Daily Summary: Dollar Recovers Losses, Oil Near 3-Week Highs 🗽 US30 Falls 1%

The European session was broadly weaker, with the DAX down almost 0.45% and France’s CAC 40 falling nearly 0.6%. European TTF gas futures climbed to five-month highs amid lower storage levels ahead of the heating season. Losses also dominated on the Warsaw Stock Exchange, where the WIG20 fell 1.2% and KGHM shares dropped more than 4% following the company’s results. Thursday’s Wall Street session brought moderate declines, led by the Dow Jones Industrial Average (US30) as Walmart shares fell more than 8% after earnings. US30 futures were down close to 1%, the S&P 500 lower by 0.55%, and the Nasdaq 100 down more than 0.7%. Investors were unsettled by a stronger U.S. dollar and rebounding Treasury yields, which erased a large part of yesterday’s decline triggered by the U.S. Treasury Department’s intervention in the bond market. Brent crude futures (OIL) were trading above $93.5 per barrel, the highest level since July 24. SpaceX shares declined more than 6%, while Moderna shares fell 25% after a previous surge of over 100%, following encouraging reports of its mRNA cancer therapy. U.S. data showed a still-solid labor market and stronger manufacturing activity, with initial jobless claims falling to 206,000 (vs. 210,000 expected) and the Philadelphia Fed Business Index jumping to 47.4 (beating the 25 estimate). The CB Leading Index rose 0.2% MoM, confirming strong manufacturing activity. The Federal Reserve’s Alberto Musalem did not pre-judge the September meeting, emphasizing core inflation and cautioning against rapid policy easing. The 30-year TIPS auction was strong, with a yield of 2.973% and a bid-to-cover ratio of 2.82, signaling solid demand from large investors. However, high real yields remain a concern for growth and technology stocks. Nvidia announced a new AI chip for the Chinese market, with initial shipments expected before the end of the year. Meanwhile, U.S. CENTCOM reported MV-22B Osprey aircraft operating from the USS Boxer, enforcing a U.S. blockade against Iran, with 67 commercial vessels redirected, 3 disabled, and 2 boarded as of August 20. U.S. Treasury Secretary Scott Bessent reiterated the administration’s strong-dollar policy, stressing weak economic growth as the biggest threat to financial stability. He also warned of maximum economic pressure on Iran, secondary sanctions, and potential easing of oil sanctions if talks with Iran and China progress. Bitcoin rose above $72,000, while Ethereum traded above $2,340. Precious metals held relatively well: gold was slightly lower after gains, and silver rose over 2%, breaking its 200-session EMA200, signaling potential upward momentum. The Dow Jones remained close to its all-time highs, with 70% of constituents trading above their SMA200. Valuation concerns included a trailing P/E of 24.9x, EV/EBITDA of 21.6x, and P/B of 8.2x, indicating a quality premium with limited room for earnings disappointment. Sector rotation showed healthcare and energy holding up better, while industrials weighed down the index. Walmart was down around 8.8%, Boeing 3.0%, Home Depot 2.4%, and American Express 1.8%, while Coca-Cola was up 1.6%, Travelers 1.2%, and Chevron/McDonald’s each gained around 0.9%. The valuation gap was stark: Walmart traded at 40.3x earnings, Boeing at 72.3x, while Travelers was valued at 9.2x and Goldman Sachs at 14.5x, reflecting market punishment for overvalued stocks.