Written by: Tide Research
Last Friday, US stocks gave up early gains to close lower across the board, with the S&P 500 falling 0.25% to 7,711.76, the Nasdaq dropping 0.52% to 26,402.42, and the Dow Jones Industrial Average declining 0.02% to 53,559.99. For the week, the Dow gained 0.03%, while the S&P 500 lost 0.08% and the Nasdaq fell 0.28%. Over the weekend, Federal Reserve Chair Kashkari's hawkish speech at Jackson Hole caused the probability of a September rate hike to jump from 35% to nearly 60%; US-Iran exchanged strikes over the weekend, pushing international crude oil up over 2% in early Monday Asian trading; Trump announced an agreement with Venezuela for a "historic largest oil deal". The core question this week is: with hawkish rate hike expectations and escalating geopolitical conflict emerging simultaneously, can high-valuation tech stocks hold up under interest rate pressure?
Kashkari's Hawkish Jackson Hole Speech Sends Rate Hike Odds Soaring
Fed Chair Kashkari's speech at the Jackson Hole Economic Symposium was perceived as hawkish, with markets comparing its tone to the most hawkish Fed chair statements since 2009. Kashkari hinted that interest rates could be raised if inflation does not decline quickly. Market bets on a September hike surged from 35% to nearly 60%, with expectations of up to two rate hikes before March 2027.
The US Treasury market experienced significant volatility. The yield on the 10-year Treasury note rose 4.18 basis points to 4.7180%, having earlier fallen to a daily low of 4.6485% before rebounding. The yield on the 2-year Treasury surged 11.14 basis points to 4.3434%, after dropping to 4.2135% before the release of Kashkari's speech text, and then climbing steadily. The surge in short-term rates far exceeded that in long-term rates, flattening the yield curve as markets price in a more aggressive rate hike path. The US Dollar Index jumped to a two-week high, gaining 0.55% to 99.703. Offshore yuan traded at 6.7308 per dollar at the New York close, down 114 pips from the previous session. The yen weakened past the 160 per dollar level, falling back to levels seen before Japan's currency intervention at the end of July.
Kashkari's hawkish signals directly pressured interest-rate-sensitive assets. The Russell 2000 small-cap index fell over 1%; spot gold dropped 3.2% to $4,454.23 per ounce, ending a three-week winning streak; Bitcoin tumbled from $81,455 to as low as $76,877 during the session, at one point losing over 5%.
US-Iran Weekend Strikes Lift Oil Prices in Early Monday Asian Trading
Geopolitical tensions escalated over the weekend. US officials stated that American forces struck two weapons facilities on Iran's Larak Island on Sunday, accusing Iran of attempting to lay mines in the Strait. The Iranian military responded that the attack on Larak Island caused multiple casualties and that it had launched missiles at US military bases. The weekend strikes between the US and Iran mark an escalation in direct military confrontation between the two sides.
Prior to this, the Iranian President stated that "if the Strait of Hormuz is to be reopened, the US must fulfill its obligations," with the military emphasizing that "vessels cannot pass without coordination." Iran's Deputy Foreign Minister mentioned an understanding reached with Oman but said there was no rush to reopen the Strait. Iran's stance appears to be hardening, casting new shadows over the prospects for navigation through the Strait of Hormuz.
Last Friday, WTI crude closed down 0.16% at $83.40 per barrel, while Brent crude settled 0.87% lower at $89.31 per barrel. The weekend military conflict reversed the previous downward trend in oil prices driven by geopolitical de-escalation, as risk premiums are being re-priced into the oil market.
Venezuela's "Historic Largest Oil Deal" Agreement Reached, Oil Prices Tugged by US-Iran Conflict and Venezuelan Output Increase
Trump announced an oil agreement with Venezuela over the weekend, which was later confirmed by Caracas, stating that a large-scale cooperation deal had been signed. According to disclosures, the framework agreement spans 25 years, aiming to boost Venezuela's crude oil production to 1.5 million barrels per day, involving the development of 17 strategic oil fields, with an investment scale exceeding $100 billion. Trump claimed the US would gain "majority control" of over 65 billion barrels in reserves to replenish the US Strategic Petroleum Reserve.
The scale of this deal far exceeded market expectations. If Venezuela's production increases as planned, it could fundamentally alter the global supply landscape for heavy crude oil. However, the deal's implementation faces multiple uncertainties. Repairing Venezuela's existing infrastructure will take time, and US domestic politics also present variables. In the short term, the news of the deal and the escalation of US-Iran conflict create opposing forces, with oil prices seeking balance between the two. But the market's pricing focus remains on the interest rate front, with Kashkari's hawkish speech being the core variable determining asset direction last Friday, putting the most pressure on high-valuation tech stocks.
Chip Stocks Retreat Collectively, Nvidia Gives Up Half Its Post-Earnings Gains
The Philadelphia Semiconductor Index fell 3.47% last Friday to 11,469.66 points. Nvidia closed down 4.57% at $217.55, surrendering roughly half of its post-earnings gains. Chip stocks fell collectively, with Marvell Technology down over 10%, and Intel, AMD, Broadcom, among others, also weakening. The "Magnificent Seven" mega-cap tech stocks fell about 1.2% overall, with Microsoft, which rose over 6% for the week on a six-day winning streak, leading gains, while Tesla fell about 2%, performing weakest. Rising interest rates compress the discounted present value of future cash flows, affecting long-duration assets like chip stocks the most. Software stocks showed divergence: Workday closed up nearly 6%, driven by strong Q2 results fueled by AI applications; Salesforce gained over 20% for the earnings week, still closing up nearly 2% on Friday. Signs are evident of capital shifting from hardware to software and the application layer.
Focus for the Week
Focus One: Repricing of the Interest Rate Path After Kashkari's Speech. The probability of a September rate hike has risen from 35% to nearly 60%. Whether the 10-year Treasury yield can hold above 4.70% and whether the 2-year yield continues to surge will determine if the valuation repair space for high-valuation tech stocks is completely closed. The market needs at least one full trading day to price in Kashkari's hawkish signals.
Focus Two: Subsequent Evolution of the US-Iran Conflict. Following the weekend strikes, whether Iran takes further retaliatory measures and whether the US adds more military strikes will directly impact oil price movements and global risk sentiment. Brent crude has already risen over 2% in early Monday Asian trading. If the geopolitical situation escalates further, oil prices could retest the $90 per barrel level, further pushing up inflation expectations and rate hike probabilities.
Focus Three: Whether the Selling Pressure on Chip Stocks Can Stabilize. The Philadelphia Semiconductor Index fell 3.47% in a single day, with Nvidia's post-earnings gains significantly pared back. If chip stocks continue to weaken at the start of this week, it would signal the market's pricing logic has shifted from the "AI growth narrative" to "interest rate pressure on valuations"—the most crucial signal to watch in September.
The S&P 500 is currently at 7,711.76 points, at the lower end of its trading range since August. Upside resistance is seen around the previous high near 7,800 points, while downside support lies near the mid-August low around 7,650 points. The core variables for the week are how the two forces of rate hike expectations and geopolitical conflict will resonate. If US Treasury yields continue to rise alongside increasing oil prices, high-valuation tech stocks will face dual pressure on both valuations and earnings expectations. If oil prices retreat due to a cooling of geopolitical tensions, the interest rate shock following Kashkari's speech might be partially offset.
The core signal from overnight US markets is that Kashkari's hawkish remarks have re-anchored interest rate expectations, temporarily closing the valuation repair window for high-valuation tech stocks. The escalation of US-Iran conflict provides a new geopolitical risk premium for oil prices, creating a potential positive feedback loop between inflation concerns and rate hike expectations.
