This Week

We kick off the new week with stocks sitting just below all-time highs, implied volatility still low, and most of earnings season in the rearview. Short-term Treasury yields are sliding, and a Fed rate cut next week looks all but certain. Still, Friday’s jobs miss may have stirred up growth worries, while inflation remains a concern heading into this week’s PPI and CPI reports. More on this week in a second, but first some of the stories from over the weekend:

• Nvidia’s breakdown, dismal jobs report and other ills fail to slow down this bull market by much yet (CNBC)

  • Bear-baiting is illegal in a majority of states that allow bear-hunting, but on Wall Street it’s happening right out in the open.

    The markets have dangled in front of the bear den a weaker-than-hoped jobs report Friday, which took its three-month average payroll gain to minimal levels mostly seen ahead of recessions. Nvidia , the biggest stock in the universe and the principal vehicle of this bull market’s most propulsive theme, has fallen 8% and cracked below its 50-day average in seven trading days since posting a stellar quarter. Bitcoin has traced out a similar pullback pattern in breaching the same trend line, falling 10% from its August peak.

  • The most-coveted initial public offerings of recent months have been wretched since their Roman-candle rallies upon first listing: Figma , Circle , CoreWeave , Chime Financial and Bullish are all between 40-60% beneath their immediate post-pop peak. Let’s not forget that all of these ailments and injuries to the tape have struck in what is solidly the worst month historically for stock returns and against a backdrop of generous equity valuations.

  • This daunting, if admittedly selective, litany of ills has merely slowed the bull market moderately, prompting some fortuitous rotation from previous leaders to 2025 laggards, leaving the S&P 500 up 10% for the year and less than 1% and one day removed from an all-time high.

• Tariffs? Dutch Pensions? What’s Giving Bond Markets the Jitters? (WSJ)

  • The past week’s stock-market wobble had an immediate cause: suddenly higher longer-dated bond yields, with the 30-year Treasury briefly passing 5%. The logic for the selloff in long bonds—and subsequent recovery all the way back—was much less clear. There was no obvious trigger, and fund managers and market reporters threw out lots of explanations. Was it the court ruling against most of President Trump’s tariffs? Was it concern about Federal Reserve independence? Worry about the government borrowing way too much? Perhaps the French government’s impending collapse? The British budget? Dutch pension reform? September?

• Companies Kick Off September With Deluge of Bond Sales (WSJ)

  • Rate cuts are on the way, and U.S. companies are borrowing billions of dollars. American corporations including Merck and Ford Motor opened September with a wave of debt sales, issuing around $56.4 billion of investment-grade bonds through Thursday this past week, along with about $9.6 billion in junk bonds, according to PitchBook LCD data.

• Japan Prime Minister Ishiba Shigeru says he will step down after election setback (CNBC)

  • Japan’s Prime Minister Shigeru Ishiba said Sunday he will step down as leader of the world’s fourth-largest economy amid growing political discord within his party. “I made a difficult decision to step down,” Ishiba said during a press briefing, in comments translated by Japan’s public broadcaster NHK. It comes after Japan struggled to reach a trade agreement with the U.S. and protect its massive auto sector from high duties.

• An iPhone Air, new watches, and heart rate-tracking AirPods: What to expect at Apple's Sept. 9 event (Yahoo Finance)

  • Apple (AAPL) will host its annual fall event on Sept. 9 at its Cupertino, Calif., headquarters, where the company is expected to debut its latest iPhone and Apple Watch lineups.

• OpenAI Says Its Business Will Burn $115 Billion Through 2029 (The Information)

  • OpenAI has sharply raised its projected cash burn through 2029 to $115 billion as it ramps up spending to power the artificial intelligence behind its popular ChatGPT chatbot, The Information reported on Friday. The new forecast is $80 billion higher than the company previously expected.
    

We kick off the week with slightly lower short-term vol that we did the week of the Jobs Number. The SPX is pricing a 1.2% move for the PPI/CPI week — indicating not much worry amongst traders of a number wildly off from consensus estimates:

This Week’s Expected Moves:

• SPX/SPY: 1.2% (6400-6550)

  • QQQ: 1.7%

  • IWM: 2.2%

  • TLT: 1.5%

  • USO: 3.3%

We’ve noted a few times lately that IWM—and now TLT—are showing noticeably higher implied and realized volatility. This could signal we’re entering a stretch where rates and Treasury moves are back in the driver’s seat for equities, something we really haven’t seen since April’s bond volatility flare-up. Last week alone, TLT swung 3.5% and IWM about 3%, compared to an SPX that’s been basically flat for the past three weeks.

This week’s calendar is headlined by PPI on Wednesday and CPI on Thursday (a reversal in order from last month, when CPI came first, followed by PPI, which was the hot one).

Economic Calendar: (consensus)

• Wednesday

  • 8:30am - PPI (0.3%)

• Thursday

  • 8:15 - ECB Rate Decision

  • 8:30am - CPI (0.3%, 2.9%)

  • 8:30am - Initial Jobless Claims (240k)

• Friday:

  • 10am - UofM Consumer Sentiment, prelim (59.2)

How much vol rises into the PPI is likely dependent on whether Friday’s volatility carries over into tomorrow. It appears that traders aren’t too worried about the inflation prints themselves. But if nerves are tested tomorrow (or we see the dip bought in force back above 6500) that could change how those days are priced.

The key question now is what kind of economy the Fed is cutting into. The jobs market already looks shaky, and hotter-than-expected PPI or CPI would only add to concerns—as it puts the Fed in a really tough spot. On the flip side, cooler prints could push traders to assume we’re heading toward the more typical setup of a slowing economy paired with easing price pressures, which makes the Fed’s job much more straightforward.

We’re nearing the end of earnings season and the amount of companies reporting each day is dwindling a bit. But this week we do hear from two software names that have been going in opposite directions this year, ORCL and ADBE.

Earnings (with expected moves):

• Tuesday 

  • After-hours: ORCL 8%, GME 10%

• Wednesday

  • Pre-market: CHWY 8.5%

• Thursday

  • Pre-market: KR 5%

  • After-hours: ADBE 8%

One last point: with the SPX repeatedly gravitating back to the 6450–6500 zone, implied vol has been forced lower. But as mentioned, volatility is bubbling up elsewhere—most notably in Treasury yields and the stocks most sensitive to them. If yields keep swinging into this rate-cutting cycle, it’s only a matter of time before that volatility spills over into the major indices. The VIX sitting at 15 won’t last long if bond market volatility continues to rise.

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