Morning in New York: Oil Shrugs Off New Sanctions

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

Investors are focusing on the outlook for the U.S. bond market, the intensifying sanctions pressure on Iran, and the release of data on U.S. consumer demand.

The geopolitical landscape remains uncertain rather than tense. The U.S. has announced sanctions against 60 Iran-linked organizations, individuals, and vessels. The restrictions affect the oil sector, shipping, aviation, technology, gold, and digital assets. This news triggered a “sigh of relief” in the commodities market: WTI is trading below $85 per barrel, down from $87 at the start of the week. This suggests that the tightening of sanctions alone does not increase the geopolitical premium, and the market requires more significant developments for sustained price growth. Future developments will depend on how the announced restrictions are enforced and whether there are signs of an actual reduction in Iranian exports or disruptions to shipments through the Strait of Hormuz.

Yesterday it was reported that the U.S. Department of the Treasury is considering using funds from the Treasury General Account (TGA), which totals approximately $950 billion, to finance expanded buyback operations of long-term off-the-run Treasury bonds (Treasuries that are not from the most recent issues). Such a mechanism could temporarily limit the rise in yields on bonds with long durations. However, the specific amounts and timing of the TGA’s use have not yet been determined. The market will be awaiting further details on this initiative and any new comments from Finance Minister Scott Bessent. Meanwhile, billionaire investor Stanley Druckenmiller, who served as the minister’s mentor at a hedge fund early in his career, called the Treasury Department’s intervention in the bond market a mistake.

The Conference Board's Consumer Confidence Index for August will be released today (consensus: 90.2 points; July: 90.8). According to analysts at Freedom Broker, the index is likely to remain at a low level, but its release is unlikely to significantly alter the overall assessment of U.S. consumer sentiment. In addition, this Tuesday will see the release of new home sales data, the results of the Richmond Fed’s survey, and the Philadelphia Fed’s services sector business activity index. These releases will help clarify current trends in demand and business activity, but the main macroeconomic indicator of the week will be the personal income and spending statistics, including the PCE deflator, which will be released on August 26.

Before the start of the main session, Bank of Montreal (BMO), Bank of Nova Scotia (BNS), and Dick's Sporting Goods (DKS) will report their earnings. After the market closes, Intuit (INTU), Zoom Communications (ZM), HEICO (HEI), Box (BOX), nCino (NCNO), and Semtech (SMTC) will report their quarterly results.

S&P 500 and Nasdaq 100 futures are up about 0.5% and 0.9%, respectively. We assess the risk outlook for the upcoming session as neutral, with moderate volatility.

— Boeing (BA) shares are up 0.9% on news that the company has been awarded an exclusive IDIQ contract with the U.S. Air Force with a maximum value of $131.2 billion for the production, modernization, and maintenance of the F-15. The agreement supports the long-term outlook for Boeing’s defense portfolio; however, the amount cited represents a maximum limit, not a guaranteed order volume.

— Kura Oncology (KURA) shares rose about 9% following the disclosure that the company’s president and CEO, Troy Wilson, had purchased 100,000 shares at $12.39 each, for a total of $1.24 million. This is the executive’s second major purchase in a week, which the market interpreted as a sign of management’s confidence in the company’s prospects.

— Gorilla Technology (GRRR) shares fell 10% due to investors’ volatile reaction to a mixed earnings report. The company’s revenue for the first half of the year rose 99% to $78.4 million, and its revenue forecast for 2026 has been raised to at least $200 million. However, the company reported an adjusted loss for the reporting period, and its own revenue guidance for 2027—in the range of $450 million to $500 million—fell short of the FactSet consensus of $559.9 million.

Trading on August 24 on U.S. stock markets ended with mixed results. The S&P 500 fell 0.28%, the Nasdaq-100 dropped 0.97%, the Dow Jones rose 0.26%, and the Russell 2000 lost 0.76%. Meanwhile, the equally weighted RSP gained 0.11%, while the SPY fell 0.29%. The positive performance of stocks in the consumer staples sector (XLP: +1.76%) and the financial sector (XLF: +1.24%) points to a rotation of capital without a broad-based flight from risk. IT companies (XLK: -1.59%) and energy stocks (XLE: -0.76%) were among the day’s underperformers.

Selling pressure was concentrated in the stocks of semiconductor manufacturers—including memory chip makers—and other momentum stocks. However, the 3-basis-point decline in 10-year Treasury yields to 4.70% failed to support the technology sector. This suggests that the correction was primarily driven by the unwinding of over-leveraged positions and rising expectations for returns on AI investments, rather than by a further deterioration in the interest rate environment. Investors remain cautious ahead of Nvidia’s (NVDA) earnings release on August 26, which will serve as a key test of the sustainability of investments in AI infrastructure. Rising capital expenditures by hyperscalers are supporting expectations of strong demand for accelerators; however, a slower-than-expected improvement in forecasts and a more than 15% increase in server prices due to memory costs are heightening focus on Blackwell and Rubin shipments, as well as on customers’ return on investment. This nervousness was exacerbated by reports in the FT about unexpectedly low demand for Anthropic’s expensive Fable 5 AI model. Price competition with Chinese LLM labs is intensifying.

On Monday, the U.S. administration announced its intention to raise tariffs on Canadian cars, trucks, and auto parts to 50% effective January 1, 2027. In addition, the White House is considering imposing an additional 7.5% tariff on a number of Chinese goods. However, the fact that some of the measures will be implemented at a later date leaves room for negotiations.

Overall, investors have adopted a wait-and-see approach ahead of Nvidia's earnings report, due out this Wednesday, and Fed Chair Kevin Warsh's speech, scheduled for this Friday.

This article was AI-translated and verified by a human editor