Stocks mixed on tech weakness while long-end yields slide - Newsquawk US Market Wrap

• SNAPSHOT: Equities down, Treasuries up, Crude down, Dollar up, Gold down.
• REAR VIEW: Bessent could tap near USD 1tln treasury general account to fund bond buybacks; Bessent said US launched Operation Economic Outcast and are going to end the Iran threat; Bessent threatens Iran enablers with action and cut off from the US Dollar system; Trump raises some tariffs on Canada to 50%, effective January 1st; UKMTO received a report of an incident 63NM west of Yanbu; NVDA raises AI server prices
• COMING UP: Data: German GDP Final (Q2), Ifo Expectations (Aug), US ADP Employment Change Weekly, House Price Index (Jun), US Richmond Fed Manufacturing Index (Aug) Events: RBA Minutes (Aug), Riksbank Minutes (Aug), Fed Discount Rate Minutes (Aug) Supply: Australia, UK, Germany, US Earnings: Intuit.

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MARKET WRAP

Stocks were mixed on Monday, with the Dow Jones outperforming in the green, while the other major indices closed lower. Weakness was led by the Nasdaq as the Technology sector underperformed, with both semiconductor and memory names under pressure. Despite the broader downside, the equal-weight S&P 500 was flat, while sectors were mixed. Consumer Staples, Communication Services and Financials led the gains, while Technology, Energy and Industrials lagged.

Energy prices settled lower despite the Treasury confirming harsh sanctions on Iran under Operation Economic Outcast, targeting nearly 60 Iranian entities, individuals and vessels, alongside secondary sanctions aimed at five key Iranian sectors: digital assets, technology, gold, aviation and shipping. The administration's focus on intensifying economic pressure rather than further military action may have helped keep some pressure on crude. Meanwhile, sources reported that Trump spoke with the Pakistani Army Chief last week ahead of his visit to Tehran, with Trump reportedly wanting Pakistan to use its influence to bring Iran back to the negotiating table, suggesting there remains some willingness from the administration to pursue diplomacy.

The Treasury curve bull flattened on Monday, with source reports surrounding buybacks supporting the long end. CNBC reported that Treasury could use the TGA to fund its long-end buyback operations, while FBN's Gasparino reported that other potential measures could include further buybacks, greater short-term issuance and even changes to long-dated issuance, including the possible elimination of the 20-year bond.

In FX, the Dollar gained, with some strength seen following Bessent's announcement on Iran, while the Canadian Dollar lagged after Trump confirmed tariffs on Canadian autos, auto parts and steel would rise to 50% from 1st January 2027. Meanwhile, gold added to its recent gains amid falling Treasury yields, although it settled off highs as the Dollar strengthened.

Attention this week remains on US-Iran developments, with Iran vowing an economic response to the latest US measures. Fed Chair Warsh, Nvidia earnings, US PCE and the BLS annual payroll benchmark revisions will also be in focus, alongside US Treasury supply and any further developments surrounding Treasury buybacks or the administration's view of the yield environment.

US

BESSENT: The US Treasury Secretary announced Operation Economic Outcast on the Iranian economy. The sanctions target nearly 60-Iran linked entities, people, and vessels across nuclear, missile, cyber and oil networks. It also is targeting five sectors for potential secondary sanctions; Digital assets, tech, gold, aviation and shipping. A network of broker company shadow fleet vessels were also targeted across UAE, Hong Kong, China, Singapore, Switzerland and Europe. Treasury Secretary Bessent said that the actions will tighten the noose and block every potential source of revenue that funds the IRGC and Iranian regime, stressing they are enforcing a zero-leakage approach. He also stressed that Iran's enablers purchase and transport its petroleum and turn a blind eye to seaborne oil transfers and overland transits. Bessent added that US President Trump has been calling world leaders to cut their economic ties with Iran, noting there is a finite timeline to shutdown activities identified by the Treasury. He added there is no set timeline, but they do not have infinite patience. Bessent also noted that a major financial institution will be sanctioned by the end of this week over Iran, adding the US will end dollar access to those laundering Iran money. Overall, there was little reaction but the Dollar did see some strength while gold sold off marginally.

FIXED INCOME

T-NOTE FUTURES (U6) SETTLED 6 TICKS HIGHER AT 108-14+

T-notes bull flatten on buyback sources. At settlement, 2-year -0.6bps at 4.234%, 3-year -1.3bps at 4.300%, 5-year -2.5bps at 4.403%, 7-year -3.3bps at 4.535%, 10-year -4.0bps at 4.696%, 20-year -5.1bps at 5.214%, 30-year -4.9bps at 5.227%.

THE DAY: Treasury yields fell across the curve on Monday, with the long end outperforming and resulting in a bull flattening of the curve. The front end was relatively anchored in comparison, while yields declined by as much as 5bps further out the curve.

Focus remains firmly on the long end following last week's Treasury buyback announcement. The latest source reports suggested that the Treasury could use funds from the Treasury General Account, which currently stands around USD 1tln, to finance additional buybacks. Meanwhile, FBN cited Wall Street executives familiar with Bessent's thinking as saying he will do whatever it takes to "put the fear of God" into bond vigilantes who short the long end in an attempt to drive the 10-year yield towards 5%. The report suggested potential measures could include further buybacks, greater short-term issuance and even changes to long-dated issuance, including the possible elimination of the 20-year bond.

Bessent also confirmed an escalation of the administration's campaign against Iran, announcing Operation Economic Outcast, including secondary sanctions targeting key Iranian sectors such as shipping, aviation, gold, technology and digital assets. Bessent subsequently warned against conducting business with Iran, particularly those turning a blind eye to seaborne and overland oil transfers designed to circumvent sanctions.

Aside from fundamentals, there was also a chunky Treasury futures curve block worth highlighting. At 09:56EDT/14:56BST, 52.6k September 2026 2-Year T-Note futures traded at 102-310, while at the same time 22.7k September Ultra 10-Year T-Note futures (TNU6) were blocked at 110-090.

Later this week, the US PCE report will be the data highlight, while Fed Chair Warsh's remarks at Jackson Hole and the annual BLS benchmark revisions will also be closely watched. There will additionally be 2-, 5- and 7-year Treasury auctions this week.

SUPPLY

Notes/Bonds

US to sell USD 69bln of 2-year notes on August 25th, USD 70bln of 5-yr notes on Aug. 26th, and USD 44bln of 7-yr notes on Aug. 27th; all to settle on Aug. 31st

Bills

• US sold USD 93bln of 3-mnth bills at high-rate 3.715%, B/C 3.08x; sold USD 79bln of 6-mnth bills at high-rate 3.790%, B/C 3.05x * US to sell USD 95bln of 6-wk bills on Aug. 25th and USD 28bln of reopened 2yr FRN on Aug. 26th; all to settle on Aug. 27th.

STIRS / OPERATIONS

• Fed Hike Pricing via CME FedWatch: Sept 10.5bps (prev. 10.0bps), Dec 27.0bps (prev. 25.4bps)
• EFFR at 3.63% (prev. 3.63%), volumes at USD 96bln (prev. USD 102bln) on August 21st
• SOFR at 3.65% (prev. 3.63%), volumes at USD 2.952tln (prev. USD 2.922tln) on August 21st
• NY Fed RRP op demand at 0.38bln (prev. 0.20bln) across 2 counterparties (prev. 1) on August 24th

CRUDE

WTI (V6) SETTLED USD 2.05 LOWER AT 85.01/BBL; BRENT (X6) SETTLED USD 2.13 LOWER AT 90.54/BBL

The crude complex saw pressure on Monday, despite the escalating of tensions between US and Iran, with the former launching 'Operation Economic Outcast'. In Treasury Secretary Bessent's press conference he said they are going to end the Iran threat, and they have two paths, normalcy or total isolation. As such, the US Treasury announced sanctions on nearly 60-Iran linked entities, people, and vessels across nuclear, missile, cyber and oil networks, alongside targetting five sectors for potential secondary sanctions, alongside announcing that any country helping Iran must cease to do this and have a finite time to act. Despite all this, oil prices were pretty unreactive to the newsflow. Prior to this, benchmarks saw upside on source reports that the US Treasury is expected to announce it will broaden the scope of secondary sanctions on nations/entities doing business with Iran. In addition, benchmarks also saw a bit of strength after the UKMTO received a report of an incident 63NM west of Yanbu, Saudi Arabia; tanker was struck by an unknown projectile. For the calendar, Oman's Foreign Minister will visit Tehran on Tuesday regarding maritime security and freedom of navigation in the Strait of Hormuz. Looking ahead, attention remains on further US/Iran rhetoric, if there is any retaliation from the latter, and the outcome of Operation Economic Outcast. Sources via Al Jazeera also reported that Trump spoke with the Pakistan Army Chief ahead of his visit to Tehran in an attempt to use Pakistan's influence to resume Iran/US negotiations. WTI traded between USD 84.36-86.57/bbl and Brent USD 90.17-92.06/bbl.

EQUITIES

CLOSES: SPX -0.28% at 7,653, NDX -0.98% at 29,024, DJI +0.26% at 53,417, RUT -0.70% at 2,997.

SECTORS: Consumer Staples +1.76%, Financials +1.24%, Utilities +1.04%, Communication Services +1.01%, Real Estate +0.59%, Materials +0.30%, Consumer Discretionary +0.29%, Health +0.04%, Industrials -0.69%, Energy -0.76%, Technology -1.59%.

EUROPEAN CLOSES: Euro Stoxx 50 -0.26% at 8,453, Dax 40 -0.07% at 26,119, FTSE 100 -0.26% at 10,854, CAC 40 -0.37% at 8,453, FTSE MIB -0.24% at 52,542, IBEX 35 +0.69% at 20,099, PSI +0.40% at 9,392, SMI -0.07% at 14,447, AEX +0.36% at 1,110.

STOCK SPECIFICS:

• Nvidia (NVDA) customers have been notified of price increases of more than 15% on AI servers.
• Alibaba (BABA) prices HKD 80bln share placement.
• YMTC plans to raise USD 4.9bln in a Shanghai IPO to expand production and develop next-gen storage products, WSJ reports.
• Boeing's (BA) PEEA engineers union rejected a proposed contract and authorised strike action.
• Amazon (AMZN) reportedly plans new automated warehouses, reports Business Insider. Potentially of note for Symbotic (SYM).

FX

The Dollar Index saw strength on Monday, and gained, albeit to varying degrees, against G10 FX peers. The Loonie was the G10 laggard, and came as US President Trump formally announced new 50% tariffs on Canadian autos, auto parts and steel from 1st January 2027. Elsewhere, the most notable headlines were on the US/Iran footing and the accompanying Treasury Secretary Bessent press conference in otherwise thin newsflow. Briefly recapping, Bessent announced Operation Economic Outcast on the Iranian economy, and threatened any further enablers of the Iranian economy. In the US morning, CNBC reported that Bessent could tap near USD 1tln treasury general account to fund bond buybacks, which garnered slight weakness in the Buck. There was no tier 1 US data or Fed speak on Monday, with the highlights this week being Nvidia earnings (Wed) and Fed Chair Warsh at Jackson Hole (Fri).

As mentioned, aside from the lagging Loonie, losses across G10 peers vs. the Dollar were more contained. GBP and EUR saw slight losses, while Antipodeans were the next worst performers, although in pretty thin currency-specific newsflow and more trading off the wider risk tone. For the single-currency Euro, ECB's Cipollone said that monetary policy needs to be well calibrated; inflation is far from adverse & severe scenarios and that there are no signs pointing to a scenario of stagflation.