year to compete with Novo Nordisk $NVO.

Trade Threats  
Trump wants tariffs on countries that tax Google $GOOGL ( ▼ 0.66% ) and Meta $META ( ▲ 0.03% ) through digital service taxes. Also threatened China with tariffs if they restrict rare-earth magnet exports.

Market Overview

U.S. Stock Indexes

Stock Spotlight

Eli Lilly   $LLY ( ▲ 5.68% ) delivered strong obesity drug results. Its pill helped patients lose 10.5% of body weight vs 2.2% for placebo. The company files for approval this year, challenging Novo Nordisk's market dominance.

EchoStar   $SATS ( ▲ 70.05% ) secured a $23 billion spectrum deal with AT&T covering 400+ US markets. The transaction closes in mid-2026.

Advanced Micro Devices   $AMD ( ▲ 1.92% ) received a Truist upgrade to buy. Hyperscale customers are deploying AMD chips at scale, moving beyond price negotiations with Nvidia. The IBM quantum partnership adds growth potential.

Constellation Brands   $STZ ( ▼ 3.2% ) faced a Bank of America downgrade to underperform. The firm cited weak beer sales, pressure on Hispanic demographics, and Mexico tariff risks.

Big Name Updates

Nvidia   $NVDA ( ▲ 1.19% ) moved higher before Wednesday earnings. Investors focus on data center revenue growth and forward guidance amid AI infrastructure demand questions.

Tesla   $TSLA ( ▲ 1.16% ) faces continued skepticism from Baird. The firm maintains a neutral rating, citing automotive estimates that appear too optimistic while investors focus on robotaxi potential.

Interactive Brokers   $IBKR ( ▲ 0.88% ) joins the S&P 500 Thursday, replacing Walgreens. The change reflects the shift from traditional retail to digital finance platforms.

Apple   $AAPL ( ▲ 0.63% ) faces potential tariff exposure as the administration targets countries with digital service taxes on US tech companies.

Other Notable Company News

Semtech   $SMTC ( ▲ 14.92% ) reported strong second-quarter results and robust third-quarter guidance.

Cracker Barrel   $CBRL ( ▲ 6.2% ) recovered after President Trump suggested returning to the original logo following rebranding criticism.

Spotify   $SPOT ( ▲ 0.33% ) launches direct messaging this week, allowing users to share content within the app.

Energy Fuels   $UUUU ( ▲ 12.26% ) partnered with Vulcan Elements to develop US rare-earth supply chains outside China.

Sector Watch

Bond Market

The Treasury market reflected expectations around Fed changes. The yield curve steepened as long-term rates rose while short-term yields declined. This pattern suggests investors expect:

• Political pressure driving near-term rate cuts

• Reduced inflation control focus over time

• Higher long-term borrowing costs as Fed credibility declines

The 10-year Treasury yield sitting at 4.262%.

Policy Watch

Fed Responds  
The Federal Reserve defended governor tenure as a "vital safeguard" while pledging to respect court decisions on Cook's removal. Treasury Secretary Scott Bessent backed Trump's moves, claiming the president is "restoring trust" at the Fed.

Defense Contractor Shake-up   Commerce Secretary Howard Lutnick  
revealed Pentagon discussions about taking equity stakes in defense contractors like Lockheed Martin $LMT ( ▲ 1.72% ) . Lutnick called current arrangements "a giveaway" and pointed to the Intel $INTC deal as the new model.

Trade Week Ahead  
Chinese negotiator Li Chenggang arrives in Washington for the first formal talks since the tariff truce. Key issues include unresolved soybean purchases and EU pressure over digital service taxes on US tech companies.

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What to Watch

Nvidia Earnings Wednesday  
The AI story lives or dies here. Data center revenue, margins, and guidance will determine if this rally continues or tech gets hammered. A miss sends ripples through the entire sector.

Federal Reserve Court Fight  
Cook's lawsuit tests whether presidents can actually fire Fed governors. A Trump win fundamentally changes central bank independence. Watch for injunctions that could drag this out for months.

China Trade Talks Resume  
First formal talks since the tariff truce begin this week with negotiator Li Chenggang. Key issues:

• Unresolved soybean purchase commitments

• Rare earth mineral export restrictions

• Potential for 200% tariffs if talks fail

Pentagon Equity Stakes  
Lutnick's defense contractor comments could reshape the entire military-industrial complex. Watch for specific proposals beyond the Intel model that could hit major contractors like Lockheed Martin.

Thanks for reading 🙂

- John