Market Update | 08/24/2026

Last week was all about U.S. debt, the dollar and yields. The latest Treasury auction came in at higher yields, adding concerns around the rising cost of financing the U.S. debt and creating some volatility across markets. In response to higher long-term rates, U.S. Treasury Scott Bessent’s announcement to double the size of treasury buyback cap operations from $2 billion to $4 billion. That initially pushed yields down — the 10-year briefly fell toward 4.64% and the 30-year toward 5.18%. However, the announcement couldn’t ease investor worries about the bigger structural issues of the high fiscal deficit and inflation, driving yields back up again. The move also pressured the dollar as that was the only release valve given that bond market could not clear the sovereign risk premium. Gold and Bitcoin moved higher, while the S&P 500 saw some volatility and finished the week lower. On earnings, retailers generally reported solid sales growth, but Walmart was the key disappointment. Comparable sales grew 2.6%, below expectations of 3.7–3.8% and last year’s 4.6% growth increasing concerns on the health of the lower-end consumer. This week, there are two main events to watch. Jackson Hole on Friday and Nvidia earnings on Wednesday. At Jackson Hole, the market will be focused on guidance, if any, from Warsh, particularly given the tension at the long end of the curve. The Fed appears comfortable allowing higher long-term rates to tighten financial conditions, while Treasury is simultaneously trying to limit the rise in those same yields.

Warsh vs Bessent

Since Kevin Warsh took over the Fed, he’s offered limited forward guidance and seems comfortable letting the market’s inflation concerns push long-end yields higher. Higher long-term rates tighten financial conditions across the economy, from mortgages and corporate borrowing to asset values, effectively doing some of the Fed’s inflation-fighting work without requiring additional hikes. That has pushed the 10-year above 4.7% and created some tension with the Treasury Department. On 8/19, Secretary Bessent announced that Treasury would double its long-end buyback cap from $2 billion to at least $4 billion per operation starting September 9, providing some support to the long end of the curve. However, this caused the wrong effects in the market, given this announcement the US dollar sold off on concerns that the treasury felt compelled to intervene in an off-cycle action, thus increasing concerns over US fiscal sustainability. The underlying issue is that the U.S. is still running a fiscal deficit of roughly 6% that needs to be financed, keeping Treasury supply elevated. At the same time, the AI infrastructure buildout is generating enormous amounts of long-duration IG issuance, competing with Treasuries for many of the same institutional buyers. More long-duration supply from both the government and corporates, sticky inflation, and persistent deficits continue to put pressure at the long end.

Retail Earnings

Q2 earnings results from the major retailers were mixed but overall came in a little weak. Starting off with WMT, US same store sales came in lower than expected however much of it was due to a pharmacy pricing headwind. Q3 guidance revision was also softer than expected, with management noting fuel cost pressures and already drained tax refunds. TJX beat on overall earnings and raised guidance but missed expectations within its TJ Maxx and Marshalls, with the HomeGoods brand driving the overall strength in the quarter. Related to housing, HD and LOW both noted weak consumer demand for large-scale home improvement projects as many are focusing on small upgrades. On the positive side, both ROST and TGT posted strong results, with ROST reporting store sales growth of 10% and TGT beating sales estimates and raising their full-year outlook. Given that retail sales for July came in weak, receiving news from the major retailers that show some cracks in consumer spending was not that surprising. We continue to expect a slowdown in consumer spending in the second half of 2026, especially now given that energy price pressure will likely be around for longer.

Frontier Labs Head to IPO: Anthropic & OpenAI

Last week, the race between the cutting-edge AI labs heated up further, as Anthropic disclosed financial metrics that gave the public insight ahead of its much-anticipated IPO. Revenue run rate (RRR), which annualizes a company’s revenue based on its current pace of sales, came in at $65 billion, up sevenfold since the start of the year, all the while quarterly revenue more than doubled on a quarter-over-quarter (QoQ) basis. Profitability, on the other hand, remains negative on a net income basis, but there were signs of improvement as EBITDA turned positive, driven by the company finding ways to improve compute efficiency. Meanwhile, OpenAI reported an RRR of $40 billion and QoQ revenue growth of just 18%, raising concerns that the company is falling short in its monetization efforts and is already leading to leadership turnover. Mounting costs were also a key concern for OpenAI, as operating losses widened from $9.3 billion in Q1 to $12.3 billion, adding further pressure on the company to improve its profitability outlook as it continues to take on several large spending commitments with firms such as Oracle, Nvidia, and others. The timing of these reports matters as both companies edge closer to the public markets, with investors increasingly concerned that cheaper models from China could take market shares, erode pricing power, and pressure margins over the long term. Thus far, though, plans to go public have not changed, as Anthropic was last valued at $965 billion in May and is targeting an IPO as soon as this fall, while OpenAI is expected to follow suit in 2027.