Last week’s market decline reflects typical volatility and does not alter our underlying thesis. While short-term market debate continues, our trend-following framework remains intact, reinforcing our strategy to stay the course.
U.S. stocks ended the week lower. The S&P 500 fell 1.4%, the Nasdaq Composite declined 2.1%, and the Dow Jones Industrial Average lost 0.8%. Rising long-term interest rates pressured equity valuations, particularly in the technology sector. In contrast, gold rose approximately 5.6% to finish near $4,624 per ounce, reaching a three-month high as investors responded to a weaker dollar and growing concerns about U.S. fiscal policy.
The Long End
The 30-year Treasury yield rose to 5.33% during the week, its highest level since 2007, after settling to 5.27%. The increase reflected several concerns, including persistent inflation and federal debt that has now surpassed $40 trillion. Higher long-term yields also have broader economic consequences because they influence mortgage rates, corporate borrowing costs and the valuations investors are willing to assign to stocks.
The Treasury Department responded by announcing that it would at least double the size of its liquidity-support buybacks for 10- to 30-year securities. Beginning September 9, the Treasury will increase the maximum size of each operation from $2 billion to at least $4 billion. The announcement briefly pushed the 30-year yield lower, although it ended the week near 5.27%.
The announcement weakened the dollar and helped drive demand for gold. A weaker dollar makes dollar-denominated gold less expensive for international buyers, while concerns about debt sustainability increase the appeal of assets viewed as stores of value. Together, these factors helped create a “debasement trade,” in which investors moved toward gold in response to worries about the dollar’s long-term purchasing power.
What the Fed Minutes Added
Minutes from the Federal Reserve’s July 28–29 meeting showed that inflation remained the Committee’s primary concern. The Fed voted 9–3 to maintain the federal funds rate at 3.50%–3.75%, with Beth Hammack, Neel Kashkari and Lorie Logan favoring a 25-basis-point increase.
The vote itself was not new; the same result was announced immediately after the July meeting. However, the minutes provided more information about the disagreement. Officials who favored an immediate increase argued that acting earlier could prevent inflation from becoming more persistent and reduce the risk of needing more aggressive tightening later.
The split represented a meaningful change from the Fed’s June meeting, when policymakers voted 12–0 to hold rates steady. It shows support for another increase has emerged even as parts of the economy begin to weaken.
Economic data continues to send mixed signals. S&P Global’s flash Composite PMI rose to 56.0 in August, its highest level since April 2022. The Services PMI increased to 56.8, while Manufacturing PMI remained in expansion territory at 53.2. These results suggest that business activity remains strong, especially in services.
However, the PMI figures contrast with earlier reports showing that payrolls declined by 23,000 in July, retail sales fell 0.6%, and consumer sentiment weakened in August. The combination leaves the Fed with a difficult balance: economic activity remains resilient, but employment and household demand are showing signs of strain.
Economic Pressure on Iran
Geopolitical risk also increased during the week. President Trump announced an “Economic D-Day” against Iran, threatening economic consequences for countries, financial institutions and businesses that continue to provide support to Tehran. The announcement expanded the administration’s existing economic pressure campaign as negotiations remained stalled and shipping through the Strait of Hormuz remained below normal levels.
Oil prices rose on fears of tighter supplies. WTI crude gained approximately 5.7% for the week to $87.06 per barrel, while Brent advanced 6.4% to $94.39. Higher energy prices could keep inflation elevated and strengthen the Fed’s argument for maintaining restrictive monetary policy. The escalation also provided additional safe-haven support for gold, although the Treasury buyback announcement, fiscal concerns and dollar weakness appeared to be the more direct drivers of the metal’s weekly gain.
Looking Ahead
This week will feature two major events. Nvidia will report fiscal second-quarter results after the market closes on Wednesday, August 26. The company previously guided to approximately $91 billion in quarterly revenue, and investors will look for evidence that spending on AI infrastructure remains strong.
The Federal Reserve’s Jackson Hole Economic Policy Symposium will follow from August 27 through August 29. This year’s theme is “Financial Innovation: Implications for Payments and Policy.” Investors will watch for guidance on how the Fed plans to balance persistent inflation against softer employment and consumer data.
“All we’re trying to do is get people to focus on the fundamentals and not trade the headlines.”
—Scott Bessent, U.S. Treasury Secretary, August 21, 2026
Moderna’s Breakthrough Could Matter More to Merck Than It First Appears
Moderna captured most of the attention after its experimental cancer vaccine succeeded in a late-stage trial. Its shares rose 177% in one day, while Merck gained a comparatively modest 12.6% in response.
However, the long-term significance may be greater for Merck than the difference in share-price movements suggests. The result gives Merck a potential multibillion-dollar product, strengthens the position of Keytruda in cancer treatment, and provides an important new defense against the patent cliff facing its largest franchise.
The breakthrough does not solve every problem in Merck’s future. It does, however, make the company’s path beyond Keytruda considerably easier to see.
Success for Both Companies
Recently, Moderna’s late-stage melanoma trial of intismeran, a personalized cancer vaccine jointly developed by Moderna and Merck, succeeded. The result moves intismeran closer to regulatory approval and validates the potential of personalized mRNA technology in cancer treatment.
For Moderna, it shows that its mRNA technology may have valuable applications beyond infectious-disease vaccines. For Merck, it shows that Keytruda could potentially be combined with a new type of treatment to produce better results and create an additional revenue stream.
Moderna and Merck began their personalized cancer-vaccine collaboration in 2016, when mRNA technology was still unproven and Moderna had no approved products. Merck initially paid Moderna $200 million to fund early research and help build the specialized manufacturing capacity required to produce a different treatment for each patient.
The agreement gave Merck the right to join the program after early studies provided sufficient evidence that the technology could work. Merck exercised that option in 2022 and paid Moderna another $250 million. The companies agreed to share development costs and any profits from the personalized cancer-vaccine program equally.
Merck is not simply supplying Keytruda for a Moderna trial. It is a co-developer and co-commercialization partner with a 50% economic interest in intismeran.
The arrangement gives Merck two potential sources of value. First, it receives half of the profits generated by intismeran. Second, patients receiving the combination will also use Keytruda, which remains Merck’s product. This partnership may produce more income for Merck than what we can see on the surface.
Behind the Stock Price
Before the announcement, Moderna was still struggling to prove that it could build a durable business after the decline in COVID-19 vaccine sales. Intismeran’s success changed the perceived value. There was about 14% of the public float was sold short before the announcement, which also contributed to the rally with short squeeze. As a larger and more diversified pharmaceutical company, Merck experienced a more measured increase than Moderna.
Looking at market capitalization, Moderna’s 177% surge added approximately $44.5 billion and Merck’s much smaller 12.6% gain added about $42.1 billion. This resonates with the 50-50 sharing of intismeran (autogene) between the two companies. That being said, although Moderna’s surge is eye-catching, Merck, which shares half of the interest of intismeran and can strengthen the demand for Keytruda, is the power behind the stage that we should pay closer attention to.
The relationship between the two stocks will remain strong around intismeran-related events, including regulatory decisions, commercial-launch plans, manufacturing updates, and results from studies in other cancers. Outside those events, their performance is likely to diverge. Moderna remains highly sensitive to the perceived value of its mRNA technology, while Merck is also influenced by Keytruda sales, new-product launches, acquisitions, drug-pricing policy, and the rest of its pipeline. They share the economics of one important program, but they are not interchangeable investments.
A New Layer of Protection for Keytruda
Keytruda remains both Merck’s greatest strength and its largest long-term risk. Keytruda and its newer subcutaneous formulation generated approximately $8.4 billion in the second quarter, representing more than half of Merck’s total sales. However, core patent protection begins to expire later this decade, raising concerns about lower-priced competition and declining revenue.
Although intismeran could not fully protect Merck’s future sales even with optimistic sales estimates, viewing the vaccine only as a replacement product could understate its strategic value.
The combination could help Merck in three ways. First, Merck will receive half of intismeran’s profits. Second, the combination could support or expand Keytruda use in patients who have undergone melanoma surgery. Third, success in melanoma increases confidence that the same approach may eventually work in larger cancer markets.
The third benefit could matter most. Merck and Moderna are studying intismeran in several other cancers, including lung, bladder, and kidney cancer. Melanoma is the first commercial opportunity, but success in larger markets will determine whether intismeran becomes merely a useful new product or a major cancer-treatment platform.
This creates valuable optionality for Merck. The current result supports a potential melanoma launch, while every additional successful trial could expand the commercial opportunity. Merck secured half of that opportunity before the successful late-stage result dramatically increased the project’s value.
The Rest of Merck Is Also Improving
The Intismeran result arrives at a favorable point in Merck’s broader transition.
Second-quarter sales increased 5% to $16.6 billion, and management raised its full-year revenue forecast to between $66.3 billion and $67.3 billion. Winrevair sales rose 75% to $588 million, while Keytruda Qlex, the subcutaneous version of Keytruda, generated $463 million as its launch accelerated.
These products show that Merck is building additional sources of growth. Winrevair, Capvaxive, Ohtuvayre, Keytruda Qlex, and a large development pipeline give Merck several ways to soften and cover the eventual decline of its largest product.
Intismeran now becomes one of the most credible assets in that transition. Many experimental drugs look promising in early research but never reach the market. Intismeran has now succeeded in a large late-stage trial against an established treatment. It still faces regulatory and commercial risks, but it has moved much closer to becoming an actual source of revenue and profit.
Important Questions Remain
The companies have announced that the trial succeeded, but they have not yet released all the detailed results. Investors still need to learn how large the improvement was, whether the benefit was consistent across different patient groups, and whether the treatment eventually helps patients live longer. There is also no guarantee that the melanoma result can be repeated in other cancers.
Commercial execution may be an even greater challenge. Intismeran is not a standard medicine produced in identical doses for every patient. Each treatment must be designed and manufactured using information from that individual patient’s tumor. This personalized process creates concerns about commercialization. Cost control, production speed, and and insurance reimbursement are among the many factors that can keep a successful treatment from becoming profitable.
Overall, Intismeran's success represents more than a promising cancer treatment. For Moderna, it provides evidence that its nRNA technology could deliver greater profitability beyond COVID vaccines. For Merck, the early action of partnership reflects management’s foresight in preparing for its approaching patent cliff.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
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WEEK AHEAD
August 24-28, 2026
Weekly Market Commentary:
Pressure at the Long End
The Long End
What the Fed Minutes Added
Economic Pressure on Iran
Looking Ahead
Moderna’s Breakthrough Could Matter More to Merck Than It First Appears
Success for Both Companies
Behind the Stock Price
A New Layer of Protection for Keytruda
The Rest of Merck Is Also Improving
Important Questions Remain
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.