Good morning Traders and Quants! U.S. equities capped last week with a flourish as the S&P 500, Nasdaq, Dow, and Russell 2000 all closed at record highs. 

Tech, communications, and consumer discretionary led the charge, each up more than 1% on the week, while energy lagged as oil slid for a third straight session. 

FedEx jumped 2% on stronger earnings despite warning of a $1B trade hit. 

Treasuries firmed, with the 10-year yield settling just above 4.1%, and the dollar clawed back from four-year lows. Gold hovered near $3,740 after notching fresh highs.

The story remains the Fed. Last week’s quarter-point cut to 4.0 – 4.25% marked the first easing since December, and forecasts suggest two more cuts are possible before year-end. 

Small caps outperformed, with the Russell 2000 holding a four-year high, as investors rotated toward rate-sensitive plays. Traders will be watching whether this “insurance cut” looks more like 1995 and 2019, preemptive and bullish, or if growth cools faster than expected.

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Futures are pointing lower this morning, with the Dow off 0.3% alongside the S&P and Nasdaq. Markets are looking to Fed speak to sustain momentum, with Miran, Williams, and Musalem all due today ahead of Powell’s economic outlook tomorrow. Friday’s PCE inflation print looms as the week’s key data point.

Gold is extending gains, up 1.5% in pre-market action, while the dollar is steady after last week’s rebound. Oil is flat in the low $60s, caught between oversupply worries and fresh geopolitical flare-ups in Russia and the Middle East.

Beyond rates, investors are parsing sectoral catalysts:

Quantum push: A new U.S.–U.K. pact on quantum computing and AI signals deeper government involvement in next-gen tech.

Russia’s economy is sputtering after two years of war-fueled stimulus. GDP growth slowed to 0.4% in July, oil exports are down, and profits weak, but wages remain strong and unemployment at record lows. Sanctions continue to leak through barter and transshipment, limiting pressure on the Kremlin.

In the Middle East, the U.K., Canada, Australia, and Portugal recognized Palestine on Sunday, with France and others expected to follow. The move provoked fury in Israel, where Netanyahu and far-right ministers are pushing for West Bank annexation. Options range from Area C to the Jordan Valley, though any move risks a “red line” response from the UAE and potential European trade measures. For markets, the stakes are rising for energy security and regional stability.

Separately, Trump’s London state visit produced a quantum computing memorandum with the U.K., aimed at creating standards and legitimizing the nascent industry. IonQ, Rigetti, and IBM remain the most visible beneficiaries, while governments frame the race as both economic and security critical.

Charlie Kirk’s assassination has become a rallying point for Republicans. At a five-hour memorial in Arizona, Trump, Musk, and party leaders invoked a “revival” blending evangelical fervor with political mobilization. Erika Kirk now leads Turning Point USA and pledged to expand its reach, already fielding a surge in chapter requests. Analysts warn Democrats should be concerned about youth turnout in 2026.

Yet cracks are visible. The FCC’s Brendan Carr threatened Disney/ABC over Jimmy Kimmel’s comments, drawing rebukes from Cruz, Paul, Massie, and Shapiro, who warned of overreach on free speech. Bondi’s suggestion that “hate speech” could be prosecuted was later walked back, but the episode highlights tension between cultural war instincts and First Amendment guardrails.

Odds of a government shutdown are rising into the Sept 30 deadline. Prediction markets now peg the risk near the mid-50s, with House Republicans pushing a stopgap to Nov 21 but margins tight. If the CR fails, expect a partial shutdown beginning Oct 1, with “excepted” functions (Treasury auctions, key Fed-adjacent data collection).

On immigration, Trump’s $100,000 H-1B visa fee is drawing alarm from economists. While some native tech workers could benefit from less foreign competition, studies show innovation and productivity gains from skilled immigration far outweigh the costs. Restrictions risk pushing U.S. multinationals to shift more R&D abroad, undercutting long-term competitiveness. India, already hit with tariffs, could bear the brunt.

Chicago Fed National Activity Index

No notable reports

Asia: Nikkei 0.99%, Shanghai 0.22%
Europe: FTSE 0.08%, DAX -0.60%

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Markets enter the week at all-time highs but stretched valuations and seasonal volatility make Fed guidance critical. Gold and AI-linked sectors are flashing momentum, while energy stays capped by oversupply. Geopolitics, from West Bank annexation talk to Russia’s slowdown, adds another layer of risk. The test now is whether dovish Fed signals can extend risk appetite through quarter-end, or if politics and policy start to reprice the rally.