Market Summary
U.S. equity futures are pointing to a mixed, subdued open Wednesday morning, with S&P 500 futures trading 2.00 points above fair value while Nasdaq futures sit 21.00 points below fair value as of 8:06 a.m. ET. The market is digesting a combination of rising crude oil prices — climbing on reports that Iran has considered targeting U.S. military assets in Europe — alongside lingering weakness in technology and semiconductor names following Tuesday’s sharp reversal. Treasury yields have stabilized somewhat overnight, a welcome development after longer-dated yields served as a persistent headwind in recent sessions.
Tuesday’s session ended broadly lower, with the S&P 500 falling 53.30 points (-0.7%) to 7691.76, the Nasdaq Composite dropping 355.20 points (-1.3%) to 26310.74, and the DJIA holding up better with a 116.38-point (-0.2%) decline to 53343.40. The damage was concentrated in semiconductor and momentum names — the PHLX Semiconductor Index tumbled 5.0% — while defensive sectors including health care (+1.6%) and consumer staples (+1.1%) provided ballast. Energy (+1.8%) also outperformed as crude oil extended its geopolitical-risk-driven climb.
This morning’s calendar is light on economic data, with all eyes on the FOMC Minutes from the July meeting due at 3:00 p.m. ET, which should offer additional clarity on the Fed’s policy trajectory. Corporate news is mixed: Lowe’s and Target both posted earnings beats but diverged on guidance, while Merck and Moderna surged on positive Phase 3 melanoma trial data. WaveFinder breadth data shows a bullish primary sentiment reading, though the 40-day SMA sentiment remains bearish, reflecting the market’s still-unsettled technical backdrop.
Market Snapshot
Futures (as of 8:06 ET):
- S&P 500 futures: +2.00 vs. fair value
- Nasdaq futures: -21.00 vs. fair value
Tuesday’s Close (18-Aug-26):
- DJIA: 53,343.40 (-116.38, -0.2%)
- S&P 500: 7,691.76 (-53.30, -0.7%)
- Nasdaq Composite: 26,310.74 (-355.20, -1.3%)
Year-to-Date Performance:
- Russell 2000: +21.6%
- S&P MidCap 400: +16.6%
- Nasdaq Composite: +13.1%
- S&P 500: +12.4%
- DJIA: +11.0%
WaveFinder Market Breadth:
- Primary Sentiment: Bullish (Bulls 1,176 / Bears 753)
- 4% Sentiment: Neutral
- 40 SMA Sentiment: Bearish
- Above 20-day SMA: 31%
- Above 40-day SMA: 51.65%
Sector Performance
Ranked by Tuesday’s session performance (Briefing.com):
1. Energy: +1.8% — Led all sectors as crude continued its geopolitical-risk rally
2. Health Care: +1.6% — Defensive rotation; JNJ +3.33%, AMGN hit fresh all-time high
3. Consumer Staples: +1.1% — Defensive bid; KO +2.12%
4. Communication Services: -0.6% — META weighed (-4.45%) amid legal headline risk
5. Industrials: -1.5% — Pressured by AI-infrastructure-linked names; CAT -4.63%
6. Information Technology: -1.9% — Bottom of standings as semiconductors sold off sharply
Note: Financials, Consumer Discretionary, Materials, Utilities, and Real Estate performance percentages were not specified in Tuesday’s Briefing.com sector recap.
WaveFinder Sector Volatility (ATR):
- Energy: 3.55% (rising, P100) — highest volatility reading
- Health Care: 2.14% (falling, P53)
- Communication Services: 1.45% (rising, P89)
- Industrials: 1.18% (flat, P37)
- Materials: 0.91% (falling, P32)
- Financials: 0.69% (flat, P0)
- Technology: -0.69% (rising, P68)
- Utilities: -1.04% (flat, P16)
- Real Estate: -0.90% (flat, P0)
- Consumer Discretionary: 0.34% (falling, P21)
- Consumer Staples: 0.29% (flat, P5) — lowest volatility reading
Key Earnings & Movers
- Merck (MRK) 146.80, +11.63 (+8.6%) — Phase 3 INTerpath-001 trial met primary endpoint (recurrence-free survival) and key secondary endpoint (distant metastasis-free survival) in resected stage IIB-IV melanoma
- Moderna (MRNA) 122.93, +59.97 (+95.25%) — Sharing in the same Phase 3 melanoma trial success alongside Merck
- Lowe’s (LOW) 308.01, -7.63 (-3.5%) — Beat EPS by $0.18, revenue in-line, but guided FY27 EPS and revenue below consensus
- Target (TGT) 151.48, -1.00 (-0.7%) — Beat EPS by $1.76 and topped revenue expectations; guided FY27 EPS and revenue above consensus, yet shares still slipped
- Fabrinet (FN) 482.52, -116.06 (-19.39%) — Plunged despite a Q4 beat and above-consensus Q1 guidance, dragging related names lower
- Lumentum (LITE) 873.31, -95.59 (-9.87%) — Swept up in optical/semiconductor-related selloff
- Coherent (COHR) 306.12, -45.10 (-12.84%) — Same sector pressure
- Teradyne (TER) 404.29, -38.85 (-8.77%) — Same sector pressure
- Caterpillar (CAT) 840.83, -40.82 (-4.63%) — Gave back Monday’s gain amid AI-infrastructure-linked industrial weakness
- Meta Platforms (META) 543.67, -25.30 (-4.45%) — Pressured as opening arguments began in a child social-media addiction case
- Johnson & Johnson (JNJ) 271.12, +8.75 (+3.33%) — Defensive rotation beneficiary
- Coca-Cola (KO) 88.82, +1.84 (+2.12%) — Defensive rotation beneficiary
- Amgen (AMGN) 425.28, +5.90 (+1.41%) — Notched a fresh all-time high, extending post-earnings advance
- Home Depot (HD) 337.67, -0.21 (-0.06%) — Gave back early gains despite a Q2 beat; management flagged “frozen housing market” conditions
- Baidu (BIDU) — Adjusted EPS and revenue missed expectations, revenue down 4% yr/yr, though AI-cloud infrastructure revenue grew 50% yr/yr and GPU-cloud revenue surged 283% yr/yr
Stock Spotlight
Fabrinet (FN) delivered one of the more counterintuitive reactions of the week, plunging 19.39% to $482.52 despite beating Q4 (June) expectations and issuing guidance above consensus for Q1. Adjusted EPS of $4.10 topped estimates, and revenue accelerated 44.6% yr/yr to $1.32 billion. The company also unveiled a new reporting structure — Data Center, Communications Infrastructure, and Automotive/Industrial/Other — to better reflect its end markets. Data Center revenue, which captures optical and interconnect products tied to AI infrastructure, surged 68% yr/yr to $669 million, with DCI and HPC as primary growth drivers, while Communications Infrastructure grew 40% yr/yr to $413 million.
Management expressed strong confidence in FY27, citing customer visibility extending through the end of 2027 and multiple upcoming transceiver ramps, including a hyperscaler-direct program starting this quarter. Adjusted operating margin reached a three-year high of 10.9%, even as gross margin slipped 30 basis points yr/yr to 12.2%. Despite the robust underlying demand picture, shares had run up sharply into the print, raising the bar for results, and the new segment reporting structure may have complicated near-term comparisons for investors — helping explain the sharp negative reaction despite genuinely strong fundamentals. The selloff spilled over into related names Lumentum (-9.87%), Coherent (-12.84%), and Teradyne (-8.77%), amplifying Tuesday’s broader semiconductor-sector rout (PHLX Semiconductor Index -5.0%).
Bond Market & Treasuries
Treasuries are on track for a modestly higher start Wednesday, building on Tuesday’s cautious rebound. Overnight yield moves:
- 2-yr: -2 bps to 4.16%
- 3-yr: -2 bps to 4.23%
- 5-yr: -2 bps to 4.35%
- 10-yr: -3 bps to 4.69%
- 30-yr: -1 bp to 5.28%
Tuesday’s session saw the 30-yr yield briefly spike to a fresh 2026 high of 5.326% before Treasuries staged a late rebound; final levels: 2-yr unchanged at 4.18%, 10-yr -2 bps to 4.71%, 30-yr -2 bps to 5.29%. The rate backdrop remains a key market driver — global long-end yields have been notably elevated, with reports highlighting the highest yield on Japan’s 10-yr note (2.954%) in more than 40 years, Germany’s 30-yr bund (3.779%) in 15 years, and France’s 10-yr OAT (4.11%) since 2008. A $16 billion 20-yr Treasury bond auction is scheduled for 1:00 p.m. ET, ahead of the July FOMC Minutes release at 2:00 p.m. ET (3:00 p.m. per Stock Market Update).
Commodities
- WTI Crude: $85.85/bbl, +1.1% — rising on renewed Iran-related geopolitical risk
- Gold: $4,419.00/ozt, unchanged
- Copper: $6.42/lb, -1.1%
- Tuesday’s WTI settlement: $84.88/bbl (+0.5%), amid an overnight strike on a cargo ship in the Strait of Hormuz
Overseas Markets
Asia-Pacific (mostly lower):
- Nikkei 225: 65,326.42, -2,134.30 (-3.2%)
- Hang Seng: 25,495.07, +23.90 (+0.1%)
- Shanghai Composite: -2.4%
- Sensex: -0.4%
- Kospi: -5.8% (a notably volatile session)
- ASX All Ordinaries: -0.2%
Key drivers: SK Hynix reached a tentative wage agreement; President Trump signaled interest in a November meeting with North Korea’s Kim Jong Un; Japanese debt yields on longer tenors hit fresh 2026 highs before recovering; Moody’s affirmed Australia’s AAA rating with a Stable Outlook.
Europe (mixed, near flat lines):
- STOXX Europe 600: unchanged
- DAX: -0.1%
- FTSE 100: unchanged
- CAC 40: +0.4%
- FTSE MIB: unchanged
- IBEX 35: +0.1%
Key drivers: U.K. CPI accelerated to 2.9% yr/yr (from 2.6%), the first acceleration in four months; ECB’s Rehn said no clear signs of second-round inflation effects yet; ECB President Lagarde stated the region “can’t miss out on the AI revolution.”
Economic Data
- MBA Mortgage Applications Index (week ended Aug 15): -0.4% (prior +3.6%)
- Eurozone July CPI: +0.2% m/m, +2.9% yr/yr, as expected; Core CPI +0.0% m/m, +2.5% yr/yr
- Eurozone June Current Account: surplus of EUR35.10 bln (vs. expected EUR26.8 bln surplus)
- U.K. July CPI: +0.3% m/m, +2.9% yr/yr, as expected; Core CPI +0.2% m/m (vs. 0.1% expected), +2.6% yr/yr (vs. 2.5% expected)
- U.K. July Input PPI: -1.7% m/m (vs. 0.0% expected); Output PPI +0.2% m/m, as expected
- Japan June Core Machinery Orders: +9.7% m/m (vs. 7.2% expected), +16.9% yr/yr (vs. 10.8% expected)
- Australia Q2 Wage Price Index: +0.8% qtr/qtr, +3.2% yr/yr, both as expected
- New Zealand Q2 PPI: Input +2.9% qtr/qtr (vs. 1.3% expected); Output +1.6% qtr/qtr (vs. 0.8% expected)
- Swiss Q2 Industrial Production: +5.5% yr/yr (vs. -4.7% expected)
Prior day’s data (Tuesday) continues to reverberate: July Housing Starts fell sharply to 1.239 mln (consensus 1.360 mln), with broad-based weakness in single-unit starts across every region. Building Permits rose to 1.443 mln (consensus 1.390 mln), with single-unit permits up 2.5% m/m as a leading positive signal. July Import Prices fell 0.4% m/m while Export Prices dropped 1.3% m/m, though yr/yr increases remained outsized at +5.9% and +8.2% respectively.
Looking Ahead
- 10:30 ET: Weekly crude oil inventories (prior: +17.4 mln bbl)
- 1:00 ET: $16 billion 20-yr Treasury bond auction results
- 2:00/3:00 ET: July FOMC Meeting Minutes — key focus for gauging the Fed’s next policy move
- Continued monitoring of semiconductor sector stabilization following Tuesday’s 5.0% PHLX Semiconductor Index decline
- Geopolitical developments in the Strait of Hormuz and U.S.-Iran tensions likely to remain a driver for crude oil prices
- Ongoing earnings reactions to watch: Baidu’s AI-cloud growth trajectory versus advertising weakness; Fabrinet’s FY27 guidance credibility after Tuesday’s outsized selloff despite beat-and-raise results