US futures are a "sea of red" (as Bloomberg describes it) in early trading as thin summer volumes persist, with the wrong kind of inflation coming to the fore and Monday’s tech selloff weighing on sentiment despite bullish AI news. The recent stock-bonds disconnect is finally being reappraised with US futures lower across the board. As of 8:00am ET, S&P 500 futures fell 0.
4% with Nasdaq 100 contracts down 1.1% with Semis, Mag7, and Memory all under pressure, while Software is bid. Nvidia dropped 1.
8% as the cost of protecting its debt against default closed in on a high reached last month. Defensives and Energy are leading as investors continue to de-gross / de-lever. Tech stocks drove declines across global markets equities as long-dated bond yields pushed further into multidecade highs and oil prices extended their climb, draining traders’ appetite for risky assets.
Yields on 30-year Treasuries rose 2bps to 5.33%, the highest since 2007 as "yields seem to be reacting to a combination of energy prices, the deteriorating US fiscal situation, elevated credit issuance, and BOJ/JPY dynamics which are all driving term premia higher", per JPM. US crude neared $85 a barrel with Brent trading above $91, while the Diesel crack spread rose above $100 for the first time ever, as tensions in the Middle East showed no sign of easing.
The dollar was little changed while gold declined. Price pressure concerns are hardly new. But with long-term yields around the globe hitting multi-decade highs, the debate may be shifting toward whether the set-up reflects persistent “sticky” inflation or an AI-driven “growth” dynamic.
For the former, the signals are clear to see: persistently elevated oil prices, soaring diesel costs, “Dr. Copper” dynamics and the effects of El Niño. Today’s macro data focus is weekly ADP, Import / Export prices, Housing Starts, Mfg measures, and Pending Home Sales.
Tomorrow’s Fed Minutes are likely more impactful as he bond market focuses on next week’s Jackson Hole mtg / Warsh speechIn premarket trading, Mag 7 stocks are mostly lower: Meta Platforms (META) slips 1% as the company heads to court Tuesday for a high-stakes showdown with a coalition of state attorneys general over claims that the company deliberately designed Facebook and Instagram to encourage compulsive use among young users (Apple +0.6%, Microsoft +0.7%, Amazon -0.
4%, Alphabet -0.5%, Tesla -1.3%, Nvidia -1.
9%)Chipmakers and other AI-related firms slide, weighing on US stock futures, as risk-off sentiment sets in.Abercrombie & Fitch (ANF) is down 2% after Raymond James downgraded the clothing company to market perform following the stock’s recent rally.Amylyx Pharmaceuticals (AMLX) rises 26% after saying a late-stage trial of its experimental drug met its primary endpoint for patients who experience low blood sugar levels following bariatric surgery.
Aon (AON) slips about 1% on light trading after saying CFO Edmund Reese is leaving after two years in the post.Baidu ADRs (BIDU) drop 6% after the Chinese search-engine operator reported its fifth quarter of free cash outflow in the past six, thanks to soaring capital expenditures. Its revenue was shy of analyst estimates, dragged by underperformance at its subsidiary iQiyi.
Bath & Body Works (BBWI) climbs 3% after Citi raised the recommendation on the company to buy, with analyst Paul Lejuez noting a second quarter EPS beat and positive tone about recent product launches.Fabrinet (FN) slides 9% after the process engineering and manufacturing services firm’s Datacom sales disappointed investors.Home Depot (HD) climbs 2% after results beat estimates in the latest quarter, a sign that spending on improvement projects is holding up despite high borrowing and housing costs.
Norwegian Cruise (NCLH) falls 2% as Mizuho downgrades the company to neutral, saying cash requirements may pressure the balance sheet.August’s rebound in chipmakers faltered in premarket trading, with semiconductor stocks sliding 3.4% and Nvidia down almost 2% as its CDS push wider.
Equity markets are struggling under the weight of rising borrowing costs as bond investors demand higher premiums to finance spendthrift governments and shield against persistently sticky inflation. Elevated oil prices have also reinforced expectations that central banks will need to tighten monetary policy.“The Middle East is clearly re-escalating again and long-term interest rates are rising, and these are things that end up corroding the value of equities,” said Emma Moriarty at CG Asset Management.
“And in a market where it’s summertime, liquidity is a little bit thinner, it’s a bit more prone to volatility.In Europe, French 30-year yields hit their highest since 2008, while their UK peers were approaching 6%. Germany’s borrowing costs hit a 15-year high in a major sale of long-dated bonds.
Yardeni Research warned investors are becoming more concerned about the surge in borrowing by AI hyperscalers and questioning whether the Fed will remain sufficiently vigilant on inflation if oil prices climb again.“We aren’t pushing the panic button,” strategists led by Ed Yardeni noted. “However, we are closely monitoring whether the bond vigilantes might do so.
Events in the Middle East will remain a key point of focus as both the US and Iran show less willingness to compromise. President Donald Trump said he won’t try to revive a stalled truce with the Islamic Republic, dimming prospects for a swift reopening of the Strait of Hormuz. For Mohit Kumar at Jefferies, there is “no easy way out” and “further pain in the near term” for energy costs.
“We have stayed away from the long end of the curve and rates duration and instead focus on steepeners,” he wrote. “We see no reason to change our portfolio.”Traders expect tech-stock volatility to continue as investors shift their focus back and forth between robust earnings and worries over whether debt-fueled infrastructure investment will deliver sufficient returns to justify the spending.
“You are going to get winners and losers and you’re going to get a lot of wasted capex,” said Justin Onuekwusi, chief investment officer at St. James’s Place. “That, to me, is a huge future challenge.
”The Stoxx 600 equity index headed for a fifth straight day of losses, the longest such stretch this year. Here are the biggest movers Tuesday:H&M climbed as much as 4.6%, the most in almost 11 months, as Citi places the Swedish fashion retailer on a 90-day positive catalyst watch ahead of its third-quarter resultsColoplast shares gained as much as 3.
6% after the Danish medical-products maker reported better-than-expected revenue for the third quarterHemnet Group shares surged as much as 13%, to the highest in more than three months, after JPMorgan double-upgraded the Swedish online property portal to overweight and said it’s “worth revisiting” following a period of underperformanceSkan shares rose as much as 8.5% to the highest level in almost a year after the pharma equipment supplier reported first-half resultsBasilea shares jumped as much as 8.1%, the most in more than a year, after the Swiss biopharmaceutical company reported an increase in revenue for the first half-year and upgraded its outlook for the full year1&1 shares soared as much as 6.
5% as its parent United Internet plans to buy as many as 6 million shares in the telecom companySchott Pharma shares advanced as much as 7.6%, to the highest in almost a year, after Barclays said the German pharma packaging company is leaving its issues “in the rear-view mirror” and is set for growth accelerationHuber+Suhner shares dropped as much as 12%, the most since 2020, after the maker of antenna systems and fiber-optic cables reported weak results that missed expectations in the first halfRoyal Unibrew fell as much as 9.1%, the most since April, on weak second-quarter earnings because of a soft performance in Northern EuropeScor shares fell as much as 3.
1%, the most in eight weeks, as UBS downgrades the reinsurer to sell fr