US equities rallied in a risk-on move led by tech, with the Nasdaq rebounding ahead of Nvidia’s results. Nvidia rose 1.8% and moved back above $210 after its longest losing streak in four years, having clocked seven consecutive down sessions, even as it is expected to report more than $92bn of revenue for the last quarter. The broader advance was narrow: the Dow lagged, while five S&P 500 sectors were in the red and consumer staples fell by more than 1%, keeping consumer-linked names under pressure despite lower yields and weaker oil.
Oil sold off after Iran and Oman outlined a phased framework to reopen the Strait of Hormuz, with Brent and WTI each down more than 3%; Brent traded just above $87 a barrel and was down 4.6% on the week. Bond yields fell into Jackson Hole, with the US 10-year Treasury yield down 5bps and the UK 10-year down 7bps. Elsewhere, the dollar was subdued as tariffs were exchanged between the US and Canada, while precious metals eased: platinum fell more than 1% and gold slipped after hitting a three-month high; attention also turned to the Treasury’s $1 trillion war chest and July core PCE due tomorrow.
Volatility Strategies And Sector Hedges
We should prepare for a spike in market volatility over the next few weeks as derivative traders navigate a highly fragmented rally. While tech is bouncing back ahead of Nvidia’s highly anticipated earnings report, the broader market remains fragile, with consumer staples showing clear signs of distress. To hedge this risk, we can look at buying near-the-money put options on consumer discretionary and retail ETFs, such as the XLY or XRT, to capitalize on the widening cracks in US consumer spending.
The sharp decline in global energy prices offers another strategic entry point for options traders. Brent crude has tumbled below $87 per barrel following positive diplomatic talks regarding the Strait of Hormuz, which has simultaneously dragged down treasury yields. We can look to exploit this trend by targeting short-duration call options on TLT (i-Shares 20+ Year Treasury Bond ETF) as bond yields continue to soften ahead of the Jackson Hole symposium.
Currencies, Precious Metals, And Defensive Positioning
Furthermore, we should keep a close eye on the currency and precious metals markets as the US dollar remains subdued due to escalating trade tensions with Canada. Historically, when trade tariffs increase, supply chains face disruption, which could keep pressure on the greenback. Given that gold has recently retreated from its three-month highs near $2,500 an ounce, we see an opportunity to accumulate longer-term call options on gold futures (GC) to prepare for a defensive shift if consumer data continues to deteriorate.
