Tech cracks before Nvidia. Treasury reaches deeper

Rundown · 2026-08-25

A split tape: the Nasdaq fell 0.76% as chips cracked ahead of Nvidia's Wednesday print, while the Dow rose 0.26%. Yields eased — the 10Y to 4.704% — on a report the Treasury may tap its ~$1 trillion General Account to fund buybacks. The toughest-ever Iran sanctions landed and oil fell 2.5% anyway. Traders now price a better-than-40% chance of a September hike.

Market Performance

• Nasdaq: 25,980.19 (-0.76%) — -200.26 pts, the day's clear loser on chip weakness
• S&P 500: 7,652.86 (-0.28%) — -21.51 pts; tech losses outweighed the drop in yields
• Dow: 53,417.16 (+0.26%) — +140.15 pts, green while the other two fell
• The iShares Semiconductor ETF fell 2.7% — Micron -5.8%, Seagate -6.5%, SanDisk -6%, AMD -3%+, Broadcom -2%+
• Optical and hardware names went with them: Coherent and Lumentum both -4%+, Corning -3%
• 10Y: 4.704% (-3 bps) · 30Y: 5.2497% (-2 bps) — the long end eased for the first time in three sessions

Note the shape. A day when yields fall and the Dow rises but the Nasdaq drops 0.76% is not a risk-off day — it is a rotation. Money left the most crowded trade in the market and stayed in the market. That distinction matters going into Wednesday.

Tech Cracks Before Nvidia

• Nvidia reports Wednesday, and the complex around it de-risked ahead of the print rather than chasing it
• Micron -5.8%, Seagate -6.5%, SanDisk -6% — the memory and storage names took the worst of it
• AMD fell more than 3% and Broadcom more than 2%; the SOXX semiconductor ETF dropped 2.7%
• Applied Optoelectronics -14% on a $600M at-the-market equity offering, which dragged the optical group with it — Coherent and Lumentum each fell about 5%
• This is positioning, not a thesis change. Nobody sells Micron 5.8% because of a view on 2027 — they sell it because they are long into a binary event
• The read-through cuts both ways: a de-risked tape going into Nvidia means less to unwind on a miss, and more fuel on a beat

The Treasury Reaches for $1 Trillion

• Yields fell after a report that Treasury could use its roughly $1 trillion General Account to help fund the expanded bond buybacks
• The 10Y dropped more than 3 bps to 4.704%; the 30Y eased over 2 bps to 5.2497%
• Understand the escalation. Last week was doubling the buyback size from about $2B to at least $4B. This is about where the money comes from
• The General Account is the Treasury's checking account at the Fed. Drawing it down to buy back long bonds adds reserves to the system — closer to a liquidity operation than a debt-management one
• That is a materially bigger lever than the announcement that moved yields for one session last week
• Gold pushed to a three-month high near $4,677 spot, its best since mid-May, and the dollar sat at multi-month lows around 98.7
• Both of those are the same trade: if the Treasury is reaching for the liquidity toolkit, you want less dollar and more hard asset

Sanctions Land and Oil Falls Anyway

• The administration rolled out its global Iran sanctions plan, dubbed "Operation Economic Outcast" — with China explicitly not exempt
• Bessent called it "the single greatest financial offensive ever marshaled against an adversary", having trailed it as an "economic D-Day"
• WTI fell about 2.5% to $84.89 — the toughest-ever sanctions campaign against a major producer, and crude sold off
• That is the whole lesson of the session. The market had been bidding crude for two weeks in anticipation; when the news actually arrived there was nobody left to buy it
• It also suggests traders read the plan as pressure on Iran's revenue rather than a genuine threat to barrels reaching the market
• If crude stays near $85 instead of pressing $90, one of the more uncomfortable inputs to the inflation math gets easier

The Trade War Reopens With Canada

• US-Canada talks collapsed Friday night, just before a midnight deadline, and 50% tariffs took effect on about $20B of Canadian goods
• The list is specific and consumer-facing: hockey sticks, building materials, liquors and certain clothing
• Prime Minister Carney says Canada will match the tariffs "dollar for dollar" starting September 8
• Each side blamed the other. Carney cited "uneconomic" and "unfair" US demands; the USTR said Canada "declined to finalize the trade deal under the terms agreed earlier this week"
• $20B is small against total trade flows — this is not a macro shock on its own. The risk is the September 8 escalation and what it signals about every other negotiation

A September Hike Is Now a Real Probability

• Traders are pricing a better-than-40% chance of a rate hike at the September meeting, per CME FedWatch
• That is the number to sit with. The debate has moved from when the Fed cuts to whether it hikes
• It follows the July minutes, where three members dissented for a quarter-point hike and "many" said one would be needed if inflation did not decline
• The July PCE price index lands Wednesday and Fed Chair Kevin Warsh speaks at Jackson Hole on Friday
• The 10-year still sits below the roughly 6.5% nominal GDP growth rate, and below its 2023 peak near 5% — context worth holding, because it means this yield backup is not yet extreme by the standards of the last cycle

Notable Movers

• (AAOI) -14% — Announced a $600M at-the-market equity offering, and the dilution hit immediately. The optical group followed, with Coherent and Lumentum each down about 5%
• (HIMS) -8% — Visa enrolled the company in its Acquirer Monitoring Program after credit card disputes in its weight-loss subscription business breached acceptable levels in July. It faces an $8 surcharge per dispute and must hold its dispute rate below 1.5% for three consecutive months to exit
• (SEAG) -6.5% — Storage and memory took the brunt of the pre-Nvidia de-risking
• (MU) -5.8% — Same trade, and the most crowded name in it
• (EXPE) +5% — Evercore ISI's Mark Mahaney raised his target to $430 from $375, a Street high, reiterating Outperform. Wedbush followed to $417 from $334
• (AMD) -3% — Part of the broad semiconductor pullback; the SOXX ETF fell 2.7%
• (AVGO) -2% — Gave back part of Friday's BMO-initiation gain

Cross-Asset

Yields eased across the long end for the first time in three sessions, and the reason was a headline about plumbing rather than about growth:

Asset · Level · Change · Driver

10-Year yield · 4.704% · about -3 bps · Report on tapping the General Account

30-Year yield · 5.2497% · about -2 bps · Same, though it moved less

WTI crude · $84.89 · about -2.5% · Iran sanctions landed and were sold

Gold spot · about $4,677 · about +1.6% · Three-month high, best since mid-May

• The dollar sat at multi-month lows near 98.7, extending the slide that began with last week's buyback announcement
• Gold at a three-month high with the dollar at multi-month lows and yields falling is a clean, internally consistent trade: the market is pricing more liquidity, not less inflation
• Crude at $84.89 after the toughest sanctions campaign ever announced is the outlier, and the most informative price on the board

Private Dealmaking

• Delix Therapeutics (psychoplastogens for neuropsychiatric disease) — $85M
• Convex (reactive backend platform for app developers) — $57M
• Claros Technologies (PFAS-destruction technology) — $55M
• Fish Audio (AI voice models) — $52M

What To Watch

• Wednesday: Nvidia earnings. The tape just de-risked into it, which cuts both ways
• Wednesday: the July PCE price index. The Fed's preferred gauge, landing with a hike better than 40% priced
• Friday: Kevin Warsh at Jackson Hole. After a 9-3 hold with three hike dissents, this is where the Fed either owns the hike debate or defers it
• September 8: Canada's retaliatory tariffs take effect, matching dollar for dollar
• September 9: the first enlarged buyback operation, and the first real test of whether the bid holds
• Watch whether crude stays near $85 rather than pressing $90 — it is the swing input in the inflation math

TLDR

• Nasdaq -0.76% to 25,980.19, S&P -0.28% to 7,652.86, but the Dow rose 0.26% — a rotation, not a risk-off day
• Chips led lower into Wednesday's Nvidia print: SOXX -2.7%, Micron -5.8%, Seagate -6.5%, AMD -3%+
• Yields eased — 10Y -3 bps to 4.704%, 30Y -2 bps to 5.2497% — on a report Treasury may tap its ~$1T General Account to fund buybacks
• "Operation Economic Outcast", the toughest-ever Iran sanctions with China not exempt, and WTI still fell 2.5% to $84.89
• 50% tariffs hit ~$20B of Canadian goods after Friday's talks collapsed; Canada retaliates dollar-for-dollar September 8
• Traders now price a better-than-40% chance of a September HIKE (CME FedWatch); PCE Wednesday, Warsh at Jackson Hole Friday
• AAOI -14% on a $600M ATM offering; HIMS -8% on Visa's monitoring program; EXPE +5% on a Street-high $430 target

The Bottom Line

Three separate escalations landed in one session and the index barely moved, which is its own kind of signal. The Treasury went from doubling its buybacks to floating a draw on a $1 trillion account to fund them — an escalation from debt management toward liquidity provision, and the reason gold hit a three-month high while the dollar sat at multi-month lows. Washington launched the harshest sanctions campaign it has ever aimed at a producer nation, and crude fell 2.5%, because the market had spent two weeks buying the rumor. And the trade war reopened with Canada over hockey sticks and liquor, with the real bill due September 8. Underneath all of it sits the number that actually matters: better than a 40% chance of a rate hike next month. The debate is no longer about when this Fed cuts. Nvidia reports Wednesday alongside PCE, and Warsh speaks Friday — by the weekend the market will know whether that 40% was too high or far too low.

_For informational purposes only. Not investment advice._