FIVEo1 — MARKET RECAP
Geopolitical Tensions and Hawkish Fed Tone Weigh on Equities
Monday Market Open — August 31, 2026
Escalating U.S.-Iran military activity around the Strait of Hormuz pressured risk assets at the Monday open. U.S. forces struck Iranian launchers on Larak Island, followed by Iranian missile attacks on U.S. military positions in Jordan. Brent crude subsequently moved above $90 per barrel, while WTI also advanced.
Despite the renewed geopolitical pressure, U.S. equities entered the final trading session of August after a positive month for the major indexes.
Monetary Policy & Rates
Federal Reserve Chair Kevin Warsh delivered a notably hawkish message at the Jackson Hole Economic Policy Symposium on August 28. Warsh said inflation remained above the Fed's 2% objective and that recent PCE and CPI data did not demonstrate meaningful improvement in underlying inflation trends. The Fed's preferred PCE measure was cited at 3.7% year over year and 4.1% over six months.
Market pricing for a September rate increase rose sharply following the speech. Available market reporting placed the probability around 57%–60%, rather than establishing a substantially higher probability.
The repricing pushed the 2-year Treasury yield higher and supported the U.S. dollar. Gold declined sharply on Friday as higher yields and a stronger dollar reduced demand for the non-yielding asset. The 10-year Treasury yield closed Friday near 4.72%.
Labor Market in Focus
Friday's August employment report, scheduled for September 4, will be the week's principal macroeconomic release. Current estimates call for a modest increase in nonfarm payrolls, although published consensus estimates vary; one current estimate is approximately 58,000 jobs with unemployment around 4.1%.
The more significant development was the Bureau of Labor Statistics' August 28 preliminary benchmark revision. The March 2026 benchmark revision reduced estimated total nonfarm employment by 79,000 jobs, or 0.1%, while private employment was revised downward by 178,000. The revision is preliminary and has not yet been incorporated into the official establishment-survey employment series; the final benchmark revision is scheduled for February 2027.
JOLTS, ADP private employment data and other labor indicators will provide additional information before Friday's payroll release.
Earnings Concentration
Earnings growth remains heavily concentrated among a relatively small number of companies. Goldman Sachs analysis cited Nvidia as contributing approximately 18% of projected 2026 S&P 500 earnings growth and Micron approximately 14%, together accounting for about 32% of the expected increase. The top 10 contributors account for approximately 65% of projected S&P 500 earnings growth.
This concentration increases the importance of the largest earnings contributors to maintaining index-level earnings momentum, particularly within semiconductors and AI-related companies.
Sector & Stock Highlights
- Energy: Oil prices moved sharply higher Monday after renewed U.S.-Iran hostilities around the Strait of Hormuz. Brent crude rose above $90 and WTI moved into the mid-$80s.
- Venezuela: The U.S. and Venezuela announced an agreement involving U.S. access to approximately 65 billion barrels of recoverable/proven Venezuelan oil reserves. The agreement is long term; analysts caution that Venezuela's deteriorated infrastructure means the reserves cannot translate into substantial near-term supply.
- PG&E (PCG): PG&E came under substantial pressure after California's wildfire-liability legislation failed to provide the broader protections investors had expected. Mizuho downgraded PCG from Outperform to Neutral and reduced its price target from $21 to $16; Wells Fargo and BMO also lowered their ratings/targets. PG&E separately stated that Senate Bill 492 does not adequately address the financing risks created by the current wildfire-liability framework.
- Deere (DE): Deere gained more than 2% following Baird's upgrade to Outperform, according to the market report.
- Amazon (AMZN): Amazon gained approximately 4% Friday following Evercore ISI's higher price target and positive commentary regarding retail applications of agentic AI.
- Rubrik (RBRK): Rubrik fell approximately 13% Friday despite reporting a second-quarter revenue beat and improving guidance.
Technicals & Sentiment
Friday's market data showed continued weakness beneath the major-cap index surface.
The Russell 2000 fell 1.39% to 2,972.37, reflecting sensitivity to higher borrowing costs and the changing interest-rate outlook.
The S&P 500 Equal Weight Index also weakened and fell below its 20-day moving average on Friday, indicating softer short-term breadth.
The original characterization of the VIX as reaching a fresh 2026 high is incorrect. The VIX closed Friday at 14.43, down 0.55%, and remained well below its recent 2026 peaks, including approximately 20.66 on July 29.
Friday's closing levels were:
- S&P 500: 7,711.76, -0.25%
- Nasdaq Composite: 26,402.42, -0.52%
- Dow Jones Industrial Average: 53,559.99, -0.02%
- Russell 2000: 2,972.37, -1.39%
- VIX: 14.43, -0.55%
- 10-year Treasury yield: approximately 4.72% ← Back to Fiveo1