Ringside · Post-Bell · August 18
- A Wall Street Journal tally of $3 trillion in off-balance-sheet technology obligations set off the selling.
- Housing starts fell 12.4% to 1.239 million, roughly 150,000 units under what forecasters expected.
- Thirty-year Treasuries touched 5.33% intraday, then closed at 5.285%, two basis points easier.
Indexes
An accounting story did more damage than any scheduled release. The Wall Street Journal totted up the footnotes of nine large technology companies and found roughly $3 trillion of off-balance-sheet commitments, most of it tied to artificial intelligence, against about $600 billion of disclosed capital spending over the past year. It landed in the same week Anthropic and OpenAI each disclosed annualized revenue — $65 billion and $40 billion — that came in under the figures circulating privately. The VanEck Semiconductor ETF (SMH) lost 4.09% to $569.77 and the Nasdaq 100 fell 1.68%, while the broad S&P 500 shed 0.69% to 7,691.76, finishing three points off its session low. Only the Dow kept its loss under a quarter of a percent, because Exxon Mobil (XOM) rose 2.54% and Johnson & Johnson (JNJ) added 3.33% as the chip names came apart. Nothing in the volatility complex agreed this was serious: the VIX closed at 15.84.
| Index | Close | % Chg | Range | Note |
|---|---|---|---|---|
| S&P 500 | 7,691.76 | -0.69% | 7,688.63 - 7,713.95 | Closed three points off the low |
| Nasdaq Composite | 26,289.71 | -1.33% | 26,266.68 - 26,422.50 | Worst of the four |
| Dow Jones | 53,343.40 | -0.22% | 53,256.34 - 53,478.76 | Energy and drugmakers offset |
| Russell 2000 | 3,017.89 | -1.30% | 3,017.54 - 3,049.32 | Back under 3,050 |
| VIX | 15.84 | +4.28% |
Sector Heat Map
The order of finish matched the order investors reach for when they want cash flow this quarter instead of growth in five years.
| Sector ETF | Close | % Chg |
|---|---|---|
| Energy (XLE) | $63.68 | +1.76% |
| Health Care (XLV) | $169.73 | +1.60% |
| Staples (XLP) | $85.58 | +1.06% |
| Financials (XLF) | $57.84 | +0.45% |
| Communications (XLC) | $110.48 | -0.31% |
| Discretionary (XLY) | $116.36 | -0.33% |
| Utilities (XLU) | $44.02 | -0.36% |
| Real Estate (XLRE) | $44.63 | -0.45% |
| Materials (XLB) | $51.78 | -0.88% |
| Industrials (XLI) | $183.57 | -1.48% |
| Technology (XLK) | $185.62 | -2.47% |
The spread from energy to technology came to 4.23 percentage points.
In the News
Rates, FX, Commodities
Duration made its high for the cycle and then handed the move back. Thirty-year yields reached 5.33% in the morning, a mark unseen since 2007, verified against the 2007 peak of 5.44% and not merely assumed, before finishing at 5.285%. The two-year, at 4.19% on Monday's constant-maturity reading, has moved two basis points in three sessions, so essentially all of the steepening in this curve is coming from beyond ten years.
| Treasury | Yield | Note |
|---|---|---|
| 2Y | 4.19% | Aug 17 constant maturity |
| 5Y | 4.37% | Tuesday close |
| 10Y | 4.71% | Tuesday close |
| 30Y | 5.29% | Peaked at 5.33% |
Crude extended a third consecutive session of gains while the metals complex went the other way, which is the combination that does the most damage to a long-duration equity book.
| Commodity / FX | Level | % Chg | Note |
|---|---|---|---|
| WTI crude | $85.15 | +0.77% | Third straight advance |
| Brent crude | $91.01 | +0.15% | |
| Gold (spot) | $4,338.22 | -1.76% | Under the 100-day at $4,384 |
| Natural gas | $2.79 | +3.72% | |
| Dollar Index | 99.67 | +0.05% |
Technicals
Nothing important broke, which is the argument against reading the day as more than a rotation. At 7,691.76 the broad index sits 87 points above its 20-day average of 7,604.83 and 170 above its 50-day at 7,522.24, and the August 13 record close of 7,798.99 about 107 points overhead, a peak verified by walking the full daily series and finding no higher close. Its 100-name Nasdaq counterpart held 115 points above the 50-day average of 29,376.26, finishing at 29,490.96. The Russell 2000 was the tell, closing at 3,017.89, within a third of a point of the session low.
Ten-year yields reached 4.74% overnight and closed back inside the 4.60% to 4.72% band that held through late July, at 4.706%. The long end is the part of the curve doing the work, and the 30-year has no modern chart reference above 5.30%. SanDisk gave up nine percent in a session that produced nothing from the company itself; its intraday chart is below.
Breakouts & Breakdowns
Breakouts
Johnson & Johnson (JNJ) — closed at $271.11, a fresh 52-week closing high, with the 20-day average at $260.51 and the 50-day at $252.76 well below.
Targa Resources (TRGP) — took out its prior 52-week closing high with a $297.77 finish after an intraday $305.08, and sits 9.8% above its 20-day average of $271.30. Prices that far from the average tend to spend the following week closing the distance.
Breakdowns
SanDisk (SNDK) — lost the 50-day average at $1,657.50 and closed at $1,625.78. The 20-day sits at $1,375.16, dragged down there by July's drawdown, so the useful downside reference is the July low and not that average.
Caterpillar (CAT) — at $840.87 it is under both the 20-day average of $852.02 and the 50-day at $910.09, and 21% below the June 30 high of $1,064.90. Next support is the 200-day at $757.46.
Top Movers
Gainers
Intuit (INTU) rose 4.41% to $350.41 after extending its Intuit Intelligence suite across the mid-market products, where seats carry higher revenue per customer than the small-business base that built the company. Few software names gained at all while long yields punished anything valued on cash flows a decade out.
Ulta Beauty (ULTA) added 4.75% to $516.74, recovering the prior session's decline on new board leadership, institutional buying disclosed in quarterly filings, and the run into fall promotions.
Exxon Mobil (XOM) gained 2.54% to $165.56 on the same crude strength that carried the whole energy sector.
Losers
Fabrinet (FN) collapsed 19.38% to $482.59 despite a fiscal fourth quarter that beat on both lines, revenue of $1.316 billion against roughly $1.27 billion expected and adjusted earnings of $4.10 a share against $3.81. What investors punished sat underneath: gross margin narrowed 30 basis points from a year ago and free cash flow turned negative at minus $37 million as capital spending accelerated on plant expansion in Thailand and California. The revenue guide of $1.375 billion to $1.425 billion sits above consensus, but reported earnings per share are guided down sequentially, and a stock that had run 25% into the report would not accept that. Marvell (MRVL) fell 7.82% to $216.00.
Seagate Technology (STX) fell 9.16% to $903.68, the worst finish in a storage group that had been the year's most reliable source of gains. Seagate had gained more than 200% year to date before this week, and positions that size get cut first when the theme itself is questioned.
Micron Technology (MU) lost 7.02% to $940.76, surrendering the $1,000 level it reclaimed on Monday and closing under its 50-day average of $962.57. Guidance still has fiscal fourth-quarter revenue at $50 billion give or take $1 billion with gross margin near 86%, so the selling is an argument about the multiple rather than the business.
Meta Platforms (META) dropped 4.45% to $543.67 as the child-safety trial opened, leaving it below its 200-day average of $625.68 and near the bottom of its 52-week range.
Macro Data Today
| Release | Actual | Consensus | Prior |
|---|---|---|---|
| Housing starts (July) | 1.239M | 1.390M | 1.415M |
| Building permits (July) | 1.443M | 1.380M | 1.374M |
Both prior figures are the Census Bureau's revised June readings. Starts fell 12.4% against that base and single-family starts dropped 9.9% to 808,000, while permits rose 5.0% with the single-family component up 2.5% to 894,000. Builders are still filing paperwork and declining to pour concrete, which is what happens when the thirty-year mortgage tracks a curve making nineteen-year highs. Toll Brothers (TOL) closed at $142.86, down 1.78% into its own report.
Notable Earnings This Session
Pre-Open
Home Depot (HD) was the only name of consequence, and the 1.87% early advance it carried on a beat and reaffirmed guidance did not survive the session: it closed at $337.49, down 0.12%.
Post-Close
Toll Brothers released fiscal third-quarter results after the bell, too late for this issue. The consensus going in was $2.89 a share on $2.6 billion of revenue, which would be a 22.3% earnings decline from a year ago. Management hosts the call at 8:30 a.m. Eastern Wednesday.
Drivers
- Analog Devices reports before Wednesday's open, the first semiconductor result to land since the Journal's commitments tally. Its order book runs through industrial and automotive customers, not data centres, so a strong quarter would confine the selling to the artificial-intelligence names. The VanEck Semiconductor ETF (SMH) closed at $569.77, 3.6% under its 50-day average of $590.82.
- Minutes from the July 28-29 meeting arrive at 2:00 p.m. Eastern. That meeting produced a hold over three dissents from regional Fed presidents, and the question is whether the majority framed the pause as a step toward a September increase or as ordinary data dependence. Markets have moved since: a rate rise by year-end is no longer fully priced, having been close to a coin flip a week ago, and this morning's housing figures push the same direction. Fed Chair Kevin Warsh delivers his first Jackson Hole keynote on Friday, August 28.
- Target, Lowe's, TJX and Estée Lauder all report before the open. Home Depot set the bar this morning with comparable sales up 1.7% while calling housing conditions frozen. Lowe's closed at $215.64.