Expectations cracked, and the curve followed

The Conference Board's headline index slipped 0.8 points to 89.4, its weakest since January. The interesting part is underneath. The Present Situation index rose 6.8 points to 121.2, its first gain in four months, while Expectations fell 5.8 to 68.2. The Board's own marker is 80: below it has historically been associated with a recession inside a year. People think today is fine and next year isn't. The survey ran 3 to 16 August, with pump prices above $4 a gallon throughout.

Yields fell about 6bp at every tenor: the 2-year to 4.17%, the 10-year to 4.64%, the 30-year to 5.17%. That left 10s2s at 47bp against 46bp on Monday, essentially unchanged. This wasn't a growth scare steepening the curve or a hawkish repricing flattening it. The entire structure just shifted down, which is what a soft expectations print plus cheaper oil does when nobody wants to take a view on the Fed four days before Jackson Hole.

WTI settled at $82.36, down 3.12%, a second straight decline. Brent fell 3.89% to $88.58, taking the gap between them from $7.16 to $6.22. Brent is the seaborne barrel and carries more of the Hormuz premium, so Brent is where that premium comes out first. Iran and Oman are talking about how the strait gets managed, and Qatar's foreign ministry describes draft agreements as circulating. Nothing is signed, and Tehran's public demands haven't moved. Cheaper crude did some of the work in the bond market above.

Ottawa put counter-tariffs on $27.6bn of US imports, matching Washington's 50% duties on $27.6bn of Canadian goods that took effect on the 22nd. Rates of 15, 25 and 50% land on roughly 700 products from 8 September, aimed at steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics, with each rate matched to the corresponding US one. There's C$7.5bn of support for affected workers and firms alongside it. Equities closed green anyway.

Moderna closed up 14.36% at $158.83 after Wolfe Research took it off Underperform. Worth being precise about the size of that: the upgrade was to Peerperform, not to a buy, and the stock added a seventh of its value on being moved to neutral. Wolfe put unadjusted peak intismeran sales at $9.2bn across indications. Merck, its partner on the drug, rose 3.84%. The biotech ETF added 3.00% to $169.10, within a few dollars of a high it last saw in February 2021.

Micron closed up 2.48% at $932.97, recovering most of Monday's 5.8% drop, and the memory ETF rose 3.61%. Semiconductors added 1.65% and were most of the Nasdaq 100's outperformance. Nvidia reports Wednesday after the close against a bar management set itself: $91bn in revenue, plus or minus 2%. Whatever conviction was missing from the chip complex on Monday came back the day before the print.