Ringside · Post-Bell · September 3
- Waller opened the door to a September hold; hike odds slid to about 50% from 63%.
- The Dow added 624 points, its best session since August 4, and ten-year yields eased to 4.77%.
- Ciena beat and closed down 10.4%; Hewlett Packard Enterprise beat and closed up 5.0%.
Indexes
Christopher Waller sat for an interview in Washington on Thursday morning and moved more money than any earnings report has this week. The Federal Reserve governor told Reuters that if the next fortnight of data keeps showing disinflation, he would argue for leaving the federal funds rate at its 3.50% to 3.75% target at the mid-September meeting. Chair Kevin Warsh's Jackson Hole speech in August had pushed the implied chance of an increase to roughly two-thirds by Wednesday; those same contracts were near a coin flip by Thursday afternoon. Two-year notes traded as low as 4.30% in the morning before finishing at 4.34%, the dollar lost ground against every major currency, and the Dow added 624.16 points for its strongest session since August 4. Eight of eleven sectors advanced and the broad index closed at 7,747.71, back above a 20-day average of 7,710.65.
| Index | Close | % Chg | Range |
|---|---|---|---|
| S&P 500 | 7,747.71 | +1.06% | 7,686.71 – 7,756.76 |
| Nasdaq Composite | 26,584.06 | +1.40% | 26,325.06 – 26,644.57 |
| Dow Jones | 53,686.11 | +1.18% | 53,286.15 – 53,746.50 |
| Russell 2000 | 2,968.27 | +0.51% | 2,951.29 – 2,976.62 |
| VIX | 14.32 | -5.79% | 14.23 – 15.44 |
Sector Heat Map
Banks did the heavy lifting, and the groups that answer to commodity prices were left behind.
| Sector | % Chg | Note |
|---|---|---|
| Financials (XLF) | +1.56% | Best close in at least eighteen months |
| Consumer Discretionary (XLY) | +1.39% | Tesla up 5.4% |
| Technology (XLK) | +1.29% | Software offset a weak chip group |
| Real Estate (XLRE) | +1.19% | Reverses Wednesday's decline |
| Industrials (XLI) | +1.03% | |
| Communication Services (XLC) | +0.85% | Meta up 3.0% |
| Utilities (XLU) | +0.84% | |
| Health Care (XLV) | +0.18% | |
| Staples (XLP) | -0.32% | Campbell's and Tyson both guided lower |
| Materials (XLB) | -0.62% | |
| Energy (XLE) | -0.74% | Off Wednesday's twelve-month high |
Financials, consumer discretionary and real estate all beat the index, the shape a session takes when the move starts in the bond market rather than in earnings. Energy slipped anyway, with crude near six-week highs.
In the News
Rates, FX, Commodities
Every note and bond maturity fell, and the front end fell hardest, which is what a repriced September meeting looks like. Two-year notes gave up five basis points, more than twice what the long bond surrendered, and the gap between two- and ten-year yields widened to 43 basis points.
| Treasury | Yield | Note |
|---|---|---|
| 2-Year | 4.34% | 4.39% Wednesday; touched 4.30% in the morning |
| 10-Year | 4.77% | 4.79% on Wednesday |
| 30-Year | 5.25% | 5.27% on Wednesday |
| 2s10s spread | 43 bp | 40 bp on Wednesday |
| FX / Commodity | Level | Note |
|---|---|---|
| Dollar index (DXY) | 98.98 | Down about 0.6% |
| USD/JPY | 155.78 | Weakest dollar since February 24 |
| EUR/USD | 1.1631 | |
| WTI Crude (Oct) | $91.75 | Near a six-week high |
| Brent Crude (Nov) | $95.82 | Second finish above $95 since July |
| Gold (Dec) | $4,518.60 | Lifted by the softer dollar |
| Natural Gas | $2.92 |
Those four commodity levels are late-session screen quotes, not exchange settlements, which had not been published when this was written. The table shows them without percentage changes, because a move measured between two different kinds of price is not a move.
Technicals
Back above its 20-day, the S&P 500 at 7,747.71 left a 50-day of 7,584.49 well behind and now sits 0.66% under the August 13 closing high of 7,798.99. The Nasdaq 100 at 29,482.32 reclaimed a 50-day of 29,227.02 and stopped eleven points short of a 20-day at 29,493.45. Small caps did the least: the Russell 2000 at 2,968.27 stayed under both its 50-day of 2,989.13 and its 20-day of 3,008.01. Ten-year notes have closed between 4.75% and 4.79% every session this week, and Friday's payroll figure is the first thing capable of taking them out of that band.
Breakouts. Dell Technologies (DELL) at $516.39 posted its best close of the past twelve months, clearing the $494.51 mark from August 13 it had missed by $2.31 a day earlier. The financial sector fund (XLF) at $58.56 registered its highest close in at least eighteen months. Snowflake (SNOW) at $356.47 also set a twelve-month closing high.
Breakdowns. Ciena (CIEN) at $317.46 recorded its lowest close since March 6 and sits 15.7% under a 200-day of $376.52. Campbell's (CPB) at $22.12 fell through all three of its moving averages, ending $2.12 above the $20.00 it printed in April. Broadcom (AVGO) at $357.16 finished $12.60 under a 200-day average of $369.76.
Top Movers
Gainers
Snowflake (SNOW), +16.6% to $356.47. The data-warehouse company earned an adjusted 62 cents a share on $1.55 billion of revenue against the 45 cents and $1.48 billion expected, and current remaining performance obligations of $4.91 billion beat the $4.75 billion carried while growing 42% against 38% the prior quarter. Buyers marked it up 24% overnight and took roughly a third of that back over six hours, which is what a gap that size attracts. The close was still a twelve-month high.
Hewlett Packard Enterprise (HPE), +5.0% to $54.44. Indicated 3.3% lower at seven in the morning, it finished as one of the day's strongest large-cap technology names. Nothing in the numbers changed between those two prices: revenue of $12.2 billion still grew 34%, orders still rose 42%, and the full-year earnings range still moved up 40 cents to $3.75 to $3.85. What changed was the cost of money.
Tesla (TSLA), +5.4% to $376.36. The Cybercab event was scheduled for Thursday, and the shares rallied into it rather than after it, the pattern this company's product days have followed for two years.
NetApp (NTAP), +2.6% to $185.38. Marked 8.2% lower at dawn on a quarter in which free cash flow fell 35% while revenue grew 30%, the storage maker ended green.
Dell Technologies (DELL), +4.9% to $516.39. A second advance on Tuesday's artificial-intelligence server guidance, this one carrying it to a twelve-month high.
Losers
Ciena (CIEN), -10.4% to $317.46. The optical-networking company reported adjusted earnings of $2.11 a share against $1.73 expected, grew revenue 37% to $1.67 billion, and raised its full-year outlook to $6.42 billion give or take $50 million, from $6.3 billion. It was quoted at $370 at seven in the morning. The trouble is what the raise implies: guiding the fourth quarter to roughly $1.75 billion asks the market to pay again for growth it has already paid for, and the stock is now 49.4% below the $627.00 it reached on June 2.
Campbell's (CPB), -7.0% to $22.12. Fourth-quarter sales of $2.1 billion missed the $2.14 billion expected, adjusted earnings of 39 cents matched but fell 37% from a year earlier, and the quarterly dividend was cut to 25 cents from 39 to speed up debt repayment. Next year's sales are guided to a decline of 2% to 4%, against the 0.8% dip analysts had allowed for.
Ultragenyx (RARE), -44.0% to $14.85. Wednesday evening's failed Angelman syndrome trial took everything the overnight quote had already taken and not a cent more.
Key Macro Data Today
| Release | Actual | Consensus | Prior |
|---|---|---|---|
| ISM services (Aug) | 55.4 | 54.2 | 54.1 |
| ISM services, prices paid | 72.6 | 69.5 | 70.3 |
| Initial jobless claims | 206,000 | 205,000 | 204,000 |
| Trade balance (Jul) | -$88.6bn | -$90.0bn | -$71.2bn |
Services came back strong and expensive in the same report. August's 55.4 was the best reading since February and new orders hit 60.9, a three-and-a-half-year high, while prices paid climbed to 72.6 and the employment index stayed under water at 47.8. Quarterly unit labour costs were revised down to 1.2%, the only soft inflation input of the morning. July's trade deficit widened 24.4% as imports rose 2.8% and exports fell 2.1%.
Notable Earnings This Session
Consumer and networking names went first; the heavier software slate waits until after the bell.
Pre-Open
Every early reporter fell. Ciena, Campbell's and Tyson Foods each missed on something that mattered, and Victoria's Secret beat on earnings, guided the year higher and lost ground anyway, a poor hit rate for a session the index finished up 1%.
Post-Close
Zscaler (ZS) finished at $177.80 carrying an initial fiscal 2027 outlook that called for recurring-revenue growth to slow to 16% to 17%; a revision to that figure is the reason to read the release. Lululemon Athletica (LULU) closed at $121.77. DocuSign, Copart, Samsara, Guidewire Software and Planet Labs also report tonight.
Drivers
Broadcom lifted its fiscal 2027 artificial-intelligence revenue target to $115 billion from $100 billion and told investors to expect that figure to double again in 2028, and the stock fell 2.7% anyway on a fourth-quarter guide of $34.8 billion against $35.03 billion expected. Hewlett Packard Enterprise and NetApp both beat, both opened lower, and both closed higher. The group is being sorted rather than sold.
Sterling and the euro were incidental; the dollar's real story was 156 yen, a level it had not seen since late February. Japan's own policy meeting lands on September 17 and 18.
August payrolls arrive at 8:30 a.m. Eastern on Friday, and the week has been a run of partial answers to the question it settles. ADP counted 38,000 private jobs on Wednesday, the ISM services employment index stayed in contraction at 47.8, and weekly claims at 206,000 have not left their summer band. None of that decides what the Federal Reserve does in twelve days, because the governor who moved the market on Thursday said his own vote would turn on something else: the August consumer price report, due September 11.