In this August 26, 2026 market update, Kenny Polcari provides a rapid‑fire overview of the day's macro and equity landscape. He explains how a three‑day decline in oil prices, driven by shifting supply risk perceptions rather than a de‑escalation of Middle‑East tensions, knocked down inflation expectations, pushed Treasury yields lower and reignited risk‑on buying in technology and semiconductor stocks. He reviews the recent $69 billion 2‑year Treasury auction, noting solid short‑end demand but weak direct participation and emphasizing that the real challenge lies on the long end of the curve where investors still demand higher compensation for fiscal deficits and debt. Polcari breaks down sector performance – the Mag 7, XLK, semis and disruptive tech all rallied, while consumer staples, energy and industrials lagged – and highlights the broader equity move (Dow +160, S&P +25, Nasdaq +171). He discusses gold’s technical position, recent economic data (new‑home sales down 10.5%, 30‑year mortgage rates at 6.8%, consumer confidence at 89.4, upcoming PCE and personal‑income/spending releases), and corporate news such as Dick’s Sporting Goods’ 30% drop post‑acquisition. He sets expectations for Nvidia’s upcoming earnings, stressing that the AI narrative hinges on beating revenue forecasts. The segment ends with a personal plug for a complimentary portfolio review and a detailed grilled Maine lobster‑tail recipe for Labor Day.
Chapters
Well, good morning. And yes, it's me. I'm back in Florida after spending a couple of days in New York City. Today is Wednesday, August 26th, 2026. And here are the things you know. Well, the first thing is I'm going to join Liz Claiborne today at 3 o'clock on Fox Business. So make sure to tune in. Away from that, here's what sent the market higher yesterday. Oil fell, bonds rise, yields fall. And guess what? It is risk on all over again. Now, while the conflict isn't over, It appears that we're making progress, but be cautious because we've been here before. There was a 2-year bond auction yesterday and it was well received, but the issue is at the long end of the curve, not the short end of the curve. Now, new home sales, they plunged. Mortgage rates, well, they're going higher, and confidence, it's going lower. Nvidia at 4 PM today, so hold on to your hats because it's going to be exciting. And what we haven't done it— well, it's Labor Day, summer's almost over. We're going to have the grilled Maine lobster tails. Well, okay. Apparently, the quickest way to calm down an angry bond market and a nervous stock market is to knock footalls off the price of a barrel of oil. Stocks finished higher yesterday as oil got whacked. Bonds rose, causing Treasury yields to back off, and traders and algos went right back into the risk trade, buying the very names in technology and semiconductors that they dumped on Monday. Now, we—I say this—I say traders and algos because long-term investors are not this. They don't run for the door on Monday and sell everything and then run back in the door on Tuesday and buy everything right back. I mean, it's exhausting, but that is in fact what the traders and the algos do. Now, yesterday as the bell rang, the Dow showed a gain of 160 points. The S&P added 25. The NASDAQ was up 171. The Russell added 14 points. The transports gained 24 points. The equal-weighted S&P though struggled. It lost 5 points while the Mag 7 added 227 points. And the message could not be any clearer. Oil falls, inflation anxiety drops, yields drop, gold ends the day unchanged, and stocks, well, they go up. Investors ran right back into all parts of the tech sector, almost all parts. The XLK was up 1%, semis up 1.6%, disruptive tech up 2.6%, the growth trade was up 0.7%, cloud and web services up 1.6%. But to be fair, money did move out of software and cybersecurity names. They were slightly weaker. Of the other S&P sectors, money moved into utilities, communications, healthcare, and financials. Uh, we saw weakness in consumer staples, which makes sense, uh, because as money moves back into the risk trade, it wants to move out of boring and into sexy. We also saw weakness in energy and industrials. Okay, so what happened to oil? Tensions in the Middle East remain high, yet oil has gone down for 3 straight days. Brent lost 3.6%. WTI gave up 4.6%. This morning they're lower again. Brent's down another 3%. WTI's down another 2.5%. So what gives? Did Donnie suddenly decide to play nice in the sandbox? No, he did not. In fact, he threw more sand in their face, putting more economic pressure on Iran by threatening secondary sanctions against countries that continue doing business and supporting Iran. Now, we did get an API report that shows US crude stockpiles rose by 4.2 million barrels last week, right? So it's more supply. We also got reports that suggest Oman is pushing on Iran to come back to the table, and Pakistan has apparently made some progress getting Iran to consider reopening the strait, although Trump says it's open, but that's the narrative. The Pakistanis delivered a US proposal to Iran that would involve ending the naval blockade In exchange for reopening. So think about it. Oil isn't falling because the conflict has eased. It's falling because the perceived supply risk has changed. And all this was enough for the oil traders to take some of the risk premium out of the market, causing prices to fall. And remember why this is important, because oil has been at the center of the inflation bond market problem. Higher oil feeds inflation expectations. Higher inflation forces investors to demand more yield to own long-dated bonds. Higher yields, well, they tighten financial conditions. And guess what? Kevi didn't have to do a damn thing. And that pressures stock valuations, especially the long-duration growth tech names. So when oil gets whacked, the entire equation goes in reverse. Bonds rally, yields fall, and suddenly everybody wants tech again. And that explains the move in the QQQs and the Mag 7 yesterday as they moved higher. Now, the 10-year, which traded as high as 4.74% last week, ended yesterday 4.62%. The 30-year ended the day 5.16%, down from 5.33% on August 18th. In addition, we had a $69 billion 2-year bond auction yesterday. and it was solid. The notes were priced at 4.20%, uh, versus the 4.208% yield that the market was, was giving them. The bid to cover was 2.6 times, while indirect bidders, meaning foreign central banks and overseas institutions bidding through intermediaries, they took 66% of the offering. Direct bidders, meaning institutions bidding directly with the Treasury, took 23%, while the dealers were left with just 10.9%. So while it looks like demand was there, There is a nuance. Yes, indirect demand was strong, but direct demand was weak, 23% versus the average 30%. So while it's fair to say that demand was solid, it wasn't really spectacular. And don't forget, this is a 2-year auction. It's the short end of the curve. The real fight is on the long end of the curve, the 10s, the 20s, and the 30 years, because that is where investors are demanding greater compensation for For time, for inflation, for deficits, debt, and fiscal risk. And so yes, it was good, but is the problem solved? Not even close. Why? Because the structural problem in the bond market has not changed. Yes, Scotty still has an enormous amount of debt to finance. The deficit remains huge. Corporate America, especially big tech, is competing for the capital, and investors are still demanding more compensation to lend money in the long term. Now, to be clear, I'm not trying to be a party pooper. I'm just making it clear that the road ahead remains rocky, and Scottie's buyback strategy continues to be debated. Famed investor Stanley Druckenmiller came out swinging, arguing that long-term bond yields are the last remaining fiscal disciplinarians and that artificially suppressing long-term yields only delays the inevitable conversation. Controlling the deficit, controlling spending, and keeping the debt from growing faster than the economy. In the end, the bond market isn't looking for financial gimmicks. It wants discipline out of Washington. Spend less, borrow less, and convince the bond market that Washington is serious about getting spending deficits and debt under control. That's going to be a feat. I don't think that's ever going to happen. And gold, well, it's up 14% this month, busting right up and through resistance at $4,200 to trade as high as $4,700 the other day where it ran into resistance. This morning it's down $36 at $4,620. Trendline support's down at $4,520, trendline resistance at $4,700. A push up and through $4,700 puts $5,000 right in the bullseye. A failure to hold support is going to see us test $4,380. Okay, so what did the economic data What did the data tell us? Well, July new home sales fell by 10.5%. The expectation was down 1.4%. This morning we learned that 30-year mortgage rates are now 6.8%, up from 6.5%, and that isn't helping housing nor the, nor the buyers. Consumer confidence was weaker than expected as well, coming in at 89.4, down from a revised 90.2, suggesting consumers are becoming increasingly concerned about future business conditions and employment and inflation. And then there was Dick's Sporting Goods. The stock got absolutely trashed yesterday, falling 30% after reporting disappointing results and weaker outlook, uh, raising new questions about not only the consumer but their Foot Locker acquisition. Remember, they announced that deal in May of '25. It closed in September of '25, arguing that the combination was going to create real value for Dick's. Well, Less than a year into ownership, investors are asking, where's the value? Now, while one company doesn't make an economy, it is interesting that Dick's got punched in the face the same day that consumer confidence weakened and new home sales fell by 10.5%. And tonight it's all about Nvidia. I'm not going to rehash it. We discussed this already. You know what the deal is. Jensen not only has to wow us, He has to talk about demand of their newest chip, the Vera Rubin. He has to convince us that the AI story remains alive and well and then guide us well above the Street's forward estimate. Now, right now, the Street is looking for 3rd quarter revenue to be about $104.2 billion next quarter. That's October. That's the hurdle. And just meeting that hurdle, that's not going to be enough. If Jensen gives us $107 or $108 billion, that should, should cause the stock to rally. If he gives us $100, $102 billion, even after a huge second quarter beat, the trader types and algos are likely to throw a fit and sell the stock. In the end, all Jensen has to do is validate the entire AI investment thesis. My gut says he's not going to disappoint. Let's see what the algos think. ECO data today includes personal income and personal spending, both expected to be a little bit lower But the biggie is going to be the PCE price index, right, which is the Fed's favorite inflation gauge coming out at 8:30. Month over month and year over year expected to be a bit lower, which is good. But remember, the market is already looking through August and into September because oil has surged by 18% in August. We're also going to get the second revision, the second quarter GDP, and that's expected to be unchanged at 1.5%. This morning, European markets are marginally higher. US futures are treading water ahead of the big day. Dow futures down 2 points, S&P's down 10, NASDAQ's down 46, and the Russell is down 11 points. The S&P closed at 7,677, up 24 points yesterday. We're right in the middle of the trading range, 7,550 on the downside, 7,800 on the upside. An Nvidia bid, uh, an Nvidia beat should help push the broader market up to test the highs. Well, any perceived disappointment in Nvidia is gonna cause tech to sell off, and that's gonna cause the S&P to test support. Remember, if you'd like to discuss your goals and evaluate your risk in your portfolio, or simply just get a second opinion, feel free to give me a buzz at 561-931-0190. Or better yet, you can click on the link on the slatestone.com website, the Contact Us page. It'll come right to me, and I'll be happy to provide you with a complimentary portfolio review and risk assessment of your current portfolio. Okay, so Labor Day's coming, the end of summer's coming, so we're gonna have the grilled lobster tails with herb butter. So once again, as summer comes to an end, you wanna spark up the barbecue. We're gonna grill Maine lobster tails because they're easy to prepare and easy to cook. There's nothing complicated, fresh Maine lobster tails, a hot grill, plenty of garlic herb butter, and some fresh lemon. You wanna give the lobsters a quick kiss On the grill for some char, and then we're going to finish it gently in a sauté pan with the butter. Serve it with a corn roasted— grilled corn on the cob and roasted potatoes, and we're going to call it dinner. So for this, you need the lobster tails, you need olive oil, herb butter, fresh lemons, salt and pepper, and you want to preheat the grill to medium-high. Now herb butter, all that is, you're going to take minced garlic and shallots and mix it into softened butter, right? You can season a little bit with salt and pepper if If you want. Take the tail, uh, take the tail. You're going to slice it open. You're going to pull the meat out somewhat, not completely remove it from the shell because the shell remains part of the presentation. You're going to rinse and pat dry the meat. You're going to mix a little bit of olive oil with the herb butter, lemon juice, and salt and pepper in a bowl. You're going to brush the mixture on the meat of the tail, and you're going to place it on the grill meat side down. Cook it for about a minute and a half. Turn it, cook it over for about another minute or so. You're going to brush more butter on the meat. Remove it off the grill. Now the lobster is not going to be cooked yet. It's still going to be pink. We're going to take it and put it in a sauté pan. You're going to melt some more of the herb butter and you're going to add some chopped Italian parsley. You're going to then put the lobster tails in the butter. You're going to bathe the lobster tails in this melted butter sauce, keeping the heat on medium-low. Spoon the sauce over the meat for 3 or 4 minutes and then it should be nice and cooked. You're gonna serve this with a couple of spoonfuls of butter dripped over it, with some corn on the cob that you've grilled, and some roasted potatoes. If you want, you can make a big salad as well. Either way, you're gonna eat this outside on the deck overlooking the water, sand between your toes. It's just perfect for an end of summer celebration. Until tomorrow, take good care.
