Stocks Finish Mixed as Bond Yields Fall and Chipmakers Slide

The S&P 500 Index ($SPX) (SPY) closed up by +0.21% on Wednesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed up by +0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -0.22%.  E-mini S&P futures (ESU26) rose +0.20%, and September E-mini Nasdaq futures (NQU26) fell -0.21%.

Stock indices settled mixed on Wednesday, with the Nasdaq 100 falling to a 1.5-week low.  The broader market was supported on Wednesday by lower US bond yields.  The 10-year T-note yield dropped -5 bp to 4.65% on Wednesday after the US Treasury announced that it will boost liquidity and double the size of buybacks for longer-dated nominal coupon securities to at least $4 billion.   However, weakness in chipmaker and AI-infrastructure stocks continued for a second day on Wednesday, weighing on the Nasdaq 100. 

Also, on the positive side for stocks, Moderna surged more than +176% on Wednesday after announcing a positive result from its personalized cancer vaccine trial with Merck & Co.  In addition, the Trump administration delayed 50% tariffs on some Canadian products for three days late Tuesday, less than two hours before the tariffs were set to take effect, saying the two sides had reached a tentative agreement. 

US MBA mortgage applications fell -0.4% in the week ended August 14, with the purchase mortgage sub-index down -2.0% and the refinancing mortgage sub-index up +1.5%.  The average 30-year fixed-rate mortgage was unchanged from the prior week at 6.77%.

The minutes of the July 28-29 FOMC meeting were slightly hawkish as many Fed officials indicated that policy tightening would be necessary if inflation didn't decline.  The minutes showed participants' inflation outlooks were "highly uncertain," and re re-escalation of the Iran war "clouded the inflation outlook." Officials described the labor market as stable, with labor demand and supply in balance.

The lack of a clear path to a resolution in the Middle East is keeping the Strait of Hormuz closed and limiting crude supplies from the Middle East, keeping upward pressure on oil prices.  Sep WTI crude oil prices (CLU26) rallied more than +1% to a fresh 3-week high on Wednesday as Middle East tensions intensified after the United Arab Emirates said it was cutting all economic ties with Iran after accusing Iran of firing ballistic missiles at its territory.   

President Trump said he's not interested in extending the expired agreement with Iran, dimming prospects for a swift reopening of the Strait of Hormuz.  Mr. Trump also said that the US naval blockade on Iranian ports is putting pressure on the country, and he has no timeline for resolving the US-Iran conflict.

On Monday, US Energy Secretary Chris Wright said that the US is playing the long game with Iran, implying the US has no plans to de-escalate the conflict, potentially limiting crude supplied from the Middle East.

Treasury Secretary Bessent said last week that the administration will soon announce unprecedented economic measures against Iran that “have never been seen in the history of economic isolation of a country.”  The economic measures would add to the current US naval blockade of Iranian ports. 

There have been no signs of progress toward a US-Iran agreement to fully open the Strait of Hormuz.  An Iranian military spokesperson said last Thursday that no ship can safely pass the Strait of Hormuz without Iran’s authorization and supervision and that President Trump’s claims of control over the Strait are “nothing more than lies.”  The Iranian statement was in response to President Trump's comment last Tuesday that the US has “total control over the Hormuz Strait” and that “we own it.” 

The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.  So far, earnings results have been positive, with 85% of the 459 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 32% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets settled lower on Wednesday.  The Euro Stoxx 50 fell to a 2-week low and closed down -0.37%.  China's Shanghai Composite fell to a 1.5-week low and closed down -2.40%.  Japan's Nikkei-225 Stock Average slid to a 1.5-week low and closed down sharply by -3.16%.

Interest Rates

September 10-year T-notes (ZNU6) closed up by +7 ticks on Wednesday.  The 10-year T-note yield fell -5.3 bp to 4.651%.  Sep T-notes moved higher on Wednesday after the US Treasury announced that it will at least double the maximum size of its liquidity support buyback operations for longer-dated nominal coupon sizes to at least $4 billion per operation, effective September 9.  

Gains in T-notes were limited amid higher crude oil prices, as WTI crude oil climbed more than +1% to a 3-week high on Wednesday, boosting inflation expectations.  The 10-year breakeven inflation rate rose to a 2-month high of 2.321% on Wednesday.  Also, weak demand for the Treasury’s $16 billion auction of 20-year T-bonds weighed on T-note prices as the auction had a bid-to-cover ratio of 2.53, weaker than the 10-auction average of 2.64. 

European government bond yields were mixed on Wednesday.  The 10-year German bund yield climbed to a 15-year high of 3.275% and finished up +0.3 bp to 3.262%.  The 10-year UK gilt yield fell -3.6 bp to 5.044%.

UK July CPI rose +2.9% y/y, right on expectations.  July core CPI rose +2.6% y/y, stronger than expectations of +2.5% y/y.

Markets are discounting a 96% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Mining stocks rallied sharply on Wednesday after metals prices surged when the Treasury announced that it was boosting its buybacks of longer-dated US government debt.  Hecla Mining (HL) closed up more than +13%, and Coeur Mining (CDE) closed up more than +11%.  Also, Anglogold Ashanti (AU) closed up more than +10%, and Newmont Corp (NEM) and Barrick Mining (B) closed up more than +7%.  In addition, Freeport McMoRan (FCX) closed up more than +3%, and Southern Copper (SCCO) closed up more than +2%.

Software stocks moved higher on Wednesday, supporting the overall market.  ServiceNow (NOW) and Atlassian Corp (TEAM) closed up more than +6%, and Salesforce (CRM) closed up more than +5%.  Also, Thomson Reuters (TRI) closed up more than +4%, and Workday (WDAY), Intuit (INTU), and Adobe Systems (ADBE) closed up more than +3%.  In addition, Palantir Technologies (PLTR) closed up more than +2%, and Autodesk (ADSK), and International Business Machines (IBM) closed up more than +1%.

Cryptocurrency-exposed stocks surged on Wednesday as Bitcoin (^BTCUSD) rallied more than +5% to a 2.5-month high.  Strategy (MSTR) closed up more than +12% to lead gainers in the Nasdaq 100, and Circle Internet Group (CRCL) and Coinbase Global (COIN) closed up more than +9%. Also, Galaxy Digital Holdings (GLXY) closed up more than +8%, and MARA Holdings (MARA) closed up more than +7%.  In addition, Riot Platforms (RIOT) closed up more than +2%.

Chipmakers and AI-infrastructure stocks retreated for a second day on Wednesday, weighing on the Nasdaq 100.  The iShares Semiconductor ETF (SOXX) closed down more than -2%.  Seagate Technology Holdings Plc (STX) closed down more than -7% to lead losers in the S&P 500, and Western Digital (WDC) and Lam Research (LRCX) closed down more than -6%.  Also, Broadcom (AVGO) closed down more than -4%, and Advanced Micro Devices (AMD), Applied Materials (AMAT), Intel (INTC), KLA Corp (KLAC), and Sandisk (SNDK) closed down more than -3%.  In addition, ASML Holdings NV (ASML) closed down more than -2%. 

Cybersecurity stocks moved lower on Wednesday, weighing on the overall market.  Crowdstrike Holdings (CRWD) closed down more than -5%, and Palo Alto Networks (PANW), Fortinet (FTNT), and Cloudflare (NET) closed down more than -3%.  Also, Okta (OKTA) closed down more than -1%, and Zscaler (ZS) closed down -0.60%. 

US steel and aluminum companies fell on Wednesday after Bloomberg reported that a tentative trade deal between the US and Canada would reduce tariffs on certain Canadian metal exports to 25%.  Steel Dynamics (STLD) closed down more than -7%, and Nucor (NUE) closed down more than -6%.  Also, Century Aluminum (CENX) closed down more than -5%, Commercial Metals (CMC) closed down more than -4%, and Kaiser Aluminum (KALU) closed down more than -3%. 

Moderna (MRNA) closed up more than +176% to lead gainers in the S&P 500, and Merck & Co (MRK) closed up more than +12% to lead gainers in the Dow Jones Industrials after the companies said their joint personalized cancer vaccine helped cut the recurrence of melanoma in a larger, late-stage trial. 

Estee Lauder (EL) closed up more than +16% after reporting Q4 net sales of $3.63 billion, better than the consensus of $3.55 billion. 

Marvell Technology (MRVL) closed up more than +9% after announcing an expanded chip-development partnership with Alphabet, including a warrant from Marvell allowing Google to buy as much as $12.2 billion in Marvell stock. 

Toll Brothers (TOL) closed up +4% after reporting Q3 revenue of $2.66 billion, better than the consensus of $2.63 billion.

La-Z-Boy (LZB) closed down more than -17% after forecasting Q2 sales of $475.7 million, well below the consensus of $537 million. 

Nebius Group NV (NBIS) closed down more than -9% to lead losers in the Nasdaq 100 after announcing the sale of $4.5 billion in aggregate of convertible senior notes due 2030 and 2034. 

Mercury Systems (MRCY) closed down more than -4% after reporting Q4 adjusted EPS of 37 cents, below the consensus of 38 cents. 

Earnings Reports (8/20/2026)

Deere & Co (DE), Ross Stores Inc (ROST), Walmart Inc (WMT).