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Healthcare is taking center stage this morning with Moderna +60% premarket after the company announced positive Phase 3 data for its melanoma therapy. The combination regimen significantly extended the time patients lived without their melanoma returning, compared with Keytruda alone, and also reduced the risk of the cancer spreading to distant parts of the body.

S&P futures are flat premarket as tech weakness and higher oil prices continue to weigh on sentiment. Headlines that Iran considered attacking US military assets in Europe aren't helping matters.

If you're wondering why stocks have been so strong in the face of many headwinds, the chart below says it all. Earnings move stocks, and forward earnings estimates have been off the charts. Ed Yardeni, who coined the term "bond vigilantes" in the late 1980s, has a great acronym for the current environment: FEMO — Fabulous Earnings Momentum. When earnings are this strong, the market can shrug off a lot of bad news.

CORE Headlines

• Iran considered attacking U.S. military assets in Europe if the U.S. escalates war. — FT
• Iran appears to be losing control over the Strait of Hormuz — 80% of vessel transits over the past two weeks have taken the Omani route. — CNN
• OpenAI revenue grew 18% in Q2. — WSJ
• Target beats by $1.76, beats on revenue; guides FY27 EPS and revenue above consensus.
• Amazon Prime Air drone delivery expanding to nearly 500 cities and towns this year.
• Trump said he would pause a new 50% tariff on $20B of Canadian goods as the two countries seek an agreement. — WSJ
• Klarna cut its outlook for a key metric as it expects softness in consumer spending to continue. — WSJ

Charts & Data

If you invested $10,000 in Nike exactly 5 years ago, you'd have $2,578 today (dividends included). Barchart: an extraordinary destruction of value in one of the world's most recognizable brands.

US interest payments are now 3.3% of GDP — the highest level in history. Barchart: the cost of the debt is rising much faster than the economy that pays for it.

60/40 portfolio started in 2008 would now be weighted 92% stocks / 8% bonds without rebalancing. Brian Feroldi: a useful reminder of how compounding reshapes a portfolio over time — and why rebalancing matters.

Investor bullishness near extreme levels — BofA's August survey is the third-most bullish since 2022. BofA via Daily Chartbook: a contrarian warning flag as positioning approaches historical extremes.

Equity allocations at their highest since the 2021 euphoria. BofA via Robin Wigglesworth: professional investors are fully committed to the bull market.

Record $181B of net foreign buying in June — 3-month total of $426B has never topped $300B before. Bespoke via Daily Chartbook: global capital flows into US equities at a historically unprecedented pace.

CBOE Dispersion Index fell 13 points in four weeks — most prior occurrences came early into a rally following a moderate to severe market pullback. Bespoke via Daily Chartbook: a technically constructive signal for the current environment.

Hyperscalers went from 2.7% to 4.8% of the US investment grade index in one year — could approach 10% by 2030. Torsten Slok, Apollo: a lot of bond supply coming to market as the AI buildout accelerates.

Forward earnings rising to record highs across S&P 500 Large Caps, S&P 400 Mid Caps, and S&P 600 Small Caps. Yardeni Research via Daily Chartbook: the earnings expansion is broad-based — this is what FEMO looks like.

Interesting Reads

• Kyla Scanlon: How to Get Rich In America — on wealth vs. labor and ownership vs. effort — Kyla's Newsletter
• Someone asked their AI agent to get an earlier gym booking — it cancelled someone else's appointment to do it — ABC
• Gemini's distribution pushes it into a strong second place in consumer AI — SensorTower

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