Turnaround Tuesday
Stocks rose after weakness. The day before, crude oil fell and yields fell, but that did not lift stocks. Now that pattern flipped. The names under pressure earlier were mainly tech, mainly chip makers - AMD (AMD), Intel (INTC), and Nvidia (NVDA), which fell for a seventh straight day. Today those reversed higher.
The drivers: crude down over 3%, and yields off sharply. The 10-year Treasury yield fell over four basis points; it was above 4.7% and now sits near 4.66%. These are positive signals for the market, coming after last week's weakness across the four major indices.
Key events ahead: PCE inflation data the next day, Fed Chair speaking Friday at the Jackson Hole Symposium (sponsored by the Fed), and more earnings - software names and Nvidia (NVDA) after the close the next day. Traders are taking a break from the recent selling and reaching for something positive.
"Operation Economic Outcast" targeting Iran
The Treasury Secretary said sanctions are coming, without saying exactly what. He used the phrase "economic asphyxiation" to describe the intent and named a major financial institution that could face sanctions in coming days. There was no big market reaction.
Little clarity was given. Firms are being given time to cut ties and trade relations with Iran under this effort, which the administration named "Operation Economic Outcast." The plan targets the players that have trade relations with Iran, including China. Secretary Bessent asked firms to end their dealings with Iran and plans to press everyone.
The move shifts the Iran conflict from the military side to the economic side, adding pressure on Iran. Crude oil fell to over one-week lows, which helps equity markets. The approach includes going after money laundering done for Iran and the buying of Iranian crude - choking off those flows. This follows a breakdown in talks. Qatar said it is trying to restart the talks. How the sanctions land, and their effect on energy and the broader economy, will play out over the next week or two. Investors are hopeful this could reopen the Strait of Hormuz, lift the blockade, and restart negotiations.
AMD upgrade and CPU market share
Nvidia (NVDA) has seen price target hikes even during its seven-session losing streak. The stock broke out of its recent trading range, then pulled back toward the top of that range, around $210 a share, about 11% off its all-time highs. It got a bid today.
Raymond James upgraded AMD (AMD) to strong buy from outperform and raised its price target to $641 from $565, citing CPU demand. Research from Mercury Research showed AMD (AMD) went above 30% CPU market share in Q2 for the first time against Intel (INTC), which is now below 70%. AMD keeps taking share in the CPU business. Nvidia (NVDA) is entering CPUs too, so take that with caution - watch what bookings Nvidia (NVDA) shows and what Jensen Huang says about diversifying from GPUs into CPUs, since CPUs are needed in the AI infrastructure buildout. AMD (AMD) and Intel (INTC) had faced pressure recently, but that hit all chip makers as volatility rose.
Nvidia earnings setup: a low bar
Going into results, the bar for Nvidia (NVDA) is low. The forward P/E has come in a lot. The company is expected to show 100% revenue growth year-over-year.
Things to watch:
- Gross margins - if they come in below about 74-75%, what impact that has going forward.
- Guidance.
- Potential buybacks.
- Any news on chip sales to China, which the company has basically wiped off its balance sheet. Any sales there would be a positive.
- The partnerships and the "circle of investments" and how those are working out.
This report will be a game changer for markets because Nvidia (NVDA) is a major index component: over 7% of the S&P 500, over 15% of the Nasdaq 100, and nearly 2.5% of the Dow. Even so, the bar is low into the report the next day after the close. Nvidia (NVDA) shares have often reacted poorly in recent years even after a beat and raise, so the reaction will be worth watching.
Bitcoin's comeback
Bitcoin softened a little but ran toward 80,000 overnight, a strong comeback. Several factors drove it. Short covering was a big one - there was heavy short open interest at the top end. The dollar-debasement story is back: dollar weakness is pushing money into other assets like gold and Bitcoin. Scott Bessent said the US will expand its bond buybacks to lower yields, which may help Bitcoin.
Short covering is a main driver, and it remains to be seen if the move holds. Bitcoin futures hit over three-month highs overnight, above 81,000, then pulled back a little. It is up over 25% so far this month.
