Good morning Traders and Quants! Markets enter Wednesday with a cautious tone. Yesterday’s attempt at a rebound fizzled as weak ISM Services data reminded investors that slowing growth and sticky price pressures remain front of mind.

Today, attention shifts to the tariff tape and earnings calendar. Disney, Uber, McDonald’s, and Airbnb headline a slate of consumer-facing reports that will help gauge resilience in discretionary spending. On the macro front, traders are watching for fresh developments on U.S.-China tariff extensions, plus signals from Fed speakers as markets lean heavily toward a September cut. Oil continues to slide on demand fears, while gold remains supported by safe-haven flows.

With sentiment gauges flashing caution and volatility creeping higher, the next 48 hours will reveal whether this pullback remains orderly or develops sharper edges.

Despite increasing volatility across the asset classes, the T&Q Index is holding steady, supported by DigitalOcean’s resounding earnings report yesterday. The index remains up over 24% in less than two months, meaning if you aren’t watching these names, you’re leaving money on the table. 

Markets are grappling with the weight of mixed economic signals. After opening higher, the major indices reversed course Tuesday following a weaker-than-expected ISM Services report, which showed stagnant growth and rising price pressures in the key services sector. The S&P 500 finished down 0.5%, with losses concentrated in tech, communications, and utilities. The Nasdaq followed suit, while the Russell 2000 bucked the trend, gaining 0.6% on the day as small caps continued to catch a bid.

Investor sentiment is fraying. The CNN Fear & Greed Index dropped to 56 from 68 last week, and Bloomberg's sentiment gauge flashed red, pointing to over-optimism unwinding. Bond yields were flat, but the 10-year remains near 3-month lows following Friday’s payroll miss. Meanwhile, tech earnings (and AI enthusiasm) provided early support, but Trump’s tariff threats targeting pharma and chips erased gains by midday. By the close, seven of 11 S&P sectors were in the red.

The dollar held steady, and oil posted its fourth straight daily decline (down 1.7%) as demand fears over slowing global growth outweighed supply concerns. Gold rebounded late in the session as safe-haven demand returned, closing up 0.24%.

The tariff chessboard is still in play. Trump signaled an extension to the China truce could be close, but he also confirmed tariffs targeting semiconductor and pharmaceutical imports are on deck next week. India is in the crosshairs too, with higher rates on pharma and chips now being floated.
Meanwhile, U.S. trade data shows a narrowing deficit as imports plunge—evidence that front-loaded shipments earlier in the year are reversing. Canada’s trade deficit widened as its exports to the U.S. soften, underscoring the collateral impact of tariff frictions.
In the background, a U.S. envoy is in Moscow seeking a breakthrough on Ukraine. Markets aren’t pricing a near-term resolution, but the geopolitical headline risk remains live.

The political lens is squarely on the Fed. Trump reiterated his intent to replace Powell, adding fresh uncertainty to the rate path just as markets are leaning into a September cut. Bessent took himself out of the running, and Trump says he will nominate a new BLS head this week. Democrats in Congress are moving to propose legislation that would protect agency heads from political firings—a bill unlikely to pass, but one that spotlights the tension.

Economic Data - Wednesday, August 6th
No notable releases

Earnings Reports - Wednesday, August 6th
MCD, DIS, UBER, MCK, ABNB, FTNT, DASH, EMR, MET, AIG, O, ROK, OXY

Overnight Markets
Asia: Nikkei 0.6%, Shanghai 0.45%
Europe: FTSE 0.22%, DAX +0.06%

The rally is losing altitude, but the tape still isn’t breaking. Rate cut expectations are doing the heavy lifting, with September now almost fully priced. Tariff headlines and Fed chatter will keep markets on edge until the next jobs report.