Brawl Street Blues

Last Week

Bond yields slogged higher, with longer-term rates reaching their highest levels since the financial crisis; Walmart posted its slowest same-store sales growth since the pandemic; and peace talks between the U.S. and Iran showed no visible progress. Meanwhile, an ugly brawl broke out in the Wrigley Field bleachers between Cubs and White Sox fans. In short, a downbeat week.  The S&P 500 fell 1.4%, the Nasdaq composite dropped 2.1%, and the Russell 2000 slid 1.75%. Declining issues outnumbered advancing issues by a factor of 1.7-to-1; Bitcoin, oil, and gold enthusiasts, meanwhile, enjoyed nice rallies across those assets. The Health Care sector was the top performer, driven by rallies in Moderna and Merck shares following positive results on their breakthrough development of new cancer vaccine technology.

An interesting dynamic is also developing between the Federal Reserve and the Treasury Department, as the U.S. Treasury said it will at least double the maximum size of its liquidity-support buybacks of longer-dated nominal coupon securities. Fed Chair has made clear their attention to shrinking its balance sheet of those very same securities. Fueled by the extra cost of the war, the total national debt now exceeds $40 trillion. The dollar weakened 1%, holding slightly above its 4-year low. Any further declines in the dollar could be a canary in the coal mine, leading to higher rates and inflationary pressures. The 10-year Treasury yield reached 4.74%, up 4 basis points. Corporate bond yields are also rising as companies issue massive amounts of debt to fund the AI buildout.

On the Chicago Sports Scene, the Cubs hit a rough patch following the brawl earlier in the week, but snapped their losing streak in emphatic fashion on Sunday, routing the Mariners 19-2. Meanwhile, the Sox continue to lead the AL Central division—no comment on the Bears preseason game on Saturday night.

This Week

Nvidia’s earnings on Wednesday will be in focus. The Company’s earnings and revenues are expected to have doubled from the same quarter last year. The share price is down fractionally since its last earnings report, despite explosive growth.

The Bureau of Economic Analysis will release the personal consumption expenditures price index for July. Economists forecast a modest decline from the previous month, with core inflation at 3.2% for the year.

On Friday, investors will be listening closely to Fed Chairman Kevin Warsh’s assessment of inflation, monetary policy, and the rate outlook at the Jackson Hole summit.

Geopolitics remains a wildcard in the landscape, as we approach the 6-month mark of the Iranian conflict with no end in sight.

The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.