Here are two trades to make ahead of a critical week for markets as Nvidia results and Jackson Hole loom

By Jamie Chisholm

There's a way to play more interest rate angst or an Nvidia-inspired tech bounce, says Evercore ISI

Expect more volatility.

So much for the dog days of summer! The penultimate week of August started with U.S. Treasury Secretary Scott Bessent's so-far forlorn attempt to suppress long-term bond yields, which rattled traders.

News of a fresh trade war with Canada and a sharply negative reaction to Walmart's (WMT) earnings is adding to the noise, according to Julian Emanuel, strategist at Evercore ISI.

In a note published over the weekend, he said the new week is also replete with market-moving factors, including Bessent's plan for an "economic D-Day" for Iran, Nvidia's (NVDA) fiscal second-quarter earnings and guidance on Wednesday, and Federal Reserve Chair Kevin Warsh's speech at Jackson Hole on Friday.

"A lot of things could happen - and with 10-year yields near the very sensitive 4.75% level, the one thing this week won't be is silent or boring," Emanuel said.

It is a sensitive time for stocks. Emanuel described the Nasdaq 100 NDX - the big tech-heavy index - as the market's "sore spot," having moved from bull-market leader to current laggard.

It's being weighed down by reverberations from a shift among hyperscalers to negative free cash flow, which is causing information technology credit spreads - a gauge of perceived risk, in the chart below - to widen.

Emanuel said the coming sessions could affect the market in two main ways.

His base case was still that the Fed chair's challenges on inflation and bond yields, the upcoming midterm elections and the end of earnings-season catalysts will prolong the near-term choppiness. This will be accentuated by small-cap stocks' particular sensitivity to moves in bond yields as well as Nasdaq 100 weakness.

However, it's possible that the "bondfire" subsides under the direction of Bessent and Warsh, Emanuel said. More realistically, a positive share-price reaction to Nvidia earnings reinforces investors' faith in the robustness of the artificial-intelligence trade.

Under those latter conditions, investors' fear of missing out "could begin early," he said, which would result in both rising stocks and rising bond yields - which ended both the dot-com bubble and Japan's 1989 bull market.

He said that short-term investors should consider buying put options on the iShares Russell 2000 exchange-traded fund IWM of small-cap stocks. Put options give the buyer the right to sell the ETF at a particular price within a given time period, a negative bet, and Emanuel suggested buying the November 275 puts.

In the medium term, Emanuel expressed more optimism about technology, favoring call options on the Invesco QQQ Trust Series I QQQ, a proxy for the Nasdaq 100. Emanuel suggested buying March 850 calls.

Those QQQ calls will exploit the "runaway upside we expect before the 'Checkered Flag' is waved to end the 'AI Revolution' Bull Market race," Emanuel said.

And for those who don't trade options, and who have what Emanuel called "an AI-tilted portfolio," some stocks with negative beta could be added so that "you and your portfolio will sleep better at night."

Negative beta stocks are those that tend to move in the opposite direction to the overall market. Emanuel has previously suggested including ExxonMobil (XOM), Johnson & Johnson (JNJ), AbbVie (ABBV), Costco Wholesale (COST), Coca-Cola (KO), Philip Morris (PM), T-Mobile (TMUS), McDonald's (MCD), Lockheed Martin (LMT) and Progressive Corporation (PGR).

The markets

U.S. stock-indices SPX DJIA COMP are lower at the opening bell even as Treasury yields BX:TMUBMUSD10Y dip. The dollar index DXY is higher as oil futures (CL.1) slip and gold futures (GC00) trade around $4,730 an ounce.

 
Key asset performance                                                Last       5d      1m      YTD     1y 
S&P 500                                                              7674.37    -1.43%  3.54%   12.11%  18.67% 
Nasdaq Composite                                                     26,180.45  -2.05%  4.82%   12.64%  21.79% 
10-year Treasury                                                     4.713      -1.30   5.50    54.10   43.70 
Gold                                                                 4696.5     4.99%   15.15%  8.41%   37.70% 
Oil                                                                  85.09      0.16%   3.88%   48.21%  31.43% 
Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

The U.S. and Canada are in a fresh trade war after Ottawa rejected new demands from Washington and said it would retaliate against levies. U.S. steel stocks Nucor (NUE), Steel Dynamics (STLD) and Cleveland-Cliffs (CLF) are higher.

U.S. Treasury Secretary Scott Bessent said the Trump administration has launched an "economic D-Day" against Iran.

Alibaba shares (HK:9988) (BABA) are lower after China's e-commerce and cloud group said it planned to raise HK$80bn ($10.2 billion) from a share placement to pay for AI investment.

Samsung shares (KR:005930) had their worst day in three weeks, dragging other memory plays lower, as investors reacted to the chip maker's $65 billion shareholder return plan.

Softbank (JP:9984) said it plans to issue 1 trillion yen, or $6.3 billion, in yen-denominated retail bonds as it deepens multibillion-dollar commitments to OpenAI and related projects.

The corporate highlight this week is expected to be AI-chip maker Nvidia's (NVDA) earnings, due after the market close on Wednesday.

The Trump intervention that got the Justice Department off Live Nation's back.

The chart

There's worry for the sweet-toothed among us: Ole Hansen, head of commodity strategy at Saxo, noted that traders' positioning in sugar futures (SB00) has seen a "dramatic reversal" of late. "In just three weeks, funds have moved from a 112k-contract net short to a 151k net long, a swing of more than 260k contracts," Olsen said. "The turnaround has been driven by El Niño-related weather concerns, rising price volatility, uncertainty over demand and supply prospects in India, as well as expectations that Brazilian mills may direct a larger share of cane towards sugar production," he added.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

 
Ticker  Security name 
NVDA    Nvidia 
TSLA    Tesla 
SPCX    SpaceX 
MU      Micron Technology 
MRNA    Moderna 
AMD     Advanced Micro Devices 
AAPL    Apple 
TSM     Taiwan Semiconductor Manufacturing 
META    Meta Platforms 
PLTR    Palantir Technologies 

-Jamie Chisholm

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(END) Dow Jones Newswires

08-24-26 0931ET