The S&P 500 Index ($SPX) (SPY) is up +0.02%, the Dow Jones Industrial Average ($DOWI) (DIA) is down -0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.15%. September E-mini S&P futures (ESU26) are up +0.01%, and September E-mini Nasdaq futures (NQU26) are up +0.16%.
Equities are finding support today as the probability of a September Fed rate hike fell to 29% from 35% on Thursday, following weaker-than-expected US retail sales and consumer sentiment reports. Despite providing a tailwind for stocks, these economic reports indicate a slowdown in US consumer activity. Meanwhile, the 10-year T-note yield has ticked up by 1 bp amid persistent inflation concerns.
US technology stocks are benefiting from carry-over support following an overnight rally in the South Korean Kospi, where Samsung Electronics and SK Hynix saw gains exceeding 15% this week. However, the domestic semiconductor sector is seeing only modest gains, with the iShares Semiconductor ETF up 0.2%.
July US retail sales reported a decline of 0.6% month-on-month, significantly underperforming the projected 0.1% growth. Excluding autos and gasoline, sales fell 0.2% m/m, missing the expected 0.3% increase. This downturn may be partly attributed to technical shifts, as June sales were boosted by World Cup spending and an earlier Amazon Prime Day. Nevertheless, the data suggests consumers are tightening spending due to high prices, rising fuel costs, and financial uncertainty.
The University of Michigan’s preliminary August consumer sentiment index dropped by 4.2 points to 51.0, a much steeper decline than the anticipated 0.2-point decrease from July’s 55.2.
Earlier favorable inflation reports continue to provide support to the markets. Wednesday’s July core CPI matched a 5.5-year low of 2.5% y/y. The nominal July CPI fell to 3.4% from June’s 3.5%, though it remains higher than last year’s 2.3% low. Thursday’s July PPI stood at 4.7% y/y, down from May’s 5.9% peak, though it remains above the Fed’s 2% target. The July core PPI eased to 4.1% from June’s 4.7%.
September WTI crude oil prices (CLU26) remain largely unchanged. Oil found some support overnight following reports of attacks on two Abu Dhabi oil vessels by Iran in the Strait of Hormuz. However, prices are down from Tuesday’s two-week peak as the US administration shifts toward economic pressure rather than direct military intervention to ensure the Strait of Hormuz remains open. Treasury Secretary Bessent indicated that the administration will soon implement unprecedented economic isolation measures against Iran, supplementing the current naval blockade of Iranian ports.
Tensions remain high as there is no sign of progress toward an agreement regarding the Strait of Hormuz. An Iranian military spokesperson recently stated that no vessels can safely navigate the strait without Iranian authorization, dismissing US claims of control as inaccuracies.
Robust Q2 earnings expectations are serving as a bullish catalyst for equities. Bloomberg Intelligence reports that the S&P 500 is on track for nearly 32% earnings growth in Q2, significantly outpacing the projected 23% and historical averages since 2013. AI-related spending is driving this momentum, with AI infrastructure stocks expected to contribute nearly 60% of the S&P 500’s earnings-per-share growth for the quarter. To date, 85% of the 446 S&P 500 companies that have reported have exceeded estimates.
Markets are currently pricing in a 29% chance of a 25 bp rate hike at the September 15-16 FOMC meeting, down from 35% on Thursday and 51% earlier in the week.
International markets are trending higher. The Euro Stoxx 50 is up 0.18%, China’s Shanghai Composite closed up 0.01%, and Japan’s Nikkei-225 closed up 0.59%.
Interest Rates
September 10-year T-notes (ZNU6) are down 1 tick. The 10-year T-note yield rose 1.0 bp to 4.653%. The short end of the Treasury curve saw a boost from the weak retail data, with the 2-year T-note yield dropping 1.3 bp to 4.129%. However, the 10-year yield remains slightly up as inflation fears persist. The 10-year breakeven inflation rate rose 1.2 bp to 2.271%.
Thursday’s 30-year T-bond auction yielded 5.216%, the highest level since 2001. Investors are demanding higher yields due to the massive US budget deficit, persistent inflation, cautious policy guidance from Fed Chair Warsh, and uncertainty regarding the Fed’s commitment to inflation targets.
European government bond yields are rising. The 10-year German bund yield rose 4.1 bp to 3.173%, and the 10-year UK gilt yield rose 3.7 bp to 4.989%.
Markets are pricing in a 91% probability of a 25 bp rate hike by the ECB at its September 10 meeting.
US Stock Movers
The “Magnificent Seven” are largely trading higher, providing market support. Tesla (TSLA) is leading the group, up more than 2%, while Amazon (AMZN) trades slightly lower.
Semiconductor stocks are mixed; the iShares Semiconductor ETF (SOXX) is up 0.2%. AMD (AMD) and GlobalFoundries (GFS) are up over 3%, while Applied Materials (AMAT) and Broadcom (AVGO) are down by more than 4%.
Applied Materials (AMAT) is down over 4% despite delivering above-consensus guidance, as it failed to meet exceptionally high AI-driven expectations.
SanDisk (SNDK) has jumped over 6% following a JPMorgan overweight rating following its investor day.
Drone manufacturers are trading higher following news that the US administration will apply a 100% tariff on imported drones and components. The Defiance Drone and Modern Warfare ETF (JEDI) is up over 3%, while Unusual Machines (UMAC) is up over 10% and Aevex Corp (AVEX) is up over 2%.
Reddit (RDDT) surged over 15% on news of its upcoming addition to the S&P 500 on August 18.
Wayfair (W) is up over 2% after Bernstein upgraded the retailer to “outperform.”
Earnings Reports (8/14/2026)
Liberty Live Holdings (LLYVK).
