Market Overview: Indices Display Mixed Performance Amid Economic Nuances
The S&P 500 Index ($SPX) has recorded a modest increase of +0.17% today, while the Dow Jones Industrial Average ($DOWI) has risen by +0.20%.
Concurrently, the Nasdaq 100 Index ($IUXX) has climbed by +0.13%. Minor gains were also observed in E-mini S&P futures (ESU26), which are up by +0.05%, and September E-mini Nasdaq futures (NQU26), gaining +0.34%.
Stock indices exhibit a mixed disposition today, with the Dow Jones Industrial Average retreating to a two-week nadir.
Strength in technology equities is providing a lift to the broader market following remarkable revenue growth reported by Anthropic PBC, reinforcing the expectation of sustained investments in artificial intelligence (AI).
Anthropic indicated to potential investors that its revenue for Q2 surged by at least 14 times compared to the same quarter last year, as reported by Bloomberg. However, a downturn in software stocks is exerting downward pressure on the Dow.
Equities have also benefited from unexpectedly positive US economic indicators. The August Empire Manufacturing Survey’s general business conditions index has risen by +5.0, reaching a 4.5-year peak of 20.6, significantly surpassing the anticipated decline to 10.0.
Nonetheless, signs of economic fragility in China are dampening global growth outlooks, adversely affecting stock performance.
China’s industrial production for July increased by +4.5% year-on-year, falling short of expectations of +5.0%. Additionally, July retail sales rose by merely +0.6% year-on-year, below forecasts of +1.5%.
The unemployment rate also climbed to +5.2%, exceeding expectations of 5.1%. Furthermore, housing prices in China experienced a monthly decline of -0.18%, marking the thirty-eighth consecutive month of depreciation.
September WTI crude oil prices (CLU26) are experiencing an upward trend, influenced by renewed hostilities involving Israel and Iranian-backed Hezbollah in Lebanon, which complicates the potential for peace in the Middle East and impedes the reopening of the Strait of Hormuz.
Israel has targeted Iranian-backed Hamas in Gaza, while the Houthis in Yemen have launched assaults on vessels in the Red Sea, with several ships reportedly struck by projectiles in the Strait.
Despite a recent surge, crude oil prices are retreating from their peaks following indications that Iran and Oman are nearing an agreement regarding the management of the Strait of Hormuz.
Iranian Foreign Ministry spokesperson Baghaei mentioned that finalizing a “shipping map” would form part of a broader agreement, ensuring both nations maintain sovereignty and facilitate secure passage for vessels.
In an assertive move, Treasury Secretary Bessent commented last week that the administration would soon unveil unprecedented economic sanctions against Iran, the likes of which have not been seen throughout the history of economic isolation of a nation. These measures are expected to augment the current US naval blockade of Iranian ports.
No advancements towards a comprehensive US-Iran pact for the Strait of Hormuz have emerged. An Iranian military representative asserted last Thursday that no vessels can navigate the Strait without Iran’s consent and oversight, dismissing President Trump’s assertions of US control as “falsehoods.” This statement followed Trump’s declaration last Tuesday claiming “total control” over the strategic waterway.
The prospects for robust earnings in Q2 are casting a favorable light on equities. The S&P 500 is projected to witness earnings growth nearing 32% for Q2, well above estimates of +23%, and nearly quadrupling the average earnings growth rate during the non-Covid period since Q4 of 2013, per Bloomberg Intelligence.
A significant portion of this growth is anticipated to derive from AI investments, with infrastructure stocks in the AI sector contributing nearly 60% to the S&P 500’s earnings-per-share escalation. \
To date, earnings outcomes have been encouraging, with 85% of the 456 S&P 500 companies reporting Q2 earnings surpassing expectations, as noted by Bloomberg data.
The markets are currently pricing a 32% likelihood of a +25 basis point rate increase at the forthcoming FOMC assembly scheduled for September 15-16.
Global Market Snapshot
International stock markets presented a mixed bag today. The Euro Stoxx 50 recorded a slight decline of -0.05%. Meanwhile, China’s Shanghai Composite surged to a 5-week apex, closing with an increase of +1.41%, and Japan’s Nikkei-225 Stock Average gained +0.74%.
Interest Rate Developments
September 10-year T-notes (ZNU6) have declined by -3 ticks today. The yield on the 10-year T-note increased by +1.2 basis points to 4.704%.
Rising WTI crude oil prices are amplifying inflation expectations, thus weighing on T-notes. The 10-year breakeven inflation rate reached a three-week high of 2.296%.
Moreover, the positive news regarding the August Empire manufacturing index’s unexpected rise has also negatively impacted T-note prices.
European government bond yields have seen an uptick today. The yield on the 10-year German bund ascended to a three-week high of 3.214%, up +0.7 basis points to 3.211%. Similarly, the 10-year UK gilt yield is experiencing an increase of +0.2 basis points, now at 5.039%.
Markets are factoring in a 92% probability of a +25 basis point rate hike by the ECB during its upcoming policy assembly on September 10.
Noteworthy US Stock Movements
Chipmakers and AI-infrastructure companies are generally trending upwards today, positively influencing the broader market.
The iShares Semiconductor ETF (SOXX) has risen over +1%. Marvell Technology (MRVL) has surged more than +5%, leading gains in the S&P 500, followed closely by SanDisk (SNDK), which has also increased by over +5%.
Additional notable performers include Western Digital (WDC) and Micron Technology (MU), both increasing by more than +4%, as well as Applied Materials (AMAT), which has risen by over +3%.
Seagate Technology Holdings Plc (STX) is up by more than +2%, with KLA Corp (KLAC), ASML Holding NV (ASML), and Texas Instruments (TXN) each gaining over +1%.
Conversely, the software sector is under significant pressure today, curtailing overall market gains. Datadog (DDOG) has faced a decline of more than 3%, leading losses on the Nasdaq 100, while Salesforce (CRM) has dipped over 2%, taking the lead on the Dow.
Other significant decliners include Adobe Systems (ADBE), ServiceNow (NOW), Workday (WDAY), Atlassian Corp (TEAM), Autodesk (ADSK), Intuit (INTU), and Oracle (ORCL), each falling by more than -2%. Microsoft (MSFT) and Palantir Technologies (PLTR) are also down by more than 1%.
Astera Labs (ALAB) has gained more than +6%, leading Nasdaq 100 gainers after Northland Securities upgraded its rating to outperform from market perform, with a price target of $350.
Onto Innovation (ONTO) has risen more than +4% following Goldman Sachs’ initiation of a buy rating with a price target of $400.
Target Hospitality (TH) has increased by over +2% after Morgan Stanley initiated coverage with an overweight recommendation and a $22 price target.
EyePoint (EYPT) has plummeted by over 71% after announcing that its experimental treatment for an ocular ailment fell short of achieving its primary objective in a late-stage trial.
Constellation Brands (STZ) has dropped more than 4% to lead losses in the S&P 500 after Berkshire Hathaway disclosed the liquidation of its stake in the company.
SentinelOne (S) and Netskope (NTSK) have each decreased by more than 4% following Deutsche Bank’s downgrade from buy to hold.
L3Harris Technologies (LHX) is down over 3% after announcing that Christopher Kubasik has resigned from his positions as CEO and chairman of the board, effective immediately.
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