Typical Post-Labor Day Weakness Continues

US equities look to continue Tuesday’s slide into Wednesday as crude prices continue to climb to fresh three-month highs again pushing up global bond yields with the 2-year US Treasury at one point hitting the highest levels since July 2024 and the 10-year Treasury pushing against the highest since October 2023.

Crude’s Brent benchmark pushed back over $100 as the US military destroyed five Iranian tankers in response to attempts to hit a US Navy warship with ballistic missiles overnight, US Central Command said. That comes on top of the reports of increased buying from China as mentioned yesterday, Goldman Sachs increasing its forecasts for oil prices as mentioned last night, and a report from analytics firm Vortexa that the amount of oil on ships at sea is down by more than 150 million barrels since the middle of July. The U.S. on Tuesday also issued 36 Iran-related sanctions targeting Iran’s aviation sector and other companies as part of a broad push to escalate economic pressure on Tehran.

Not helping the indices, semiconductor stocks are lower following a four-day rally, with an exchange-traded fund tracking major chipmakers sliding more than 1% in US premarket trading.

In terms of US economic data, as mentioned in the Week Ahead it’s an overall light week and Wednesday is the lightest day. Earlier we did get weekly mortgage applications, which fell back as mortgage rates increased seeing the share of adjustable-rate loans increase to 8.5% up from 8% the previous week and 3% pre-pandemic. We also got the ADP weekly job growth estimate for the four weeks through August 22nd which came in the best since July 11th even as the 4-week moving average fell to the least since February 7th (post below).

This afternoon we’ll get an auction of 10-year Treasury notes, with traders awaiting the size of Thursday’s buyback operation for outstanding 10- and 20-year securities. In addition, Apple’s (AAPL) fall event kicks off at 1pm ET.

As of 8:50 am ET, the S&P 500 is down by 0.4% while the tech-heavy Nasdaq-100 index is -0.6%, and the small-cap Russell 2000 is -0.6%.

[Note the International Update is below the US update]

Note on all charts the colored lines are daily moving averages (the average price over the given number of days):

20 = green
50 = purple
100 = blue
200 = brown

The middle panel is MACD = Moving average convergence/divergence line, a measure of momentum that compares longer term and shorter term momentum to gauge if a move is strengthening or weakening. This is probably my favorite individual indicator (it’s also the favorite of Katie Stockton, a very fine technician).

The bottom panel is RSI = Relative Strength Index (basically what it sounds like) = measures the strength of the move comparing gains to losses over the given lookback window (I use the standard 14 periods).

SPX futures (/ES): testing uptrend line from March lows.

2-year yield – Touched the highest since July 2024.

10-year yield – pushing up against the highest since October 2023.

30-year yield – little changed further off the highs of the year.

DXY US dollar index – would be lowest close since May.

US WTI crude – highest since May 22nd.

Gold futures (/GC) – trying to hold 100-DMA

US copper futures (/HG) – down modestly after making an all-time closing high Tuesday.

US natural gas futures (/NG) – falling away from $3 after failing at the level for four sessions.

Bitcoin futures – continues to trade in its “bull flag” pattern.

Some pre-market company news:

Casey’s General Stores (CASY)— Shares dropped more than 10% after the convenience store chain reported mixed results for the fiscal first quarter.
Signet Jewelers (SIG) — The jeweler popped 17% on the back of better-than-expected earnings for the second quarter.
Braze (BRZE) — The customer engagement platform’s shares dropped nearly 11% on Wednesday morning after it fell short on revenue against analysts’ estimates.
Chime Financial (CHYM)— Shares were up over 10% for the financial technology company after it reported better-than-expected second quarter earnings. For its third quarter guidance, the company expects to generate between $680 million and $690 million in revenue, surpassing analysts’ estimate of $640.6 million.
Uber Technologies Inc. (UBER) is looking to raise €4.5 billion ($5.2 billion) from its debut five-part euro bond, the latest move by an American company to diversify its funding in Europe.
Amazon.com Inc. (AMZN) kicked off the sale of its debut sterling bonds, with a four-part deal expected to be delivered later on Wednesday.
Dow Inc. (DOW) is considering plans to exit its $20 billion chemicals partnership with Saudi Aramco, people familiar with the matter said, as part of the US firm’s efforts to reshape its portfolio amid a prolonged downturn in the industry.
Alphabet Inc.’s (GOOG) Google is planning its biggest investment in Europe, an artificial intelligence infrastructure build out worth at least €13 billion ($15.1 billion) in Finland.

Some other headline stories:

WSJ – An Anthropic researcher is quitting the artificial-intelligence industry over fears that the lab and its competitors are racing to build systems they won’t be able to control, a sign of mounting safety concerns within top AI companies.Jacob Coxon, a researcher who specializes in training new AI models by having them consume vast amounts of data, said Tuesday that he is leaving the company because he doesn’t want to participate in an industrywide rush to build AI systems that can improve themselves, worried such systems could spiral out of control and destroy humanity.
WSJ – Legislators or governors in more than 10 states have paused or canceled tax exemptions for data centers amid a backlash against the facilities.
BBG – A new cloud computing venture by Blackstone and Alphabet has hit roadblocks in its plan to develop data centers. The startup aims to rent Google AI chips to customers by next year.
BBG – LIV Golf filed for bankruptcy, a dramatic fall for the Saudi-backed league that had big ambitions to challenge the supremacy of the PGA Tour.

International Highlights:

Europe’s benchmark STOXX 600 as of 8:10 am ET was down sharply -1.6% reacting to the continued pressures from oil prices which continue to elevate bond yields.

Germany’s DAX: -1.5%, U.K.’s FTSE 100: -1.1%, France’s CAC 40: -2.0%, Italy’s FTSE MIB: -1.4%, Spain’s IBEX 35: -2.3%.

The broad MSCI AC Asia Pacific Index though was +0.3% getting back some of Tuesday’s decline.

Japan’s Nikkei: -0.2%, Hong Kong’s Hang Seng: -0.2%, China’s Shanghai Composite: +0.3%, India’s Sensex: -1.1%, South Korea’s Kospi: +1.4%, Australia’s ASX All Ordinaries: -0.1%.

Some ex-US highlights:

WSJ – President Trump on Tuesday signed orders to ban the importation of many dairy products, alcoholic beverages and motorcycles from Canada in three weeks—a retaliation for Canadian tariffs that took effect earlier the same day. Trump also modified the scope of some existing 50% tariffs on Canada, removing levies on cement, road salt and some hospital products, while imposing 50% levies on other products including some all-terrain vehicles, boats and cheeses. The tariff changes will take effect Sept. 15, according to proclamations posted on the White House website, while the trade prohibitions are set to kick in on Sept. 29.
BBG – The European Union and Canada are working toward a new, all-encompassing relationship that will range from trade to security, as the transatlantic partners seek to build a new alliance to offset the global power politics dominated by the US and China.
BBG – Treasury Secretary Scott Bessent challenged traders to counter his efforts to strengthen Japan’s currency, saying when he makes market calls these days he’s effectively doing so with inside information. “Whenever people say, ‘Oh, well, Treasury Secretary is taking a risk,’ — well, it’s my dream, I have asymmetric information,” Bessent said at a Southern Methodist University event in Texas Tuesday.
CNBC – The head of U.K. air traffic control services has said he does not believe a cyber attack caused the software issue that disrupted hundreds of thousands of passengers with flight cancelations on Tuesday. Flight tracking website Flightradar24 said 1,300 flights were canceled to and from U.K. airports on Tuesday, and that 177 flights had been canceled as of early Wednesday morning.
BBG – China’s consumer inflation accelerated for the first time since April and factory-gate prices grew faster than expected, as more expensive food and energy revive cost pressures. The consumer-price index rose 0.8% in August from a year earlier, in line with forecasts and up from 0.5% in the previous month. Producer inflation rebounded to 3.8% from 3.5% in July, exceeding the median forecast of 3.6%. The core CPI, which strips out volatile food and energy prices, rose for the first time in four months to 1%.

BBG – China is injecting 300 billion yuan ($45 billion) into its largest banks and insurers, part of the nation’s biggest recapitalization in almost two decades, to shore up the strength of its financial system and sustain lending as economic growth slows.
Briefing.com – China is reportedly limiting IPO approvals for startups developing humanoid robots after weak results from recent offerings. Japan is expected to see a cabinet reshuffle next Thursday. Top Reserve Bank of Australia officials signaled a willingness to raise the bank’s cash rate again before the end of the year.

As a reminder, as I mentioned in the Week Ahead: “I want this piece, and to a larger extent the intra-week pieces (morning, evening, and economic updates), to evolve in whatever way is most meaningful for readers here. In that regard, I highly encourage an open and robust dialogue. Please post or email comments, questions, pushback, or suggestions on what I write, and especially what you would like to see more or less of. I read all the feedback, and I promise to be responsive as the newsletter settles into its new home.”