Nvidia sparks a tech rout, Powell looms large

House cleaning duties

The dog days of August didn’t last long. The summer calm cracked as Wall Street’s favourite generals — the trillion-dollar megacaps — stumbled in unison, and when giants trip, the whole market feels the tremor. Nvidia led the rout, sliding 3.5% and wiping billions off its frothy market cap, as traders lightened up ahead of a high-risk stretch — Jackson Hole first, then its August 27 earnings. The Nasdaq 100, priced like perfection itself, coughed up 1.4%, its second-worst showing since April’s tariff shock. By the closing bell, $385 billion in market value had evaporated across the “Big 8,” proving yet again how narrow the U.S. equity engine has become.

The pain wasn’t confined to Nvidia. Palantir, trading at 200-times forward earnings — a valuation more suited to a fantasy novel than a balance sheet — cratered nearly 10%. Oracle, riding a 49% YTD rally and stuffed with momentum money, shed 6%. The index might have had more than 350 winners on the day, but when the market’s pillars wobble, the ceiling sags no matter how many bricks at the base hold steady. Intel popped on whispers of Washington eyeing a 10% stake, and Home Depot showed Main Street resilience, but they were flickers in a gale.

Bond markets sniffed the stress and caught a bid. The 10-year yield slipped three basis points to 4.30%, traders hardening their conviction that Powell will bless a September cut at Jackson Hole. The Treasury strip now prices two cuts by year-end, but as always with the Fed, the market’s wish list isn’t necessarily the Fed’s playbook. Powell’s Wyoming speech is being framed as a high-wire act — too dovish, and he risks stoking long-end inflation fears; too stern, and he risks yanking the oxygen mask off equities already trading in rarefied air. Behind the emerald curtain at the Eccles building, the debate rages: meet the market’s dovish script or keep some hawkish powder dry?

But the elephant’s still pacing the room: tariffs. Their real bite hasn’t hit yet, and the back half of the year could get bumpier as import costs work their way into the inflation plumbing.

The yield curve steepening is the real tell. Not just 2s10s, but 10s30s too. Three forces are at work: the Fed cutting rates due to political pressure in the run-up to mid-term elections, Treasury supply flooding the long end, and markets whispering that 2% inflation may not be sacred if political calculus intrudes. If Powell signals any slippage in commitment, the back end could lurch steeper still. Traders know steepeners are rarely polite — they tear through positioning like a bull through a crowded pit.

Geopolitics added its usual theatre, though little tradable meat. Trump, fresh from White House choreography with Zelenskiy and European leaders, dangled the idea of a Putin-Zelenskiy summit. Markets initially marked optimism in Europe, but by the time the U.S. closed, the air had gone out — Trump himself admitted Putin may not want a deal. Traders treat these diplomatic “security guarantees” like an option premium: lots of time value, little intrinsic until the horse-trading over territory even leaves the paddock.

Meanwhile, crypto joined equities in risk-off mode, underscoring that when the megacap halo dims, satellites lose their orbit too. Positioning across equities remains elevated after a blistering earnings season. With the fuel tanks of earnings surprises now behind us, and rate-cut optimism already baked into the cake, investors were always set to cool their torrid pace ahead of Powell’s croupier moment in Wyoming. The dice are still in his hands; the table waits.

Oil as the real-time peace barometer

If oil is your real-time peace barometer, then ignore the media hand-wringing and watch the one asset that carries true-world consequence. Crude prices sagged Tuesday as traders priced the possibility that negotiations to end or legitimize Russia’s invasion could ease sanctions and open the spigots wider. Brent closed at $65.79, down 1.22%, while WTI settled at $62.35, off 1.69%.

The move had all the markings of a glimmer of light at the end of the tunnel trade — record shorts still leaning hard into the “peace dividend,” betting a cease-fire translates into supply relief. But the risk is obvious: if no deal comes, shorts will be caught leaning the wrong way, and the snapback could be brutal.

The political theatre added fuel. Trump, after huddling with Zelenskiy and European leaders, signalled he’d spoken with Putin and was arranging a Zelenskiy–Putin meeting, with the potential for a trilateral summit. Markets treated it as a tentative de-escalation cue, especially after a softer stance on secondary sanctions suggested less disruption for global crude buyers.

Flows responded fast. Chinese refiners scooped up 15 cargoes for October and November delivery just as Indian demand eased, showing how quickly supply lines can reroute when sanctions risk looks lighter.

But this so-called “peace trade” is still all choreography. Kyiv may talk up “good” discussions and vague security guarantees, yet the fear lingers that any settlement could tilt Moscow’s way. Traders have seen this before: plenty of diplomatic theatre, little fundamental change to the barrel count until boots and borders shift.

For now, crude trades between two forces: the peace premium being priced out and the demand drag from a sluggish China — iron ore weakness speaks volumes there. If tensions continue to ratchet down and sanction threats fade, oil looks primed to drift toward $55 by year-end. Until then, it remains the cleanest ticker of geopolitics — the live barometer of peace or war.

The trader view: Pre-Wyoming house cleaning: Sell all the things… except bonds

It felt like the market wanted to clear its throat before Jackson Hole — a broad risk-off session where traders sold first, asked questions later, and left only Treasuries standing.

The good? Housing starts came in hot — good news if you’re renting, less so if you’re trying to buy in a market where affordability’s already in the stratosphere. Hedge funds had themselves a day, finally seeing their short books work as the “most shorted” basket unravelled.

The bad? Building permits slumped — a reminder that the supply pipeline is swelling while high rates cap demand.

Gold couldn’t catch a bid, sliding for a fourth straight session and breaking key averages thanks to a stronger US dollar.

Crypto shared the same fate, with Bitcoin giving up its summer swagger and slipping to three-week lows.

The ugly? Meme stocks flirted with July highs before rolling over hard. Momentum longs were hit across the board, with the Mag 7 losing more ground while the rest of the S&P 493 went nowhere. Retail favourites saw their worst day since midsummer.

The tape told the story: Nasdaq led the drop, while the Dow managed to claw back to flat by the bell. Hedge funds, though, booked their best day in weeks as their shorts finally paid. Vol ticked up ahead of OpEx, with everyone eyeing Jackson Hole and Nvidia earnings as the next big catalysts.

The dollar roller coaster was in evidence— weaker in Asia( as has been the regional trend) , stronger in New York — but stayed stuck in its post-payrolls range. Bonds were the safe harbour, bought steadily all session, with yields down as traders looked for cover ahead of Powell.

Oil drifted lower again, slipping into the low $60s, its weakest since June. Gold cracked its 50-day moving average, Bitcoin lost its own technical footing, and both reminded traders that momentum cuts both ways.

And just for color: Moody’s downgraded the U.S. citing tariffs, while S&P reaffirmed U.S. credit on the back of… tariff revenues. A classic case of two referees calling the same play in opposite directions — the market chuckled, then got back to watching Powell’s dice.

The takeaway? Positioning’s being cleaned up before the Fed show. Bonds wear the safety bid, equities carry the bruises, and Friday’s Jackson Hole speech is the coin toss everyone’s waiting on. The dog days are behind us — and now the market wants answers.