The Morning Call
8/4/26
The
Market
Technical
Monday in the
charts.
Note: the S&P
closed above the previous high and fractionally below its all-time high,
suggesting another leg up. Weighing
against that is (1) high valuations and (2) seasonality. Still it appears the momentum has shifted to
the upside. I am now considering
nibbling on some laggards.
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
Tuesday morning
setup: S&P futures are trading at all time high with the latest push higher
triggered by comments from Scott Bessent on CNBC who echoed Trump in saying
that "we may have Iran deal tomorrow to open Hormuz" (or we may
not). The Nasdaq also looks set to extend Monday’s gains: As of 8:00am ET,
S&P futures are up 0.4% to an all-time high of 7655 and Nasdaq futures rise
1.1%, as Palantir soared 16% pre-market after upping its forecasts, while
Caterpillar rose 9% on an earnings beat. Semis are leading the Tech tape with
Mag7 (DRAM, EWY, SMH, SOXX all higher by at least 1.6%) while Mag 7 are mixed:
Amazon (AMZN) falls 2% after founder Jeff Bezos filed to sell $4.07 billion of
stock (Nvidia +1.3%, Tesla +0.6%, Apple -0.2%, Meta -1.7%, Alphabet -1.5%,
Microsoft -2%). Cyclicals are leading Defensives with healthcare/staples
lower pre-market. Bond yields are slide 2-3 bps on the drop in oil prices,
and the USD is stronger as is USDJPY following a catastrophic 10Y JGB auction
while intervention is not expected to have a lasting impact and the market is
likely signaling the need for BOJ to hike. In commodities, WTI tumbles on
Bessent's comments that we may have a deal to reopen Hormuz
tomorrow (we won't) with WTI sliding as low as $76. Base metals are
higher with Precious metals spiking and Ags bid. It’s a busy day, with earnings
this morning from McDonald’s and Caterpillar, and the AI trade front and center
this afternoon as AMD and SpaceX report. Today’s macro data focus is on
JOLTS and trade balance.
Fundamental
Headlines
The
Economy
US
The June trade
balance was -$73.3 billion versus expectations of -$73.0 billion.
June construction spending
fell 0.1% versus forecasts of +0.2%.
The July
manufacturing PMI was reported at 53.9 versus predictions of 53.8.
The July ISM manufacturing
index was 55.6 versus 54.0.
https://bonddad.blogspot.com/2026/08/august-starts-with-great-ism.html
International
Other
Taxing the rich.
https://www.powerlineblog.com/archives/2026/08/tax-the-rich-2.php
The yield curve steepens but spreads are still
too narrow.
The
War
Huge uptick in Israeli attacks in spite of
Trump’s ‘historic deal’.
Monetary
Policy
The death of forward guidance.
https://www.realclearmarkets.com/blog/2026/08/01/the_death_of_forward_guidance_1197889.html
The Fed needs to start listening to normal
people.
Summary: The Federal Reserve has various ways
to gather public input, including the Beige Book, which collects information
from businesses and community organizations, and Community development staff,
who run in-depth studies of low- and moderate-income families. The most recent
Beige Book shows consumers are adjusting to increased prices by taking on more
debt, buying less but shopping more frequently, and trading down to cheaper
alternatives, which is wearing on them and helping explain how resilience
coexists with frustration. The Fed's Worker Perspectives report shows workers
describing their work lives as "survival" rather than
"stable", with rising prices being more common than rising wages, and
workers relying on coping strategies such as shopping around for deals, taking
on debt, and relying on assistance programs. The Fed decided last week that its
response to this sentiment was not to raise rates, and offered almost no explanation. But
it needs to show that it has heard: Inflation is a thing, and controlling it is
the Fed’s responsibility. The very best minds on inflation include the people
paying the higher prices.
A
3% inflation world.
https://allisonschrager.substack.com/p/forward-guidance-wont-make-you-happier
Fiscal
Policy
What is behind the US support of the yen?
Inflation
One month of falling prices does not restore
price stability.
(4)
One Month of Falling Prices Won’t Restore Price Stability
AI
AI lowers wages but doesn’t cut jobs.
https://www.apollo.com/wealth/insights-news/insights/daily-spark/ai-lowers-wages-but-doesnt-cut-jobs
Can semiconductor makers navigate rising water
risks?
The
Chinese threat to US AI models.
What if big tech was right all along?
Investing
The challenges to
valuing companies.
https://www.tker.co/p/aswath-damodaran-quotes-about-valuation
Why selling bonds is the wrong move.
A second act for
high yield bonds.
https://giftarticle.ft.com/giftarticle/actions/redeem/f894a754-8bfb-47ba-ab64-b527f97b03c7
The case for
owning gold (but not till it breaks out of its current downtrend).
https://talkmarkets.com/article/bullion-caught-between-war-and-the-fed-1785777091
VC money floods
into US nuclear startups.
https://www.zerohedge.com/energy/vc-money-floods-us-nuclear-startups-ai-power-demand-explodes
The latest from
Goldman’s commodities guru.
The
Yen just became everyone’s problem.
Global bond market on edge.
Dip buyers need to
heed the Market’s warnings.
It is the earnings
stupid.
News on Stocks in Our Portfolios
What
I am reading today
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