US TECHNOLOGY: Applied Materials: Export Restrictions Impacts

Despite a late rally, equities were roundly lower Tuesday, with almost all S&P 500 sectors declining and just 23% of individual names higher on the day.

• The S&P 500 would fall 1.6% at the session's low, completely reversing the rally seen after Fed Chair Powell's dovishly-perceived Jackson Hole speech on Aug 22, before picking up from midday to pare losses to around 0.7%.
• The session had a defensive tone about it in the return from a 3-day weekend, with rising long-end bond yields seen weighing on rate-sensitive stocks in particular.
• That was borne out in sectoral performance. The outperformers, energy, consumer staples and health care, were roughly flat; the biggest decliners were in real estate (-1.7%), industrials (-1.1%), tech (-1.0%) and consumer discretionary (-1.0%) names.
• NVIDIA was a notable underperformer among megacaps, falling 2.0%. Equity futures saw a pullback before the opening bell after semiconductor giant TSMC announced that the US had revoked its waiver to export chips freely to China.
• Note, S&P emini futures gained 0.2% immediately after the cash close, with Bloomberg headlines pointing to gains by tech names Apple and Alphabet after Reuters reported "GOOGLE WILL NOT HAVE TO SELL OFF CHROME, JUDGE IN ONLINE SEARCH MONOPOLY CASE RULES"

• RES 4: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg  
• RES 3: 1.3925 High Aug 22 and the bull trigger
• RES 2: 1.3868 High Aug 26 
• RES 1: 1.3815 High Sep 02
• PRICE: 1.3798 @ 16:25 BST Sep 2
• SUP 1: 1.3722 Low Aug 7  
• SUP 2: 1.3709 61.8% retracement of the Jul 23 - Aug 22 bull cycle  
• SUP 3: 1.3658 76.4% retracement of the Jul 23 - Aug 22 bull cycle 
• SUP 4: 1.3637 Low Jul 25  

The bull cycle in USDCAD that started mid-June remains in play. However, the latest corrective pullback has resulted in a breach of support at the 50-day EMA, at 1.3775. A clear break of this handle signals scope for a deeper retracement and exposes 1.3722, the Aug 7 low. Moving average studies have recently crossed and are in a bull-mode position, highlighting an uptrend. The bull trigger has been defined at 1.3925, the Aug 22 high.

The Treasury cash curve bear steepened in the return from the Labor Day weekend Tuesday, taking the lead of global peers and shrugging off soft US data. 

• Treasuries took an early cue from overnight weakness in European and Japanese government bonds, which in turn was triggered by a combination of fiscal/ political/ supply factors.
• Europe (including UK) saw a record single day's issuance today per Bloomberg, just under EUR 50B. For good measure, Tuesday will have seen 58 investment-grade corporate bond offerings in the US, roughly $43.3B for a 2025 high (per Bloomberg) and narrowly exceeding last year's post-Labor Day sales.
• With UK and German 30Y yields hitting multi-year highs intraday, 30Y Tsys touched their highest levels since July 18 at a shade under the 5% mark (4.9966% session high).
• That move (around 830ET) would mark the intraday high for yields, with a smaller-than-expected improvement in the ISM Manufacturing index and continued weakness in construction spending (both out at 1000ET) helping keep a lid on yields through the rest of the session.
• Latest levels: The 2-Yr yield is up 3.1bps at 3.6474%, 5-Yr is up 3.8bps at 3.7339%, 10-Yr is up 4.5bps at 4.2731%, and 30-Yr is up 4.2bps at 4.9696%. Dec 10-Yr futures (TY) down 10/32  at 112-06 (L: 111-31 / H: 112-16)
• Friday's nonfarm payrolls report is the focus of the week. In the meantime, Wednesday's scheduled highlights include an appearance by St Louis Fed President Musalem (2025 FOMC voter, hawk), factory orders and JOLTS data, and the latest edition of the Fed's Beige Book.