Position: None

A value-added “MRKT CALL” with Dan and Guy today.

Let’s go to the tapes. 

The Market’s ‘Blind Faith’ This Rally Will Continue

Position: None

From Charlie!

The State of the Markets (August 2026) – Charlie Bilello’s Blog

Position: None 

Here are today’s things:

* Shorted SPY at $774.24 and QQQ at $724.26

* Added to MSOS at $4.11, GTBIF at $6.80, VRNO at $5.20

Position: Long MSOS (VVL), GTBIF (S), VRNO (S); Short SPY (M), QQQ (S)

– NYSE volume 15% above its one-month average;  
– Nasdaq volume 26% above its one-month average;  
– VIX index: down 0.18% to 16.47

Positions: None.

The following is from Peter Boockvar:

The US service sector

The July ISM services index was little changed at 54.1 vs 54 in June and just below the estimate of 54.5. The business activity component though gained another 3.7 pts to 59.1.

Of note after the ADP report and ahead of Friday payrolls, the employment component fell back below 50 at 47.4 from 51.2.

New orders lifted to 57.2 vs 55.1 but just back to its 6 month average of 57.1. ISM said comments from respondents include: “Beginning of new fiscal year — budgets in place and various large dollar projects (renovations) to complete this summer before the fall semester begins” and “World Cup.” Backlogs dropped 4 pts to 50.9 and below its 6 month average of 53.3. Inventories were little changed at 51.4 and 3.5 pts below its 6 month average as maybe the post conflict lift is slowing down.

Supplier deliveries calmed, down 1.6 pts (lower number means improved supply chain) but not all smooth. From ISM, they said comments from respondents include: “Some smaller suppliers are starting to be stressed financially, causing delays in shipments, missed shipments and other issues; we are spending more time monitoring and managing these small but important suppliers to our business” and “Lead times are doubling on specific electrical conductor.”

Prices paid got back above 70 at 70.3, up 2.6 pts m/o/m with 17 of 18 industries paying more and one seeing no change. No one paid less.

Export orders grew 1.6 pts to 52 and above 50 for the 6th straight month.

Breadth was a hair weaker with 13 industries seeing growth vs 14 in June while 4 reported a contraction, the same figure in June.

The bottom line from the ISM, “Tariff impacts and the Middle East conflict continued to be mentioned by respondents, but much less frequently than in prior reports. The World Cup was again cited in the comments regarding increased business activity and new orders. Overall, the U.S. services economy continues to be resilient. Concerns still exist regarding mortgage and inflation rates, and we are still in the midst of pricing impacts due to the recent run-up in petroleum costs.”

And, the current level of the ISM services figure “corresponds to a 1.9% increase in real GDP on an annualized basis” according to their model and which is about the pace of US GDP growth seen over the past 6 quarter on average.

Bottom line, the US services sector continues to be a consistent area of economic activity, particularly helped by upper income spend on the retail side along with leisure and hospitality and healthcare which is only growing in size. Construction too of course if you’re building a data center but less so if you’re building homes.

ISM Services

New Orders

Prices Paid

Employment

Positions: None

The following is from Peter Boockvar:

Higher rates slow purchases/ADP hiring data

With the average 30 yr mortgage rate rising to the highest level in a year at 6.81%, purchase applications fell 3.6% w/o/w for a 2nd straight week and now is back to the lowest since February. Refi’s declined for a 3rd week. Bottom line, the housing market remains the main economic challenge.

ADP said 44k private sector jobs were added in July, 21k below the estimate and follows a 95k increase in June (revised down by 3k). The smallest businesses (those with less than 20 employees) contributed most of the jobs, with a rise of 27k while those companies between 20-49 shed 7k. Large companies with more than 500 people added 13k and in between 8k new workers were hired.

Sector wise, education/health services continues to drive the most amount of growth, rising by 36k. Financial services added 10k, information 5k, and professional/business services 9k. Lost jobs were seen in leisure/hospitality of 11k and likely a give back from the World Cup hiring. The trade/transportation/utilities sector shed 8k.

On the goods side, construction added 1k, manufacturing by 2k, offset by a drop of 6k in natural resources/mining.

Wage growth improved for ‘job changers’ with pay up 7% y/o/y, up from 6.6% in June. For ‘job stayers’, wages grew by 4.4%, the same pace seen in June.

Bottom line, job growth slowed to the lowest since January but still has seen a nice pick up this year relative to the pace seen last year. The 3 month average is now 87k vs the 6 month average of 82k and the one year average 64k. Negatively impacted by Liberation Day last year, 2025 job growth averaged just 33k.

No response in Treasuries as yields are holding yesterday’s drop but not further falling post data.

Positions: None.

“The ancient poet Philostratus said, “For the gods perceive things in the future, ordinary people things in the present, but the wise perceive things about to happen.”

 – Barton Biggs, Hedgehogging

My favorite investment strategist of all time was Morgan Stanley’s Barton Biggs. Biggs used the phrase “Rosy Scenario” in the 1980s-2000s to describe his famous macro warnings and concerns that typically occurred late in a maturing Bull Market. In times like this, Biggs would detail the underlying and evolving risks that multiplied as investors’ narratives turned overly optimistic — convincing themselves that everything would work out perfectly in the future (despite the appearance of clouds overhead).

Importantly, he viewed Mr. Market as a manic depressive with huge mood swings. Investors, he surmised, should bet against him, not with him, especially when he is raving:

Barton Biggs was a cynical and wonderful wordsmith (his book “Hedgehogging” is a must read!).  

According to Biggs, a “rosy scenario” is a market backdrop in which investors extrapolate non inflationary growth indefinitely, believing in a new paradigm of non-interrupted growth in which investors and policy makers assume perfect economic and market outcomes. 

Biggs was particularly critical of overly ambitious company earnings forecasts (of an AI-kind?). He would often raise market concerns when the risk premia collapsed based on a growing consensus that “nothing bad can happen.”

In summary, if Barton Biggs were alive today, he might caution that the current bullish narratives have overwhelmed sober analysis.  

Fast Forward to August, 2026

Biggs would likely (as I am) be worried about several legitimate headwinds that exist now, in the belief that Mr. Market has been resilient in the face of items that would normally have produced less robust or even negative investment returns:   

• The lack of fiscal discipline in Washington, D.C. (on both sides of the political aisle), which has raised the U.S. annual deficit and overall debt load, which is being ignored by most investors.
• Improvisational (and potentially dangerous) policy from the current Administration.
• The rise in popularity of socialism (left wing of the Democratic party) and in nationalism/authoritarian rule (right wing of the Republican party). 
• The likelihood that the A.I. capital spending spree (which has buoyed economic and corporate profit growth) will not produce an “adequate” return on invested capital.
• The equity risk premium (which, astonishingly, for the first time in nearly three decades), has morphed into an equity risk discount. 
• RIsing interest rates that will likely stay higher for longer.
• Persistent inflation.   
• Elevated valuations (with traditional metrics (like  Shiller’s CAPE Ratio or Buffett’s Ratio (total equity capitalization divided by Global GDP) in the 98%-tile).

Well respected by many, no doubt (if he were still with us) Biggs’ concerns about “Rosy Scenario” would be seen in Barron’s “Up and Down Wall Street” column this Saturday (Aug. 8) – perhaps with the following warning: 

“Warren Buffett, a man, like me, who believes in America and the Tooth Fairy, presents the dilemma best. It’s as though you are in business with a partner who has a bipolar personality. When your partner is deeply distressed, depressed, and in a dark mood and offers to sell his share of the business at a huge discount, you should buy it. When he is ebullient and optimistic and wants to buy your share from you at an exorbitant premium, you should oblige him. As usual, Buffett makes it sound easier than it is because measuring the level of intensity of the mood swings of your bipolar partner is far from an exact science.”

Positions: None.

The following is from Peter Boockvar:

If interested in the oil market, I highly recommend this read/Other earnings notables and stuff overseas

For those following the energy sector, I highly recommend reading the snippets I included below from the Saudi Aramco earnings call yesterday. If you don’t want to read it all, skip to the last two paragraphs for the bottom line from them. While they are talking their book, it’s something we agree with and remain long oil and gas stocks even if the Strait is about to reopen.

From Saudi Aramco:

“In May, we were clear that the trade disruptions are the most serious we have ever seen in the energy market, and that if the Strait did not fully open by the end of that month, the impact would continue well into 2027. As we have seen, trade flows via the Strait have not normalized since then, and the impact are even more severe. The measures taken by various industry participants, such as the use of inventories to mitigate the impact, have had short-term effects. The release of inventories have now been largely deployed and are not only more difficult to be maintained, but now need to be rebuilt from critically low levels. This would require a call on additional restoration of production, and that additional production also calls on access to reserves, where we had already highlighted before that the level of investment has been insufficient from many in the industry and needs to be addressed.”

“Moving to the macro environment and market dynamics, we see some clear themes. Global oil demand has remained resilient as the supply shock was masked by an estimated 9 million barrels per day of strategic petroleum reserves and commercial inventory withdrawals and around 2 million barrels per day in demand management. The unprecedented liquid supply loss has continued into Q2, and the world lost over 2.6 billion barrels of oil that was distinct to a number of critical industries such as food, semiconductors, mobility, and petrochemicals.”

“This has been partially offset by alternative flow bypassing Hormuz, the release of strategic petroleum reserves by government and the utilization of Aramco’s East-West pipeline, which resulted in reducing the net supply loss to currently around 1.8 billion barrels. The key element of these are, first, the IEA Emergency Release Program of 426 million barrels is coming to an end in August, and with it, a 2 million barrels per day cushion will likely come off the market. Second, after utilizing oil on water and SPR volumes, the world tapped into an estimated 600 million barrels, reflecting 6.5 million barrels per day between May and July of commercial inventories, the only remaining buffer in the system today. Third, within Asia, crude oil imports were reduced by around 6 million barrels per day through a combination of SPR release, drawdown from commercially refined products inventories, and demand management. The East-West pipeline has enabled Aramco to mitigate the impact of the disruption much more than the IEA Coordinated Strategic Reserve Release. All in all, significant drawdowns of commercial inventories have helped but not met end user demand.”

“The aggregate inventory level globally are not a proper reflection of the current physical market tightness…We see an apparent disconnect between future and physical markets as evident in the strong refining margins that reflect the market tightness. Margins are expected to stay exceptionally strong throughout the second half of 2026, supported by limited export availability from key regions like the Middle East, Russia, and Asia, resilient fuel demand, and persistently low inventories. The refining system today, excluding stranded Arabian Gulf and Russian refineries that have been under attack, is stretched and is operating at near maximum utilization rates. Currently flows through the Strait of Hormuz are a tenth of a pre-conflict level.”

“Let me be clear, demand remains strong and has not been met by supply in the first half of this year, but rather from commercial and strategic inventories…Demand in the 2nd half of the year is expected to be around 2 million barrels per day higher than the first half. Restoring commercial inventories and strategic reserves to pre-conflict levels will materially add to calls on crude oil throughout 2027 and likely beyond.”

“To put this into context, if the Strait of Hormuz was to open today, it would take up to 18 months at an average rate of 2.1 million barrels per day to replenish depleted inventories on top of demand.” I bolded to highlight.

From Caterpillar, up 5.6% yesterday and has been for sure on a wild ride over the past month:

“Second quarter sales and revenues were better than expected due to strong sales volume growth in Construction industries and Resource industries, while Power & Energy was broadly in line with our expectations.”

“Power generation grew 72% driven by very strong demand for large gen-sets and turbines used in data center applications.”

How long can it last with data center construction? “There is a lot of discussion around AI demand. We have constant discussions with our customers, and all I can tell you is what our discussions with them is no one is slowing down at the moment. In fact, if we can get more units out, they’re asking us to give them more units.” I bolded.

“Our positive outlook for 2026 continues to reflect strong demand in power generation and oil and gas.” Also, “sales to users is expected to increase primarily driven by rising demand for copper and gold and positive dynamics in heavy construction and quarry and aggregates.”

They are also benefiting from public highway spending “supported by the IIJA (Infrastructure investment & Jobs Act), with the remaining funds to be spent over the next few years.”

From Cummins that fell 2% because earnings missed expectations because of lower margins but they are getting helped by data centers and the higher truck transportation prices:

“Cummins delivered record second quarter results, reflecting robust customer orders for standby power for data centers and improving North American truck markets.”

From McDonald’s, up 1.2% yesterday with mixed numbers:

“Turning to the US. After a solid start to the year, the business slowed significantly, posting comparable sales growth of .8% in the quarter. This was below our expectations and something we’re going to address in greater detail on today’s call. We don’t have a strategy problem. We simply didn’t execute at the level we needed to in the 2nd quarter.”

“Global comparable sales grew 1.3%, reflecting a challenging consumer environment that saw QSR industry traffic in several of our largest markets continued to be flat to negative. Global comparable sales were also impacted by execution that was below our expectations in the US business.”

From Wayfair, whose stock had a big day, up 30%:

“Compared to Q1, orders were up over 12%, the best sequential growth we’ve seen in Q2 since the 2nd quarter of 2020.”

“While there’s still some broader macro uncertainty and depressed housing turnover, by our measure, this marked the first quarter of flat to slightly positive y/o/y category growth that we’ve seen in the US since 2021, though skewed towards higher growth in the higher income segments.” I bolded.

“In keeping with the often discussed K-shaped recovery, we saw noteworthy outperformance from both our specialty retail brands, which grew by nearly 20% in the 2nd quarter, and Perigold, which grew by more than 35% in the luxury segment.”

From Sysco and whose stock fell 2.6%:

“For fiscal 2027, we expect to deliver positive case volume growth for national contract customers, despite a macro foot traffic environment that remans challenged. Foot traffic to restaurants remains down y/o/y, and Sysco is growing our business, taking share, and delivering profitable growth y/o/y.”

“Local restaurants are performing better than national chains for a host of reason, and increasing our work focus on local customers is a net, net positive for the long term.”

From Booking Holdings and whose stock is rallying pre-market:

“While long-haul international travel remained pressured by elevated airline prices and reduced capacity due to the conflict in the Middle East, domestic and inter-regional travel remained healthy across many parts of the world.”

“Globally, we saw a modest contraction in booking window and length of stay during the quarter, although both began to normalize in June. Importantly, in Europe, our largest region, both metrics were approximately flat for the quarter.”

Wynn Resorts said their upper end Vegas business is doing just fine and is up pre-market:

“More recently, the business has seen solid volumes and increases in both slot revenues and RevPAR, though we experienced unusually low hold in the month of July. Looking ahead, we remain positive about the business in Las Vegas. We are currently on track for another strong F1 weekend and pacing ahead of last year in our transient and leisure business for that event.”

“On the group and convention side, we saw the forward booking pace accelerate as July progressed, and the business looks strong heading into both Q4 and 2027.”

Boston and Macau also had good quarters ex the World Cup impact in Macau as business picked up in the back half of July and in early August.

From Dupont, up 1% yesterday:

“Top line growth was broad based, led by continued strength in healthcare, aerospace, and industrial water and semiconductor markets. In addition, we saw y/o/y growth in our building technologies business on strength in residential and non-residential end markets.” Asia Pacific is where they saw most of the strength in residential and non-residential markets.

Even transportation brokers like Expeditors, that focuses on air and ocean freight, are benefiting from the data center build out:

“Air buy and sell rates were highly elevated during the quarter, as demand for air capacity continued to outweigh available space, particularly late in the quarter and driven largely by a reduction in passenger flights and constrained belly capacity due to the conflict in the Middle East.”

“The ongoing heavy demand from AI hyperscalers shows no sign of slowing down, and we have seen increased demand for freighter space, as some hyperscalers are requiring upper deck access for their servers.”

“In addition, e-commerce out of North Asia has been climbing closer to where it was before the US government began restricting de minimis entries in Q2 2025, putting further pressure on capacity and rates. Given the current geopolitical state of the world and rising fuel costs along with tight capacity and routing challenges, air carriers are under enormous strain and may continue to be for some time.”

“Despite all of the complications impacting the ocean markets, the carriers have adapted well and managed capacity very carefully, driving an increase in rates particularly late in the quarter as demand also increased.”

To some economic data.

More PMI’s are out. The July China services index from RatingDog and focused on their private sector (yes, they have a big one with more than 80% of those employed working for a private company) was soft, falling to 50.4 from 54.1. They blamed slower domestic demand for the weakness while strength was seen in services exports with “Anecdotal evidence linked to higher overseas client demand to exhibitions, study tours, increased settlement business and effective management.”

Hong Kong’s July PMI fell 1 pt to 51.

Singapore’s PMI rose to 59.4 from 57.4 and remains an economic bright spot. We remain bullish on that country and hold stocks there.

Japan continues to have reason to hike rates again with the strong 3.4% y/o/y rise in June base pay. That matches the fastest pace since 1992. The yen though did not respond and is little changed but JGB yields fell, following the US drop yesterday.

Base pay in Japan y/o/y

The July Eurozone and UK service indices were left little changed with the revisions but both holding above 50 at 51.7 and 52.2 respectively.

Positions: None.

Upside:

-BLMN +29% (earnings, guidance)

-SHOP +21% (earnings, guidance)

-UPST +16% (earnings, guidance)

-PRGO +13% (earnings, guidance)

-ANET +11% (earnings, guidance)

-COMP +11% (earnings, guidance)

-BKNG +9.1% (earnings, guidance)

-CRL +7.8% (earnings, guidance)

-ELAN +7.5% (earnings, guidance)

-AVT +7.4% (earnings, guidance)

-FRPT +6.4% (earnings, guidance)

-LLY +5.4% (earnings, guidance)

-WYNN +5.1% (earnings, color)

-AZN +5.0% (reportedly there are “no discussions” ongoing between Astrazeneca and Bristol Myers Squibb over a potential deal)

-TX +4.8% (earnings, guidance)

-BWA +4.7% (earnings, guidance)

-DIS +3.3% (earnings, guidance)

-ZBH +3.3% (earnings, guidance)

-COR +3.2% (earnings, guidance)

-OC +2.9% (earnings, guidance)

-ELF +2.4% (Bernstein SocGen Group Raised ELF to Outperform from Market Perform, price target: $113)

-J +2.0% (earnings, guidance)

Downside:

-PODD -19% (earnings, guidance)

-LMAT -17% (earnings, guidance)

-EOSE -15% (earnings, guidance)

-MDLN -15% (earnings, guidance)

-CDW -13% (earnings, guidance)

-BBBY -12% (earnings, color)

-CC -12% (earnings, guidance)

-SPCX -10% (earnings, guidance)

-MTCH -9.8% (earnings, guidance)

-LCID -9.3% (earnings, guidance)

-PINS -9.1% (earnings, guidance)

-AMD -8.4% (earnings, guidance)

-NYT -8.4% (earnings, guidance)

-RXRX -8.4% (earnings, color)

-TYRA -7.8% (earnings)

-FLUT -7.6% (earnings, guidance)

-NICE -6.4% (earnings, guidance)

-VSH -6.3% (earnings, guidance)

-DVA -6.2% (earnings, guidance)

-OPEN -6.1% (earnings, guidance)

-GLXY -6.0% (earnings, color)

-ECHO -5.6% (lower in sympathy with SPCX)

-GFS -5.4% (earnings, guidance)

-CPNG -4.5% (earnings, color)

-MOS -2.8% (earnings, guidance)

-LSCC -2.7% (earnings, guidance)

-UBER -2.7% (earnings, guidance)

-EMR -2.1% (earnings, guidance)

Positions: None.

Positions: None.

The S&P Short Range Oscillator moves further overbought at 1.77% vs. 0.95%.

Position: Short SPY (M), QQQ (S)

Dougie Kass

Thanks for all of your patience, had a productive series of meetings.

More shorts (725 PM)

• SPY $772.87
• QQQ $722.72

Added Wednesday morning at 530 AM:

* SPY $773.85
* QQQ $723.81

Position: Short SPY (M), QQQ (S)