Ringside · Post-Bell · August 31
- California's wildfire liability shield vanished; Edison shed 23.07%, PG&E 20.06%.
- West Texas Intermediate settled 2.83% higher at $85.76; energy was the day's only strong sector.
- The Dow shed 374 points while the Nasdaq Composite gave up 0.12%; nine of eleven sectors declined.
Indexes
Two California electricity companies lost more than a fifth of their value apiece and the S&P 500 still finished within 26 points of Friday. That gap describes the whole session. Edison International (EIX) closed at $53.98 and PG&E (PCG) at $13.27 after the legislature passed a wildfire bill stripped of the liability cap Governor Newsom had backed, and the selling was ferocious but narrow: PG&E traded 153 million shares against a 22.5 million average, Edison 24.7 million against 2.8 million. Underneath the averages the day was worse than it looks, with nine of the eleven sectors lower and the Russell 2000 down 0.54% to 2,956.45. What kept the damage off the headline number was a handful of very large companies: Tesla added 5.51% and CrowdStrike 5.77%, which is why the Dow, carrying neither, dropped 374.09 points. August closed at 7,686.14 on the S&P 500, up 2.62% and the first winning month since May.
| Index | Close | % Chg | Range |
|---|---|---|---|
| S&P 500 | 7,686.14 | -0.33% | 7,665.06 – 7,697.52 |
| Nasdaq Composite | 26,370.89 | -0.12% | 26,249.77 – 26,398.33 |
| Dow Jones | 53,185.90 | -0.70% | 53,123.62 – 53,462.60 |
| Russell 2000 | 2,956.45 | -0.54% | 2,944.34 – 2,967.43 |
| VIX | 14.92 | +3.47% | 14.86 – 15.48 |
Sector Heat Map
Nine of the eleven sectors fell, and the two that did not were carried by very different things.
| Sector | % Chg | Note |
|---|---|---|
| Energy (XLE) | +2.04% | Crude settled 2.83% higher |
| Technology (XLK) | +0.44% | CrowdStrike set a 52-week high |
| Health Care (XLV) | -0.36% | |
| Consumer Discretionary (XLY) | -0.53% | Tesla's 5.51% was not enough |
| Staples (XLP) | -0.55% | |
| Financials (XLF) | -0.67% | Aon subtracted 9.53% |
| Real Estate (XLRE) | -0.83% | |
| Materials (XLB) | -0.92% | |
| Industrials (XLI) | -1.13% | Howmet gave back 7.51% |
| Utilities (XLU) | -1.17% | Fund at $42.23, under both averages |
| Communication Services (XLC) | -1.35% | Take-Two fell 6.67% on game leaks |
Best to worst ran 3.39 percentage points, and none of it is an argument about growth: oil went up, so the companies that sell oil went up, and everything that competes with a 4.75% Treasury for income went down.
In the News
Rates, FX, Commodities
Friday's repricing at the front of the curve held without extending. The two-year note finished exactly where it started the day while everything from five years out added a basis point or three, so the curve steepened into a session that handed the bond market a fresh oil shock to think about.
| Treasury | Yield | Prior | Note |
|---|---|---|---|
| 2-Year | 4.34% | 4.34% | Top of the August range |
| 5-Year | 4.49% | 4.48% | |
| 10-Year | 4.75% | 4.73% | Matches the July 31 close |
| 30-Year | 5.25% | 5.22% | |
| 2s10s spread | 41 bp | 39 bp |
| Commodity | Settle | % Chg | Note |
|---|---|---|---|
| WTI Crude | $85.76 | +2.83% | Friday's settle was $83.40 |
| Brent Crude | $90.49 | +2.71% | |
| Gold (spot) | $4,437.37 | -0.35% | Still up 9.7% across August |
| Currency | Level | % Chg | Note |
|---|---|---|---|
| Dollar Index | 99.433 | -0.16% | |
| EUR/USD | 1.1621 | +0.29% | |
| USD/JPY | 159.73 | -0.19% |
Crude prints as exchange settlements at 2:30 p.m. Eastern; the gold quote is spot. And what gold did is the oddity here. A metal that added 9.7% across August, with American aircraft having bombed launchers beside the world's most important oil channel on Sunday, spent Monday drifting lower.
Technicals
Both large-cap benchmarks widened the gap to their 20-day averages, having already been under them on Friday. The S&P 500 closed at 7,686.14, some 30 points beneath that line and 118 points above a 50-day average of 7,567.50, and a 20-day of 26,412.43 sits 42 points over the Nasdaq Composite's 26,370.89. Small caps are further gone: the Russell 2000 at 2,956.45 is below its 20-day of 3,018.82 and its 50-day of 2,991.63, and added 0.86% in August against 4.18% for the Nasdaq 100.
Ten-year notes finished at 4.75%, the top of an August range whose floor was 4.63%, and a match for the July 31 close. Two-year notes at 4.34% closed against their own August ceiling. Neither has broken higher, and both go into Friday's payrolls report pressed against the top of the range.
Breakouts
Schlumberger (SLB) closed at $60.10 after trading as high as $60.46, taking out the $58.82 set on May 26 and finishing at a 52-week high on 35.1 million shares against a 13.3 million average. The SPDR Oil and Gas Exploration fund (XOP) got within six cents of its own year high, printing $191.18 against $191.24, then gave it up and closed at $188.96. The best name cleared; the basket did not.
Breakdowns
Howmet Aerospace (HWM) at $244.95 is now sitting on a 200-day average of $244.45, having lost a 50-day at $276.89 some time ago; the next support of any substance is the $228 area. Take-Two Interactive (TTWO) closed at $219.70, its first finish beneath a 200-day of $228.31 since June 17, with the 52-week low of $187.63 the next reference below.
Top Movers
Gainers
Roblox (RBLX) rose 7.16% to $41.29 after platform-activity data suggested the company is tracking past its own guidance. Average peak concurrent users hit 17.1 million in the week of August 10-16, and quarter-to-date engagement implies $1.68 billion of third-quarter bookings, above both the top of management's range and consensus. The stock is still 71% below a 52-week high of $142.00, which puts a 7% day in proportion.
CrowdStrike (CRWD) gained 5.77% to $231.00 and touched a 52-week high of $233.85 as the cybersecurity company opened its Fal.Con conference in Las Vegas with a run of partnership announcements. That is a new high in a group where the year's leadership has changed hands repeatedly.
Tesla (TSLA) added 5.51% to $367.95 on confirmation that Optimus humanoid production has begun at Fremont, with a Semi event scheduled for September 24. The close reclaims a 50-day average of $359.82 that the stock lost on July 6 and has spent every session since beneath, though a 200-day at $400.57 is still $33 overhead.
Schlumberger (SLB) climbed 4.83% to $60.10, the cleanest expression of a day when oil-services shares were the trade.
Losers
Edison International (EIX) fell 23.07% to $53.98 and PG&E (PCG) 20.06% to $13.27 after the bill that reached the floor in Sacramento left out the $6 billion per-incident cap, the bar on insurer subrogation claims and the wildfire-fund top-up that Governor Newsom had backed. Mizuho cut Edison to Neutral with a $70 target, down from $86. What repriced was the absence of a ceiling: an unlimited claim against a regulated balance sheet is a different asset from a capped one, and both companies fund themselves in the bond market almost continuously. PG&E's $13.085 low was a 52-week low.
Aon (AON) dropped 9.53% to $321.52 after agreeing to buy USI Insurance Services from KKR for $17.0 billion in cash. USI is the tenth-largest American insurance broker, with $3 billion of annual revenue and close to 200 offices in middle-market property, casualty and benefits work. Investors are not disputing the asset so much as the funding, and a nine-percent haircut is their opening bid on how $17 billion of cash gets raised.
Howmet Aerospace (HWM) lost 7.51% to $244.95 after Elon Musk said over the weekend that SpaceX will manufacture its own gas turbine blades, which is Howmet's core product, to power its computing build-out. The stock had run a long way before Monday, and profit-taking did the rest.
Key Macro Data Today
Texas supplied the only figure of the day, and it landed nowhere near the forecast.
| Release | Actual | Forecast | Prior |
|---|---|---|---|
| Dallas Fed Manufacturing, August | 11.6 | 0.7 | 1.3 |
A ten-point jump in Texas factory activity would have been the story in an ordinary week. In one that opens on a hawkish Fed chair and ends with payrolls, it adds to the case for higher rates rather than against it.
Notable Earnings This Session
Pre-Open. Science Applications International (SAIC) was the only name that mattered, and it spent the day giving its report back. The government services contractor cleared both lines by a distance, was indicated 8% higher before the bell, and printed $142.66 inside the first five minutes of trading. It closed at $128.22, up 1.79%, having given back roughly three quarters of the opening move.
Post-Close. Nothing tonight. Palo Alto Networks and Dell Technologies report after Tuesday's close, and Broadcom follows on Wednesday.
Drivers
- Manufacturing gets its national scorecard at 10 a.m. Eastern, when the Institute for Supply Management publishes an August index against July's 55.6, the strongest reading since 2022. The headline is not the interesting number. With crude eight dollars off its August low and a central bank that has just restated its commitment to the inflation target as currently measured, prices paid is the line a hawkish Fed reads first.
- Nothing burned on Monday and two utilities repriced anyway, which is the sort of move that draws a ratings review rather than follows one. The question travelling east from Sacramento is whether an uncapped liability regime is a California quirk or the direction of travel wherever a grid runs through dry country. The sector fund closed at $42.23, beneath both its 50-day and 200-day averages.
- Palo Alto Networks and Dell Technologies report after Tuesday's close, the first read on enterprise technology spending since Nvidia's quarter. Dell's server margins have been the argument all year.