The Morning Call
8/18/26
The
Market
Technical
Monday in the
charts.
Monday in the
technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
Dispersion is collapsing.
Gold squeeze is
entering phase 2.
Tuesday morning
setup: 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 speech
Fundamental
Headlines
The
Economy
US
July
housing starts fell 12.4% versus expectations -4.7%; July building permits were up 5.0% versus +1.2%.
https://www.zerohedge.com/markets/us-housing-starts-plummet-july-near-covid-lows
The August housing market index came in at 35
versus estimates of 33.
International
Q2
preliminary Japanese GDP grew 0.3 versus projections of +0.5%; the Q2 preliminary
YoY price index was up 2.6% versus +2.4%; Q2 preliminary
capital expenditures fell 1.2% versus +0.3%; Q2 preliminary personal
consumption was flat versus +0.5%.
The June UK unemployment
rate was 4.9% versus consensus of 4.8%; June 3 month/year average earnings grew
4.1%, in line.
The
August EU economic sentiment indicator was reported at 31.4 versus predictions
of 25.4; the August German economic sentiment indicator was 34.2 versus 30.0;
the August German current conditions index was -61.1 versus -69.5.
Other
More on the oddities in last week’s retail
sales number.
https://wolfstreet.com/2026/08/14/my-thoughts-about-those-july-retail-sales-2/
Whither real rates?
https://econbrowser.com/archives/2026/08/whither-real-rates
What is true and not true about the yen intervention
narrative.
https://www.advisorperspectives.com/commentaries/2026/08/17/yen-intervention-narrative-true-not
Overnight
News.
Long-term borrowing costs across major economies hit multi-decade highs
on Tuesday as inflation concerns, deficit fears and surging AI bond issuance
put pressure on government debt around the world. FT
Iran
Overnight news.
Are we safer than we were six months ago?
https://econbrowser.com/archives/2026/08/are-we-safer-than-we-were-6-months-ago
Fiscal
Policy
Caught
in a debt trap.
https://www.advisorperspectives.com/commentaries/2026/08/17/caught-debt-trap
Inflation
The Fed can’t
deliver price stability (---which is different from lower inflation. Just ask Paul Volcker)
Did someone say stagflation?
https://www.capitalspectator.com/does-the-july-retail-decline-mark-the-start-of-a-growth-downshift/
On inflation and corporate bond spreads.
https://bonddad.blogspot.com/2026/08/of-inflation-and-corporate-bond-spreads.html
Rising bond yields
are a warning to the Treasury and the Fed.
https://mishtalk.com/economics/rising-bond-yields-are-a-warning-to-the-us-treasury-and-the-fed/
AI
The growing AI off balance sheet
liabilities.
Tariffs
Tariff refunds are boosting growth.
https://www.apollo.com/wealth/insights-news/insights/daily-spark/tariff-refunds-boosting-growth
The
Financial System
Private credit firms under strain.
https://giftarticle.ft.com/giftarticle/actions/redeem/cde22a08-c8a3-4c11-9d8f-6bf5f7948cc8
Investing
The problem with including private equity
funds in your 401k.
Bonds face a
bigger threat as global rates climb.
Summary: As
investors debate whether and when the Federal Reserve will raise interest
rates, market expectations for further tightening are building around the world
— and spelling trouble for bonds.Traders see borrowing costs rising faster in
Japan, Canada, the euro zone and the UK than in the US over the next year. Of
the 32 swap markets tracked by Bloomberg, two-thirds are priced for rate hikes,
with South Korea leading the pack at more than 100 basis points.
More on valuations.
https://talkmarkets.com/article/valuation-heights-1786965055
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