Stocks and yields gain ahead of key risk week - Newsquawk US Market Wrap

• SNAPSHOT: Equities up, Treasuries down, Crude up, Dollar flat, Gold up
• REAR VIEW: S&P Global Flash US PMI shows mfg miss, services beat; President Trump says, for the next 90 days, US will allow up to 300K metric tons of product for ground beef to be imported with no quota; Iranian President Pezeshkian says war must end at some point, better to end when in power; Commander of the Iranian Navy says we will soon teach the enemy a historical lesson at sea; Samsung Electronics plans as much as USD 79bln in shareholder returns.
• COMING UP: Data: Mexican Inflation (Aug), US Chicago Fed National Activity Index (Jul). Speakers: US Treasury Secretary Bessent. Earnings: Xpeng, PDD.
• WEEK IN FOCUS: Highlights include NVDA earnings, US PCE, BLS revisions, Bessent on Iran, and Jackson Hole. Click here for the full report.
• WEEKLY US EARNINGS ESTIMATES: Tech earnings the highlight; NVDA, MRVL, CRWD, and CRM due. Click here for the full report.

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MARKET WRAP

Stocks closed in the green on Friday, with gains broad-based, although the Dow and Russell outperformed while the Nasdaq slightly lagged. Breadth was strong, with the equal-weight S&P 500 rising around 0.6%, while sectors were also predominantly firmer. Materials, Health Care and Consumer Discretionary led the gains. Utilities were the clear laggard, with notable pressure in sector heavyweights NEE, SO, DUK and AEP, likely weighed on by the continued rise in Treasury yields despite the Treasury's recent announcement of increased long-end buybacks, while some may be taking data centre-related profits.

The Treasury curve bear flattened on Friday, with front-end yields leading the move higher. Long-end yields have returned above levels seen before the Treasury's buyback announcement, although the increased focus on long-end liquidity may be helping limit the relative move higher. Treasury raised the maximum size of long-end liquidity-support buybacks from USD 2bln to "at least" USD 4bln, while Bessent subsequently acknowledged a signalling element to the move and suggested long-end operations could exceed USD 4bln. In otherwise quiet trade, this may be leaving the path of least resistance towards some flattening following the pronounced recent steepening.

In FX, the Dollar extended its recent decline despite higher US yields, while the Antipodeans outperformed amid hopes for additional Chinese fiscal stimulus and the rally in metals prices.

In commodities, crude settled higher but gave back the gains post-settlement. Geopolitical messaging was mixed, with Iranian President Pezeshkian speaking in favour of ending the war while Iran remained in a position of strength, although the Iranian Navy commander separately warned that a "historic lesson" was coming for the enemy. Gold and silver extended their recent rally despite higher Treasury yields, while broader metals were also supported by hopes for additional Chinese stimulus.

Attention next week turns to Treasury Secretary Bessent announcing Iranian sanctions on Monday, the US PCE report, BLS prelim benchmark revisions, and Fed Chair Warsh at Jackson Hole.

US

FLASH S&P GLOBAL US PMI: Manufacturing unexpectedly declined to 53.2 in August from the expected and prior 53.9. Services surprised to the upside, rising to 56.8 from 54.6 (exp. 54.0). Meanwhile, the composite rose to 56.0 from 54.5. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, wrote that the data for Q3 currently points towards annualised growth approaching 3.0%, accelerating from the 1.5% pace seen in Q2. Positively, he added that “Jobs growth has also shown a welcome revival in August, with employers gaining in confidence as concerns fade over the negative economic impacts of tariffs and the conflict in the Middle East”.

FIXED INCOME

T-NOTE FUTURES (U6) SETTLED 7+ TICKS LOWER AT 108-08+

Treasury curve bear flattens as focus turns to Jackson Hole. At settlement, 2-year +4.4bps at 4.234%, 3-year +3.6bps at 4.310%, 5-year +3.2bps at 4.426%, 7-year +3.1bps at 4.568%, 10-year +3.2bps at 4.740%, 20-year +2.6bps at 5.265%, 30-year +2.7bps at 5.277%.

THE DAY: Yields rose across the curve on Friday in quiet trade. The curve bear flattened, with front-end yields leading the move higher, while crude prices settled marginally firmer.

The Treasury's actions earlier this week remain at the front of participants' minds. Traders may be reluctant to push long-end Treasury futures materially lower given the prospect of further Treasury action; Bessent said on Thursday that the Treasury has a wide toolkit, while also stressing that buybacks could exceed the USD 4bln per-operation maximum announced earlier this week. It is also worth noting that the increased liquidity-support buybacks are focused on the 10-30-year sector, potentially providing greater support to the long end relative to the front end and contributing to Friday's flattening.

Data saw the S&P Global Flash PMI report, where Manufacturing missed expectations, but the Services beat was enough to offset the weakness, with the Composite rising to 56.0 from 54.5. The report noted that the data point to a Q3 annualised growth rate approaching 3.0%, vs the roughly 1.5% pace signalled in Q2.

Geopolitical news was mixed, with Iranian President Pezeshkian saying "the war must end at some point", noting it would be better to end the conflict now from a position of strength. However, the Commander of the Iranian Navy struck a more confrontational tone, saying Iran will soon teach the enemy a "historical lesson" at sea.

Next week, the US PCE report will be the data highlight, while on Monday Treasury Secretary Bessent is expected to announce large-scale sanctions on Iran. However, for Treasury traders, Fed Chair Warsh's remarks at Jackson Hole will be key, as will the annual BLS Benchmark revisions (primers available here)

SUPPLY

Notes/Bonds

• US to sell USD 69bln of 2-year notes on August 25th, USD 70bln of 5-yr notes on Aug. 26th, and USD 44bln of 7-yr notes on Aug. 27th; all to settle on Aug. 31st

Bills

• US to sell USD 92bln of 13-wk bills and USD 79bln of 26-wk bills on August 24th, USD 95bln of 6-wk bills on Aug. 25th and USD 28bln of reopened 2yr FRN on Aug. 26th; all to settle on Aug. 27th.

STIRS / OPERATIONS

• Fed Hike Pricing via CME FedWatch: Sept 9.6bps (prev. 9.0bps), Dec 25.0bps (prev. 23.0bps)
• EFFR at 3.63% (prev. 3.63%), volumes at USD 102bln (prev. USD 95bln) on August 20th
• SOFR at 3.63% (prev. 3.62%), volumes at USD 2.922tln (prev. USD 2.923tln) on August 20th
• NY Fed RRP op demand at 0.20bln (prev. 0.23bln) across 1 counterparties (prev. 1) on August 21st

CRUDE

WTI (V6) SETTLED USD 0.23 HIGHER AT 87.06/BBL; BRENT (V6) SETTLED USD 0.61 HIGHER AT 94.39/BBL

Crude prices settled higher, now seeing two consecutive weeks of gains. Absence of positive updates was behind the move higher, as markets now look towards US Treasury Secretary Bessent's announcement on Monday of a new economic sanctions operation on Iran that will "collapse the regime". The Jerusalem Post reported that security officials reportedly see a lower near-term risk of an expanded war with Iran, with Trump’s new economic sanctions intended to buy time until after the US midterms. Today, Iran's Foreign Minister downplayed the effectiveness of prior US sanctions on Iran, claiming the incoming operation is bound to fail. Further adding to geopolitical risk, Iran's Navy Commander noted they will soon teach the enemy a historical lesson at sea. In the European morning, a delayed reaction was seen in response to the Iranian President saying it is better to end the war today when they are in power; crude prices saw short-lived downside, perhaps as the IRGC and other hardliners would push back on such actions until higher oil prices deal more damage to the US economy. Elsewhere, upside was also seen on reports that oil tankers have to wait for up to 30 days to load at Venezuelan ports, according to shipping data and sources. WTI and Brent traded between USD 85.80-87.51/bbl and USD 92.74-94.83/bbl, respectively.

ENERGY UPDATES

• Baker Hughes rig count: Oil -3 at 452, Nat gas -1 at 127, Total -5 at 588.
• Iraq's PM said that the country plans to raise oil production to 8-10mln bpd, within six years.
• Offers of Iranian crude to Chinese buyers have reportedly declined, Reuters reports.
• Saudi Aramco reportedly instructed LPG buyers to resume loading cargoes from inside the Persian Gulf for the first time since port infrastructure was damaged amid the war, sources state.

EQUITIES

CLOSES: SPX +0.43% at 7,674, NDX +0.33% at 29,309, DJI +0.98% at 53,282, RUT +0.85% at 3,018

SECTORS: Utilities -2.31%, Energy -0.23%, Technology flat, Real estate flat, Industrials +0.29%, Consumer staples +0.58%, Communication services +0.87%, Consumer discretionary +0.91%, Financials +1.01%, Health +1.31%, Materials +2.2%

EUROPEAN CLOSES: Euro Stoxx 50 +0.68% at 6,466, Dax 40 +0.56% at 26,129, FTSE 100 +0.64% at 10,817, CAC 40 +0.37% at 8,484, FTSE MIB +0.00% at 52,668, IBEX 35 +0.76% at 19,962, PSI +0.78% at 9,355, SMI +0.73% at 14,473, AEX +0.29% at 1,106.

STOCK SPECIFICS

• Ross Stores (ROST): Quarterly earnings and revenue beat expectations. It also raised FY profit guidance, supported by strong comparable sales, customer traffic and demand for discounted apparel
• BJ's Wholesale Club (BJ): EPS and revenue beat; raised FY26 profit view
• OSI Systems (OSIS): Q4 revenue missed; FY27 guidance disappointed.
• Citadel founder Ken Griffin reportedly told investors he has completed nearly 100 block trades worth more than USD 4bln; Ken Griffin said he has cut risk exposure in his original portfolio by more than 80%.
• Broadcom (AVGO) is now looking to tap the debt market for between USD 70-80bln, CNBC's Faber reports.
• Hunterbrook Capital is long Modine (MOD), says Google (GOOGL) is the undisclosed customer behind an over USD 4bln agreement, plus USD 4.5bln in demand.
• OpenAI said it's dropping and credit pricing of GPT5.6 SOL by over 20%.
• Apple (AAPL) reportedly set to cut around 200 jobs in several divisions; will cut jobs in Siri, Vision Pro 3D video and gaming teams.

FX

USD was little changed, again failing to track the move higher in US yields, remaining the casualty of the planned increases to the US Treasury buyback operations on the long end. The US Treasury announcement is to be a key topic at next week's Jackson Hole; however, Chair Warsh is likely to navigate the questioning similarly to Daly and Musalem this week, namely, referring to the Fed's dual mandate, independence from fiscal policy, and commitment to 2% inflation. The dollar's correlation with the US 2yr yields and oil prices will be scrutinised early next week given the new wave of US sanctions on Iran that will be announced next Monday. Thus far, Iran is standing firm, claiming the US operation will fail. Elsewhere, USD was muted towards a mixed S&P Global Flash PMI August report, which saw manufacturing miss and services beat. DXY now trades at 98.82, down from last week's close of 99.64.

Antipodeans outperformed after China’s Vice Finance Minister pledged additional fiscal policy measures, echoing similar rhetoric from July’s Politburo meeting. The continued rally in precious metals also supported the move higher.

EUR/USD was little changed even with EZ flash PMIs signalling solid Q3 GDP growth, a return to hiring and inflation remaining elevated by historical standards. EUR/USD hit a session high of 1.1711 before retreating to 1.1680.