Good morning Traders and Quants! Welcome to the first day of August, historically a month where things can go pear shaped, and fast. The final session of July was anything but quiet. Big Tech delivered again on earnings, but profit-taking crept in at the margins. The AI trade remains the market’s engine, yet rotation and tariffs are reshuffling the deck just as the jobs report lands this morning.

Overall the market responded positively to Big Tech’s increased CapEx around AI, but legendary short seller Jim Chanos had some thoughts on META’s earnings report:

The August open now pivots on two things: the labor market print and the final wave of trade headlines. Both could reset expectations for a September Fed move and shape risk appetite for the weeks ahead.

Despite a tough macro backdrop, the latest selections in the T&Q Index are holding their own, with Marvell Technologies up 7% this week as the market gets behind its place in the AI landscape. The index remains up over 20% since inception. 

Word Around the Street
The rally hit pause but didn’t break. The Nasdaq was flat and the S&P 500 pulled back 0.3% after early strength faded, while the Russell 2000 slid almost a full percentage point. AI-linked names (META, MSFT, GOOGL) stayed firm on earnings optimism, but pharma lagged sharply after Trump’s letters urging price cuts.
Trade dominated headlines again. South Korea signed on at 15% tariffs, India at 25%, while Mexico secured a 90-day extension on existing rates. Copper avoided the 50% levy that had been looming, sending futures lower. Canada talks remain tense as the clock ticks toward resolution.
Treasuries held steady ahead of today’s jobs report, the 10-year at 4.36%. Oil eased slightly after a strong month, while the dollar held near recent highs.

Trade Winds and Global Shifts
Tariff diplomacy is in overdrive as the August 1 deadline arrives.
South Korea joined Japan and the EU in signing agreements, but Mexico’s deal is only a temporary pause and Canada is still unresolved. India’s 25% rate takes effect next week unless exemptions are negotiated. Trump continues to float sector carve-outs for autos, steel, aluminum, and copper in multiple bilateral talks.
China discussions are ongoing with a possible 90-day extension on the table. Treasury Secretary Bessent is pushing for expanded Chinese purchases of U.S. goods, while Southeast Asian partners Cambodia and Thailand are back at the table to avoid higher tariffs.

D.C. in the Driver’s Seat
The Fed’s September path hinges on labor data. Powell emphasized the unemployment rate as the primary gauge for policy, and while no rate cut was expected this week, futures still price in two 25bp moves before year-end.
On the fiscal side, Trump is pairing trade wins with tax moves. His tax and spending bill includes changes to charitable deduction rules, and the SEC’s “Project Crypto” aims to move U.S. markets on-chain, both of which could carry market implications in the second half.

Nonfarm Payrolls
Average Hourly Earnings
Participation Rate
ISM Manufacturing PMI
Michigan Consumer Sentiment

Today: XOM, CVX, CL, REGN, GWW, D, KMB

Asia: Nikkei -0.66%, Shanghai -0.37%
Europe: FTSE -0.59%, DAX -1.66%

August opens with a data and policy storm. A soft payrolls print could bring the Fed closer to a September cut, while strong labor data keeps “higher for longer” in play. Add in fresh tariffs and the tail end of Big Tech earnings, and the month isn’t wasting any time setting the tone.

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