In this August 20, 2026 morning market commentary, Kenny Polcari delivers a rapid‑fire overview of the day’s macro and equity headlines, focusing on a surprise Treasury intervention that doubled liquidity support for long‑dated Treasuries. He explains how the move temporarily pushed 30‑year yields down and 10‑year yields lower, but argues it cannot solve the underlying fiscal deficits, soaring debt, and inflation pressures. Polcari ties the intervention to recent Federal Reserve minutes that revealed a hawkish tilt among policymakers, and notes that rising oil prices from Middle‑East tensions keep inflation expectations elevated. He reviews the mixed equity market reaction— modest gains in the Dow, S&P, Nasdaq and the “Magnificent Seven,” with sectoral strength in consumer staples, discretionary, and healthcare, but continued pressure on tech and semis. He highlights key earnings: Moderna/Merck’s successful phase‑3 melanoma trial, Target’s upbeat sales, Lowe’s mixed results, and the looming Nvidia earnings. Polcari intersperses personal experience with melanoma, uses it to underscore the biotech news, and offers a call‑to‑action for portfolio reviews. The segment ends with a detailed herb‑roasted pork loin recipe and a brief South‑Florida weather note.
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Well, good morning. It's me, Kenny Polcari, your host of the party. And today is Thursday, August 20th, 2026. And here are the things you need to know to get your day started. Well, Scotty, he may have changed the technicals, but he didn't change the fundamentals. The Fed minutes revealed that there were in fact more members who were leaning hawkish. Oil is up, gold is up, and bond yields, well, they are back up as well. And what do we have at dinner tonight? We're gonna have the herb roasted pork loin. Delicious. Okay, well, good morning. And surprise, guess what Scotty, uh, did to the bond market? He heard it screaming. After watching the 30-year yield surge above 5.3%, the 10-year pushed deeper into the danger zone. Scotty blinked. In a surprise announcement yesterday morning, minutes ahead of the opening, the news hit the tape. Bessen announced that the Treasury Will double the size of its liquidity support buybacks in the long end of the curve, the 10 to 30-year part of the curve, beginning on September 9th. That announcement caused the bond market to rally and futures went from negative to positive. And before you could even blink an eye, the 30-year yield dropped 10 basis points to 5.18%. The 10-year backed off towards 4.65%. Now, the dollar fell to a 3-month low and gold, well, that exploded higher. Gaining $190 or 4.3%, blasting right up and through the 4,500 target that we identified last week. So it's all good now. Well, before you go and pop the champagne bottle, let's look at what really happened. Scotty didn't solve anything, right? All he did was intervene in the bond market, creating artificial demand, removing some long duration from the market and pushing bond prices higher and temporarily forcing yields lower. But does it really do anything? It doesn't reduce the deficit. It doesn't reduce the nearly $40 trillion national debt. It doesn't reduce the government's exploding interest expense. And it doesn't eliminate the trillions of dollars that we need to refinance all these issues. Uh, and so we should talk about this, right? If the Treasury finances these purchases by issuing more short-term T-bills, then what we're really talking about is another version of Operation Twist, removing long duration from the market and replacing it with shorter duration debt. And look, can it work? Yes, it can work by temporarily changing the supply and demand dynamics of the Treasury market. It can put pressure on long-term yields, and we saw that yesterday. But temporarily is the operative word. It cannot permanently hold long-term rates below the natural level that's justified by inflation growth and the country's fiscal fundamentals. And here's the one thing: it works best when the economic backdrop is weaker growth, inflation is subdued, and we have control of fiscal and monetary policies. And that's the key, because today that is not the backdrop. We have enormous financing requirements. We have enormous deficits, and we have stubborn inflation and the risk of it getting worse. We have oil trading in the mid-80s. We have bond investors demanding higher yields. So while Scotty can temporarily change the tone, he cannot change the reasons why investors are demanding higher yields. And guess what? This morning, the bond market's already testing him. That rally at the long end of the curve that we saw yesterday, well, that is starting to fade already. Bonds are under pressure this morning and yields are, guess what, moving back up as everyone realizes that yesterday's intervention may have changed the technical picture, but it has not changed the fundamental picture. The 10-year is up this morning 2 bps at 4.67%, while the 30-year is up 3 bps at 5.22%. And then we still have the Middle East problem. Iran refusing to cooperate and oil refusing to back off. Brent is up $2 at $93.60 and WTI is up $2 at $87.80 as the conflict continues to pressure the global energy market. So understand this, while Scotty is trying to push the long-term borrowing costs down, rising oil is threatening to keep inflation expectations up and therefore long-term yields up. Up. So do you see the problem? Bessie can lean into the long end all he wants. He can change the maturity profile and remove some duration from the market, but he can't manufacture lower inflation. He can't manufacture fiscal discipline, and he can't force global investors to finance our debt at a price and yield that they don't like. I said it yesterday: there's an enormous amount of debt issuance coming to the market, both government and corporate. Think enormous supply, and ultimately that supply has to meet demand at some clearing price, which is really determined by the markets. So yes, the Treasury can temporarily influence that price by stepping in as a buyer, but it can't eliminate the basic laws of supply and demand. At some point, the natural buyers— think pension funds, insurance companies, bank asset managers, foreign governments, and individual investors— have to take a look at the 10, the 30, and the 20-year Treasuries and say if it works or if it doesn't. If it works, great. If they don't like it, then bond prices will have to fall and yields will rise until it does. It's basic economics, law of supply and demand, and no amount of artificial demand can permanently change it. Which is why the real solutions are lower inflation, slower growth, and a resolution to the Middle East conflict, uh, and ultimately fiscal discipline in DC. Until then, the Treasury may only be able to temporarily affect price and yield. But the spoils reversal tells you that the bond market isn't surrendering, and that is important. Okay, so now what did stocks do? They, after, after 3 days of losses, stocks ended the day higher, but they were off their intraday highs. The Dow did gain 120. The S&P's were up 16. The NASDAQ gained 41. The Russell added 15. The transports lost 35 points. The equal-weight S&P added 92— that's key— while the Mag 7 added 424 points. So yes, stocks rallied, but let's not get carried away. The move wasn't exactly a screaming vote of confidence. Yes, we saw strength in consumer staples. Yes, we saw it in consumer discretionary. Healthcare— healthcare was up big thanks to the Merck and Moderna news. Basic materials and real estate were also higher, but tech and the semis are still coming under pressure. As the algos continue to take money out of the most crowded trade on the planet. Again, this suggests more though rotation and not liquidation, and that matters because the semi trade got crowded, and once sellers started heading for the exits, they started tripping over each other because valuations matter, positioning matters, and even a great long-term investment theme can experience a nasty short-term correction. We've seen that now a couple of times. Remember yesterday's theme was, was the yesterday's note was theme versus the calculus conversation. So go back and reread that if you didn't see it. And next week it's NVIDIA's turn to wow the crowd on what they think AI spending and demand is going to look like. And make no mistake, the Street expects Jensen to deliver a monster quarter with revenues approaching $94 billion, nearly double last year. But here's the problem. Everybody already knows that. We're expecting that. At this point, Nvidia doesn't just have to beat those numbers, it has to beat even the whisper number. It has to raise the outlook. It has to convince investors that the hundreds of billions being poured into AI infrastructure is not slowing down. Good may not be good enough, and even great may not be good enough. Jensen needs to wow us. The options market is pricing in a 7% or $15-ish move in either direction depending on what he says. We're in the 195-240 trading range. A wow could see us blow right up into the upper range, and a disappointment could see us test 195. Then we got the Fed minutes, and they weren't exactly dovish. Minutes from the July meeting told us what we already knew, that 3 policymakers wanted to raise rates by 25 bps. While— but, and then it told us something else. Several more were leaning to additional tightening if inflation fails to cool. And that's what I pointed out on Monday. The surprise would be if we learned that more members were leaning hawkish. And we just found that out. So again, think about this. Scotty spent Wednesday trying to push long rates down while the Fed minutes told us that policymakers may still need to push them up. And you know who's not happy about that? Trump. But here's the problem with that. He can jump up and down all he wants. But the bond market doesn't take orders from the White House. Again, it's Econ 101. It is simple supply and demand. And then came earnings. Target delivered better than expected results as comparable sales rose 3.8%, traffic increased by 3.6%, and digital sales rose 9%. Management raised their full-year guidance outlook. Uh, and then came Lowe's. They beat on the bottom line, but they missed on revenues and comps. And more importantly, they cut their full-year sales outlook, while TJ Maxx, they beat on earnings and raised annual profits, but they failed to impress investors. But the real star yesterday was the news about Merck and Moderna, right? Moderna, they announced that their personalized mRNA cancer therapy, uh, combined with Merck's blockbuster Keytruda successfully met the primary and key goals in a phase 3 melanoma trial involving more than 1,100 patients. And understand something what happened here. This is the first successful phase 3 trial of an individualized mRNA-based cancer therapy. Think of it as personalized therapy, as giving the immune system a wanted poster of that specific patient's cancer. Doctors sequence the tumor, they identify the unique mutations, and then they create an individualized therapy that teaches the immune system exactly which cancer cells to hunt down. Keytruda then takes the brakes off the immune system, allowing those newly trained T cells to hunt down and destroy remaining cancer cells before they can cause a recurrence or spread. And trust me, I've got firsthand knowledge of this, right? My own battle with melanoma and Keytruda, and thank God for Merck. And investors went wild. Moderna gained 176% or $111 a share, and Merck was up 10%. This morning, European markets are all negative. Germany's down 0.5%, Spain's down by 0.1%. US futures this morning are also struggling to find direction. Dow's down 9, the S&P's down 2, NASDAQ is up 26, while the Russell is down 3. Economic data today includes the usual suspects, initial jobless claims and continuing claims, so don't look for economic data to drive the market. Today we're gonna hear from Walmart. They already did, they beat. The Street was looking for 74 cents a share and $187 billion in revenues. But we want to hear what they say about the consumer. Are they trading down? Are discretionary purchases weakening? What are higher energy prices doing to spending? And most importantly, what does management see for the second half of 2026 for Walmart? Now, we're also going to hear from John Deere and Workday, Intuit, Zoom, and Ross Stores. The S&P closed yesterday at 7,707, was up 16 points. Futures action this morning is muted. 7,700 appears to be holding, but we're going to most likely test it again today. Real trendline support is down at 7,500 with the resistance somewhere up in the 7,900s. Now we're heading into the final stretch of August and September is just around the corner. You know me, I'm still in the camp that we could see another drawdown as we move into September because the question isn't whether Scotty can buy enough bonds to move yields for a day. The question is whether the fundamentals are going to give investors a reason to keep them there. And so that's going to have an effect on stocks. We talked about it as a headwind, right? So, uh, listen, if you'd like to discuss your goals, evaluate the risk of your portfolio, simply just get a second opinion, give me a call at 561-931-0190. Or better yet, you can go to the website slatestone.com and just click on the Contact Us page. It'll come right to me. I'm always happy to provide you With a complimentary portfolio review and overall risk assessment. Okay, so now what do we have for dinner tonight? We're gonna have the herb roasted pork loin. Delicious, not difficult to make, and it's always, it's always a winner. For this, you need a 3-pound boneless pork loin that you're going to trim. You need fresh rosemary chopped, 4 or 5 cloves of garlic roughly chopped. You need fennel seeds, salt, pepper, and olive oil. For the gremolata, you need fresh parsley, you That you're gonna chop. You need a teaspoon of lemon zest, a tablespoon of lemon juice, salt and pepper, and olive oil. Start by preheating the oven to 400 degrees. Take the pork out of the fridge, let it sit there for a good half an hour to get to room temperature. Now, finely chop the rosemary, the garlic, the fennel seeds, put 'em all together, mix it with salt and pepper and a little bit of olive oil to form a paste. Then take the pork loin and make 10 or 12 1-inch deep splits into the pork roast, right? Then rub the paste All over the pork roast and into the slits. And put it in the oven and cook it until— cook it about 40 minutes. Should be about 145 degrees. And then remove it and let it rest for 10 minutes. Now, while that's happening, you've got to make the gremolata. You want to whisk together the parsley, the lemon zest, the lemon juice, the salt and pepper, the olive oil, all in a bowl. When it's ready, you're going to slice the pork. You're going to spoon the gremolata out on the top of the pork. And this is great with— you pick it— a roasted vegetable, a And a big mixed green salad. You can do roasted butternut squash is great. You can even do roasted potatoes. They're great with this. And make sure you have a big mixed green salad that's got tomatoes and onions and cucumbers in it. Even some chichi beans is always good. And dress it in a fresh lemon, olive oil, seasoned with salt and pepper and a little bit of oregano. It is perfect. In any event, it is another gorgeous day here in South Florida. It's going to be hot. It is going to be hot for sure. Uh, but it is a beautiful day outside. Until tomorrow, take good care.
