August 31st Market Overview

Happy Monday

Stocks gave a little back on the last session of August, all three indexes still finish the month green for August. U.S. forces hit two Iranian rocket launchers in the Strait of Hormuz on yesterday, and Brent crude went back above $90.

The move I’m paying closer attention to is in rates, where traders now expect the Fed to raise in September.

Let’s dig in...

Today's Big Picture

Traders now expect a hike, not a cut

Odds of a September rate hike sit near two in three. They were about six in ten right after Kevin Warsh spoke at Jackson Hole on Friday. Warsh said this summer's better inflation readings do not tell him the underlying trend has improved. That single line is the whole September argument.

Oil is back above $90

U.S. forces struck two Iranian rocket launchers on Larak Island Sunday, the first acknowledged strike since late July. Iranian state media said Tehran fired back at U.S. bases in Jordan. Brent crossed $90 and energy was the only S&P sector to finish the day higher. Tom Hainlin at U.S. Bank says $80 to $90 oil is livable and puts the real pain threshold at $100.

California utilities lose their legal shield

State lawmakers rejected Governor Gavin Newsom's plan to stop insurers from suing utilities over wildfire claims. Edison International $EIX had its worst day since 2001. PG&E $PCG had its worst since the Covid selloff in March 2020. BMO cut PG&E to hold with a $21 target, and now assumes uncapped wildfire liability after 2030.

Market Overview

Index Performance

Stock spotlight

Apple $AAPL ( ▼ 0.95% )  
fell on Tim Cook's last day as CEO. John Ternus takes over tomorrow and Cook becomes executive chair. Cook took Apple from a $350 billion company in 2011 to more than $4 trillion.

Tesla $TSLA ( ▲ 5.05% )  
was the best performing stock in the S&P 500 today.

Eli Lilly $LLY ( ▼ 1.13% )  
is buying Merida Biosciences for up to $2.88 billion in cash. It adds an experimental drug for thyroid-related autoimmune disease. CEO Dave Ricks says Lilly has done more deals this year than in all of last year.

SpaceX $SPCX ( ▲ 0.61% )  
rose even after OpenAI said it will cut Cursor off from its models on November 12. SpaceX paid $60 billion for Cursor earlier this month.

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Big name updates

Nvidia $NVDA ( ▲ 0.59% )  
is putting $3.5 billion into convertible bonds from Taiwan's MediaTek. The part that matters is NVLink Fusion, which lets MediaTek's customers plug their own custom chips into Nvidia's rack systems. Nvidia is selling the foundation now, not just the chip..

Moderna $MRNA ( ▲ 0.91% )  
is the S&P 500's best performer this month. Its experimental mRNA vaccine, built with Merck, kept cancer from coming back in high-risk melanoma patients.

Strategy $MSTR ( ▲ 4.15% )  
bought 4,603 bitcoin for about $370 million last week, its first purchase since June. It now holds 845,050 coins worth roughly $66 billion.

Other notable company news

Chevron $CVX ( ▲ 1.53% )  
and the rest of the energy names rose with crude.

Intel $INTC ( ▲ 0.27% )  
and other chipmakers won back some of Friday's losses.

Pinterest $PINS ( ▼ 7.33% )  
finance chief Julia Brau Donnelly leaves at the end of October, with Vikram Naidu filling in.

PepsiCo $PEP ( ▼ 0.37% )  
reportedly dropped employer coverage of GLP-1 drugs, though Lilly says the number of employers covering them is about flat.

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Sector Watch

Bond market

Long-dated Treasury yields moved higher with oil. The 10-year is sitting near its highest level in about twenty years.

Policy watch

The Fed

Treasury Secretary Scott Bessent made the case against a September hike. He called the oil move a supply shock, said core inflation is restrained, and expects AI spending to lift productivity. His point is that you wait for second and third-order effects before you move.

Warsh was in Asheville too, 100 days into the job. He said secular stagnation now reads like history and called this a global investment surge. He was not expected to talk policy, and he did not.

Fiscal and trade

• Federal debt is past $40 trillion, with a roughly $2 trillion deficit likely for fiscal 2026.

• Fitch reaffirmed its AA+ rating and said Washington has not taken meaningful action on the deficit.

• The White House keeps issuing tariffs even after the Supreme Court struck down many of the steepest ones, most recently on Canadian goods.

Goldman's David Solomon put the choice plainly. Either the economy grows faster than the debt, or spending has to come down.

Data centers

Trump publicly backed the data center build-out and told communities to get on board. That came as local opposition spreads and some states pause new construction. The bottleneck for AI spending may end up being permission rather than chips or power.

International

• G20 finance ministers opened two days of meetings in Asheville, with U.S. CEOs invited for the first time.

• Bessent says Iran's economy could buckle within weeks or months, and that the sanctions plan works without China's help. The European Union publicly backed it.

What to Watch

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

September 1st data and a new Apple CEO

Manufacturing PMI, job openings, July construction spending and auto sales all land Tuesday. John Ternus starts at Apple. Dell and Palo Alto Networks report after the close.

September 3rd Fed speakers

Christopher Waller, Beth Hammack and Austan Goolsbee all speak Thursday. First real read on how split the committee is after Warsh's speech.

Thanks for reading - you are now the more informed 🙂

- John

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