Edward Meir's week in review and thoughts on the week of Aug. 3, 2026

In other markets, things were anything but dull, especially after Chairman Kevin Warsh’s press conference Wednesday. As our readers know, the Fed kept rates unchanged for a fifth consecutive session, but the vote was not unanimous with three of the 12 Fed governors pushing for a rate hike instead. In a policy statement virtually identical to last month’s, the Fed noted economic activity is “expanding at a solid pace,” and job gains “have kept pace with the workforce, and the unemployment rate has changed little.”

Warsh doubled down on the Fed’s commitment to get inflation down to 2% and noted there was no wiggle room in the number. He also said that the Fed’s mandate to bring prices down while keeping people employed was not an “either/or” choice, but achievable on both ends. Warsh highlighted the strong rebound in business capex spending and acknowledged the key role AI is playing in this regard. He also praised the five task forces that are expected to produce fresh approaches to issues of importance to the Fed, including identifying more relevant macro data, working on better measures of inflation and employment, improving real-time information flow and refining Fed communications. The task forces will also do a deep dive into long-term structural changes in the economy centered around AI and productivity.

Although markets reacted positively to Warsh’s comments at first, a measure of unease crept in by the time he finished speaking. US equity markets reversed their gains to finish sharply lower, while treasury yields shot up. What seems to have occurred is Warsh had trouble explaining why the Fed was not raising rates given where inflation stood. As one reporter put it: “What are you waiting for?”

Warsh could have said the Fed would prefer to wait until September and give some reasons that would justify the delay, but he did no such thing. Instead, he said the Fed wants to take its cue from the markets and does not want to micromanage investor sentiment. To illustrate the point, Warsh pointed out since his first press conference, treasury yields increased by more than 20 basis points with the Fed basically watching from the sidelines. Investors were “playing the ball, not the referee” and did not need Fed guidance, dot plots, or excessive speeches. As the Wall Street Journal also noted in an approving editorial, the markets basically have to figure things out for themselves and price risk accordingly.

Stocks

The markets duly took note of Warsh’s noncommittal stance. The odds for a September hike got trimmed to 60% from 81% while 10-year yields jumped by 12 basis points in the two days following the chairman’s press conference. For the week as a whole, 10-year yields were up 15 basis points (ending at 4.745%) and were up a whopping 33 basis points in July alone. At these levels, we would not be surprised to see mortgage rates soon at around 7%, if not higher.

US equity markets fell sharply on Wednesday and Thursday, but we saw a strong reversal set in on Friday that tipped all three indices into the green for the week. Friday’s rally had nothing to do with a reassessment of anything Warsh had to say, but more to do with the fact that a large but troubled hedge fund sold out its public holdings after being unable to meet margin calls. As we understand it, 24-year-old Leopold Aschenbrenner loaded up on a variety of semiconductor and AI names and margined his positions aggressively to juice up returns. For much of the year, things were going well, with his fund up by a staggering 400% year-to-date. But when many of the chip and AI names started to wobble, Aschenbrenner faced margin calls he could not meet, prompting the sale of his positions to Ken Griffin’s Citadel. His “exit” marked the bottom in a number of battered chip names and triggered Friday’s rally. For the week, NASDAQ ended 1.6% higher, while the S&P 500 and the Dow each rose by 1%. A number of strong earnings reports also helped sentiment, including from the likes of Microsoft and Amazon.

Energy

In the energy space, the cessation of hostilities that set in last weekend between the US and Iran and which contributed to a welcome decline in crude oil prices did not last long. On Wednesday, the US military said it prevented a “surprise” attack on its troops based in Jordan. Hours later, the US and Saudi jointly struck Iran-backed armed groups in Iraq, the first time that Saudi Arabia had conducted strikes alongside the US.

Things turned quiet heading into the weekend but reports surfaced President Trump was considering another campaign that could last much longer. However, this attack was abruptly postponed. Late on Saturday, the president noted, after talking to Gulf allies, “perimeters of a deal have been agreed to” that would “open the Strait” and progress the nuclear issue.

Investors may have become somewhat jaded by now given that previous cease-fire announcements eventually fell by the wayside. We shall see what happens this time around.

Metals

Gold and silver both had relatively quiet weeks. Gold finished up by about $20/ounce week over week (w/w), settling at just under $4,100/ounce, while silver finished just about flat on the week, closing on Friday at $57.22.

Currency

The general dollar index was all over the place but finally closed down by 1.6% on the week. Although US long-term treasury yields pushed higher, the dollar did not respond much. This could be because currency markets are concerned with a resumption of hostilities that could rekindle inflation, a scenario that is ultimately bearish for the dollar. The fact that Warsh gave no indication as to when he might raise rates also makes the inflation outlook all the more complicated and was another reason behind the dollar’s disconnect from the treasury market.

Macro readings and other news from the past week

• US inflation moderated in June, with the PCE price index coming in at -0.1% month over month (m/m), On a year-over-year basis, inflation is still running high at 3.7%, although it is down from the 4.1% seen in the prior month. The June core PCE came in at 0.1% m/m, while the annual core fell to 3.4%, down by 1% from the prior reading. These declines are not surprising and complete the June trifecta of relatively subdued inflation readings brought about by the fall in crude oil prices. The July inflation readings will likely be worse, but these reports are some two weeks away.
• The US economy grew by 1.5% in Q2, but the subcomponents were not as bad as the tepid headline number suggests. Despite high gasoline prices, consumer spending was strong (up 3.2% in the quarter) and contributed 2.1% to the overall GDP number. Business investment added another 1.2% thanks to ongoing AI spending. Net exports subtracted a point from GDP, and a decline in government spending was also a negative, but the consumer and business spending increases were far more reassuring. On the business side, the Wall Street Journal noted “equipment purchases and intellectual property accounted for all of the uptick in business investment. AI hyperscalers, which plan to spend upward of $700 billion this year, are turbo-charging demand for computer chips, construction equipment, gas turbines and more. Businesses are also pumping tens of billions into frontier AI models as well.”
• Speaking of AI, ratings agency Fitch warned the current boom in spending could turn into a potential credit risk. Amazon, Alphabet, Nvidia, Meta, Oracle and SpaceX together issued $182 billion of investment-grade bonds Fitch said, while capital expenditure by companies in this space is projected to jump more than 75% this year to the $700 billion noted above. “The scale of AI investment is such that the exposure of the economy and overall capital market to such a correction is significant,” Fitch concluded.
• Personal income increased 0.2% month-over-month in June (consensus 0.3%), while personal spending came in at 0.3% (consensus 0.4%), with both figures encouraging.
• Initial jobless claims remained low at 197,000 while the four-week average declined to just over 202,000.
• US durable goods orders rose 0.3% in June following a 4.0% decline in May, while ex-transportation orders increased by 0.6%. Orders for non-defense capital goods, excluding aircraft, advanced by 0.9%. Orders for computers, electronic products and primary metals all strengthened, but fabricated-metal orders were down by 0.5%. There were upward revisions to the May numbers as well.
• The Chicago Business Barometer edged up to 57.6 as new orders strengthened, but output and employment weakened. In Texas, the Dallas Fed production index rose to 10.1 and new orders to 6.4, but raw material and wage pressures remain elevated.
• US consumer surveys diverged in July. The Conference Board’s confidence index slipped to 90.8, with its present-situation measure declining for a third consecutive month, but the University of Michigan sentiment reading rose to 55.2 from 49.5 although it still remains about 10 points below year-ago levels.
• US home-price growth picked up modestly in May, with the Case-Shiller index rising 1.6% y/y as inflation outpaced national home-price appreciation for a 12th consecutive month – an encouraging sign for home buyers. The May FHFA housing price index rose by 0.3% m/m after being down by 0.1% last in April.
• Euro-area GDP grew by 0.4% quarter over quarter, while on an annual basis growth accelerated to 1.0%. Germany, France, and Italy all expanded by 0.2% in the quarter, while Spain grew by an impressive 0.7%. EU unemployment remained steady at 6.3% in June.
• The latest PMI numbers out of China were lackluster. The official manufacturing PMI fell to 49.2 in July from 50.3 in June (a five-month low) and is now back in contraction territory. The service PMI declined to 49 from 50.2 in June, while the combined “composite” PMI came in at 49.3 compared with a prior reading of 50.6. It is quite remarkable that with a booming export sector and strong industrial activity, especially in the AI space, all three of China’s official PMI’s are now in contraction mode. Separately, Reuters notes China’s Politburo vowed to “roll out more ‘practical and effective’ policies, with timely adjustments to monetary policy, as top leaders acknowledged difficulties and challenges facing the economy”. The Politburo statement added it would seek to expand domestic demand, speed up fiscal spending and make more use of bond proceeds to attract foreign investment. These are not new initiatives and will probably not fare any better than what was tried previously. Critically, there was no mention of renewed fiscal stimulus.
• Mining.com reports a portion of First Quantum’s copper concentrate stockpile held in inventory at the Cobre facility in Panama was processed in May. About 2.1 million tons of ore were treated, with the 38-million-ton balance (containing about 70,000 tons of recoverable copper) still left. Processing this stockpile could take up to 12 months at current treatment rates. In addition, Cobre has hired about 1,000 people in anticipation of a possible full restart.
• Citi remains bullish on copper, citing tighter physical markets, low inventories, and strong Chinese import demand. Mine supply pressures were also cited as being constructive. The bank maintained its $14,500 three-month target and its $15,000 per ton year-end target.
• Rio Tinto posted a 43% jump in first half of 2026 earnings to $6.85 billion, the highest in four years. Strong performances from its copper and aluminum are, for the first time, generating more profits for the company than its traditional iron ore operations. Rio left its 2026 production and sales forecasts unchanged from its previous guidance. Separately, Glencore said its trading team made a first-half profit of about $3.3 billion, well ahead of the $2.9 billion made during all of last year, but short of 2022’s record haul of $6.4 billion. Profits were not broken down by sector, but the company will do so when it announces results this week.
• At an Indonesian government meeting that took place last week, local businesses were assured approvals for shipping processed mining products (including nickel and bauxite, among others) would be forthcoming. However, Reuters reports exporters are still waiting for the paperwork to come through. The new procedures were introduced after the Indonesian attorney general’s office identified instances of corruption in early July.

This week’s US macro readings

• Monday, we get the July ISM manufacturing index (expected at 54%, last 53.3%) and June construction spending (expected at 0.3%, last 0.1%). July auto sales comes out after the close.
• Tuesday brings us the June trade balance (expected at $-73 billion, last $77.6 billion), followed by June factory orders (expected at 0.3%, last -1.3%) and June job openings (expected at 7.5 million, last 7.6 billion).
• Wednesday, we get the July ADP employment reading (expected at 75,000, last 98,000), followed by the July ISM services (expected at 54.4%, last 54%).
• Thursday weekly jobless claims come in (expected at 200,000, last 197,000), followed by Q2 productivity readings (expected at 0.7%, last 0.3%).
• Friday brings us the July payrolls number (expected at 85,000) with unemployment expected unchanged (last 4.2%). We also get June consumer credit (expected at $12 billion, last $-0.2 billion).

We wish all our readers well for the upcoming week.