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The S&P 500 has yet to see back-to-back gains in August.

If it fails to do so by Friday, it will be the first month without two consecutive positive sessions since 2010!

🗣️ Compared to last year, the tone of this year's Jackson Hole speech was relatively mild. It also offered very little in the way of new information. As expected, Jerome Powell highlighted the Fed's progress in bringing down inflation but noted prices were still uncomfortably high and warned higher rates could be appropriate. He also pointed to better-than-expected economic growth and a resilient labor market as potential catalysts for further tightening of monetary policy. Turning to the Fed's upcoming meetings, while markets still expect rates to hold steady in September, investors are increasingly expecting a hike to follow. The probability of a 25bps increase in November has now jumped to over 50% from under 30% a month ago (shown above).

🌏 The Chinese government has made moves to make its capital markets more attractive to investors. Over the weekend, the country's Ministry of Finance announced it would cut the stamp duty (read: tax) on stock trades in half. Currently, stamp duties represent the biggest expense for Chinese stock traders. Officials also said they would lower the deposit ratio required for margin financing in addition to slowing the pace of IPOs due to "recent market conditions". While the moves were aimed at reenergizing capital markets, Chinese stocks tumbled on Monday after a brief surge following the opening bell.

• Monday: Dallas Fed Manufacturing Index

• Tuesday: Case-Shiller home prices, House Price Index, JOLTs, CB Consumer Confidence

• Wednesday: ADP employment change, retail/wholesale inventories, corporate profits, GDP (revision), balance of trade, pending home sales

• Thursday: Personal income/spending, PCE Price Index, jobless claims, Chicago PMI

• Friday: Non-farm payrolls, unemployment rate, average hourly earnings, S&P Global Manufacturing PMI, ISM manufacturing PMI

☀️ What do corporate spreads say about investors' confidence in future cash flows? As a rule of thumb, rising yield spreads over risk-free Treasuries indicate investors are worried about corporate profits (hence the higher yield demanded for the additional risk). By the same token, falling spreads indicate less concern (or more confidence) in corporate fundamentals. For both investment-grade and high-yield markets (shown above), falling spreads suggest investors are not ringing the alarm on corporate profits just yet. In fact, since the banking crisis in March, spreads have marched steadily lower, which points to increasingly optimistic outlooks.

🔍 What does breadth tell us about the overall market's health? Heading into the weekend, less than half of the S&P 500 was trading above its 200-day moving average (DMA). Less than a third closed above their 50DMA while nearly 80% ended the week below their 20DMA. In terms of relative performance, the number of members outperforming the benchmark over the past year is hovering near decade lows, according to T1 Alpha (shown above). Turning to S&P 500 sectors, Energy represents the only one in which the majority of constituents (91%) are priced above their 50DMA. That figure is less than 40% for all other sectors (including <7% and <10% for Utilities and Real Estate, respectively).

🛢️ The US rig count is an early indicator of future oil output. Data on Friday revealed the total rig count fell by 10 to 632 while the number of oil rigs dropped to 512 from 520. The former is the lowest since February 2022 while the latter is the lowest since January 2022. Energy companies have now reduced the number of active oil rigs for 9 consecutive months.

👀 What we’re watching today:

• FINV FinVolution

• AFYA Afya Limited

• GB Global Blue

• Euro 0DTE: Zero-day options are debuting in Europe this week.

• Evergrande crashes: Shares of Evergrande closed down 79% on Monday as the company struggles to restructure its offshore debt.

• Chinese earnings slump: Companies in China are expected to deliver poor earnings reports.

• Auto workers: United Auto Workers has voted to strike (if necessary) at GM, Ford, and Stellantis.

• Investor uncertainty: The S&P 500 has gone 19 sessions without posting back-to-back gains.

• Crypto mafia: How the “Fidelity mafia” came to quietly dominate the crypto industry.

• Crypto taxes: The Biden administration has proposed new crypto tax reporting rules.

• Crypto hack: Customer data at FTX, BlockFi, and Genesis has been compromised after a Kroll hack.

• Gambling stake: Blackstone is selling a 22% stake in the Bellagio casino for $300 million.

• Electronics M&A: Chinese EV-maker BYD will acquire US-based Jabil's mobile electronic manufacturing business for $2.2 billion.

• Grocery-delivery IPO: Instacart has filed for an IPO on the Nasdaq and expects shares to begin trading next month.

• Software raise: Databricks is in talks to raise funds at a $43 billion valuation.

• Healthcare M&A: The FTC has temporarily suspended its challenge to Amgen's $27.8 billion acquisition of Horizon Therapeutics.

Sources:

• https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html

• https://fred.stlouisfed.org/series/BAMLC0A0CM

• https://fred.stlouisfed.org/series/BAMLH0A0HYM2

• https://twitter.com/t1alpha/status/1694372708749111716?s=20

• https://www.dailychartbook.com/p/daily-chartbook-265

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