We are in the midst of the summer doldrums which are characterized by lower trading volumes and a lack of market moving data. That should change next week as we get earnings from Nvidia, GDP, Durable Goods Orders and a speech on Friday from Fed Chair Kevin Warsh from the Jackson Hole Symposium.
One notable from this week was the FOMC minutes from their July meeting which reflected a hawkish tone as three committee members voted for a 25bp rate hike. I can understand their perspective as oil prices are nearing $90 and the conflict with Iran has no clear endgame. Warsh’s upcoming speech will be closely watched.
As you can see in the chart below of US (WTI) crude oil, we have another leg up in prices underway. How far can we go? It will be a race to see who is able to offset the lost production as countries look to replenish their oil reserves that have been depleted this year. Fortunately, the busy summer season is ending so that may provide some demand relief on the margins (maybe).
Yields On The Move
Long-term Treasury yields continue to move higher as illustrated by the 10Yr Treasury chart below. You can see that we may be in the early stages of breaking out above the previous high of 5% after completing a three year consolidation period.
To explain the labels in this chart would go beyond the scope of this blog piece but know that yellow wave ‘4’ is where the sideways correction ended and the next leg higher begins. From this analysis, we could see the 10Yr hit 5.5% in the coming year.
Stocks Snap a Three-Week Streak
The S&P 500 was modestly lower this week after rising for most of August. It was a slow week and perhaps the Nvidia earnings will be a catalyst into month end.
Putting It Together
I’m watching two things into next week: how Chair Warsh frames policy at Jackson Hole, and whether long-term yields keep climbing or settle back down. Also, I did another interview on the Schwab Network to preview the Home Depot report that was released on Tuesday. To summarize, they beat their number but only because of a one-time tariff refund – real estate is still challenging with mortgage rates at 6.65%. Tune in below for a more detailed discussion.
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President, Kisco Capital
This commentary is provided by Kisco Capital LLC for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Opinions are subject to change without notice. Past performance is not indicative of future results. All investments involve risk, including possible loss of principal. Kisco Capital and its clients may hold positions in securities discussed herein.
