Weekend Update #290
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U.S. equities eked out modest weekly gains amid a session-by-session tug-of-war over Treasury yields, before giving back ground Friday following a much stronger-than-expected August jobs report. Monday set a risk-off tone, with the S&P 500 falling 0.71% as renewed U.S. strikes on Iranian targets lifted crude and pressured equities. Stocks recovered midweek, culminating in a 1.06% gain Thursday that brought the S&P 500 back near record territory as long-end yields stabilized and Fed Governor Christopher Waller struck a more dovish tone. Friday reversed much of that move: the Dow fell 0.51%, the S&P 500 declined 0.38%, and the Nasdaq lost 0.29%. Pressure was concentrated at the front end of the curve, with the two-year Treasury yield rising four basis points to a fresh 52-week high of 4.374%, while the 10-year held at 4.78% and the 30-year at 5.243%, leaving global long-end yields near their highest levels in nearly two decades.
August nonfarm payrolls rose 162,000, roughly triple consensus expectations near 55,000, while unemployment held at 4.1% and both June and July were revised higher. The report materially reframed the September 16 FOMC meeting, pushing fed funds futures to roughly a 58% probability of a hike after Waller’s Thursday comments had briefly pulled the odds back toward even. Energy supplied the other half of the inflation problem. Brent crude gained more than 6% on the week to roughly $95 per barrel and WTI held above $90 as fighting around the Strait of Hormuz — including tanker attacks, U.S. strikes on Iranian military infrastructure, and Iranian retaliation against U.S. bases — threatened flows through one of the world’s most important energy corridors. The downstream impact is already visible, with U.S. diesel at $5.688 per gallon, near its April peak, and European natural gas at a three-year high. Abroad, euro-zone inflation accelerated to 3.3% in August, its highest in nearly three years, with markets fully pricing a 25 bp ECB increase on September 10. U.S. services data pointed in the same direction, with the ISM services index at 55.4 and its prices-paid gauge at 72.6.
AI infrastructure remained the dominant equity theme. Nvidia agreed to acquire Hugging Face for approximately $13 billion, extending beyond hardware into the AI software and developer ecosystem while committing to preserve the platform’s open model. DeepSeek is also reportedly planning to deploy at least 160,000 Huawei Ascend 950DT accelerators at a new Inner Mongolia data center, potentially creating the largest publicly known Huawei cluster and further advancing China’s domestic compute stack. Tesla introduced the Cybercab into its Austin robotaxi fleet, though shares fell more than 6% Friday as the launch left open questions around deployment scale and the regulatory treatment of a vehicle without traditional driver controls. Uber announced plans to eliminate roughly 3,300 roles, or 10% of its workforce, including a 20% reduction in managers, as it flattens its organization and redirects investment toward ridesharing, delivery, and robotaxis.
Earnings were more challenging elsewhere. Lululemon fell 18% after comparable sales declined 9% and the company cut full-year guidance for a second consecutive quarter. Guidewire dropped 22% following a weak fiscal first-quarter revenue forecast, while Fair Isaac declined 17.5% after the FHFA ended its effective monopoly in mortgage credit scoring. On the policy and market-structure front, the administration is weighing another round of semiconductor tariffs with potential exemptions for companies investing in U.S. manufacturing. Separately, AMC publicly criticized Robinhood’s tokenized-equity product, arguing that investors could misunderstand the nature of their ownership and lack traditional shareholder rights.
U.S. stock and bond markets are closed Monday for Labor Day, compressing next week into four sessions. August CPI and PPI will dominate the U.S. calendar and could prove decisive for the September 16 Fed meeting now that labor-market data provide less justification for patience. The ECB meets September 10, with a 25 bp increase fully priced and guidance likely to matter more than the decision itself. GameStop reports second-quarter results September 8. Developments in the Strait of Hormuz remain the largest near-term swing factor for inflation expectations, while the long end also bears watching after Norway’s sovereign wealth fund proposed reducing government bonds to 50% of its benchmark bond index from 70%, a shift that could trim close to $80 billion from its U.S. Treasury holdings. With resilient labor markets, elevated energy prices, and rising long-term yields all pointing toward tighter financial conditions, the key question for risk assets is whether growth can remain strong enough to absorb a higher-for-longer rate path.
Friday's Close (Weekly Performance)
S&P 500 7,718.60 +0.09%
Nasdaq 26,506.99 +0.40%
Dow Jones 53,414.25 -0.27%
Thank you Blue Room Senior Analyst NICK PEART
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