As the S&P 500 faces a 20bp decline despite lower long-end Treasury yields, investors are focusing on key event risks and positioning. The weakness is concentrated in AI-linked names, with AI Winners extending last week’s sell-off by 2.9%. This move suggests that lower yields may not be providing sufficient support for equities, as investors remain vigilant about fresh US policy headlines and event risks such as Nvidia earnings, Jackson Hole, and Treasury Secretary Bessent’s potential new Iran sanctions.

One notable theme this month has been the continued squeeze in the short leg of momentum. Prime brokerage data indicate limited appetite to rebuild short positions even as existing shorts are forced out, leading to net long/short exposure in areas like Software and AI Risk reaching six-month highs. The persistent unwind of crowded shorts has become a key driver of recent factor performance.

Meanwhile, hedge funds have selectively re-grossed into the AI long leg, with net exposure across Semis and AI Winners recovering to June highs. This rebound in long exposure comes as single-stock volatility has eased, and attention shifts to Nvidia’s earnings on Wednesday. UBS’s Tim Arcuri expects another strong print, forecasting Q2 revenue of $94-95 bn and Q3 guidance of $107-108 bn.

Beyond earnings, markets are also tracking the ongoing US-Canada tariff dispute and potential new Iran sanctions from Treasury Secretary Bessent. This week’s key catalysts include Nvidia earnings, PCE and GDP data on Wednesday, and comments from Kevin Warsh at Jackson Hole on Friday. Other notable earnings include Marvell, CrowdStrike, Salesforce, Intuit, and Autodesk.