August 27th Market Overview

Happy Thursday

Nvidia's forecast pulled the AI names and the whole software group up with it. Then the trade numbers came out.

We bought a lot more computers and chips in July, mostly from Taiwan, Vietnam and Mexico, where Foxconn, Quanta and Wistron build the AI servers. Anything we buy from abroad gets subtracted from our growth number. So the buildout everyone is cheering made the economy look smaller this morning, and economists cut their third quarter forecasts.

Let’s dig in...

Today's Big Picture

1. The Software Panic Is Over

Salesforce raised its full-year revenue outlook to $46.1 billion to $46.4 billion. CrowdStrike guided to nearly $6.61 billion, and Okta's subscription backlog for the next twelve months reached $4.85 billion. Investors spent months betting AI would eat these companies alive. The quarter says AI is buying from them.

2. America Is Importing Its AI Buildout

The July goods deficit widened to $118.8 billion from $101.4 billion. Business equipment did it, with imports of computers and chips hitting $140.1 billion, the biggest one-month increase in more than 30 years. Imports get subtracted from the growth math, and Barclays trimmed its third-quarter estimate by roughly half a point right after the data. The buildout is real. The credit for it lands in someone else's economy.

3. The Energy Squeeze Moved To Fuel

Crude sits near $83, well off the summer highs, so the tape looks calm. Refining margins say otherwise, because the Iran war and Ukrainian strikes on Russian energy sites have pulled millions of barrels of finished fuel off the market. Diesel and gasoline are where the tightness lives now. That is the price that shows up in freight bills and at the pump.

Market Overview

Index Performance

Stock Spotlight

Best Buy $BBY ( ▼ 3.93% )  
brought in $9.8 billion and earned $1.47 a share, both ahead of estimates, on strong computing demand. The stock fell anyway.

Dollar Tree $DLTR ( ▼ 3.71% )  
beat the quarter but guided current-quarter earnings to $0.80 to $0.95 against a $1.39 estimate. The company is spending its tariff refunds back into prices.

Agilent Technologies $A ( ▲ 1.42% )  
reported $1.88 billion in quarterly revenue, past the $1.84 billion estimate.

Big Name Updates

Nvidia $NVDA ( ▲ 8.15% )  
agreed to buy Hugging Face, the open-source model library, for $12.9 billion, according to Business Insider and The Information. The company also told investors it expects no China data-center revenue this quarter.

KKR $KKR ( ▲ 0.74% )  
will pay $250 million to settle Justice Department claims over incomplete merger filings across 16 deals. The old record penalty for that violation was $12 million.

CF Industries $CF ( ▼ 0.02% )  
broke ground on a $4 billion nitrogen plant. Farmer co-op CHS and fertilizer maker OCP North America announced a $450 million phosphate facility the same week.

American Airlines $AAL ( ▼ 0.33% )  
is adding Vienna, Reykjavik and Porto next summer, plus New York flights to Amsterdam and Nice. It will be the only U.S. carrier flying to Vienna.

Other Notable Company News

Blue Chips
MarketBeat names and lists “7 Blue-Chip Stocks to Add To Your Forever Portfolio”

Pernod Ricard $RIOT ( ▲ 0.49% )  
reported annual sales of 9.4 billion euros as American and Chinese demand softened.

Kohl's $KSS ( ▲ 1.12% )  
restarted its buyback with up to $100 million planned for this year.

Dick's Sporting Goods $DKS ( ▲ 0.7% )  
said the third quarter will be harder than the fourth as rivals discount old footwear.

Intuit $INTU ( ▲ 0.64% )  
guided fiscal 2027 revenue to $23.28 billion to $23.51 billion, under the $24.7 billion Wall Street wanted.

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Sector Watch

Bond Market

Treasuries barely moved. The 10-year sits near 4.66 and the dollar index near 95.51.

The pressure is overseas. France, Italy, Britain and Japan are all taking heavier selling on inflation and budget worries.

Policy Watch

Fed

Cleveland Fed President Beth Hammack said the time to raise rates is now. She sees inflation near three percent and does not think financial conditions are restricting anything.

• Kansas City's Jeff Schmid called inflation stubborn and sticky, but stopped short of asking for a hike.

• Jobless claims came in at 203,000, below estimates, with continuing claims down to 1.78 million.

International

Iran and Oman say they are close to a permanent corridor through the Strait of Hormuz. Iran's Revolutionary Guards went further and claimed the two sides agreed on how to split revenue from tolls. Oman's foreign minister mentioned a temporary corridor and safe navigation, and said nothing about money. A toll would be a standing cost on the most important oil route in the world, so that is the piece worth following.

• South Korea raised rates for the second straight meeting as core inflation stayed elevated.

• China's industrial profit growth slowed to a seven-month low on weak domestic demand.

What to Watch

The AI Infrastructure's Backbone
10 Stocks Powering the AI Buildout

Nvidia's call at five

The numbers land first, the answers come on the call. Listen for the split between the handful of big cloud buyers and everyone else, and for networking, which ran near $15 billion last quarter and is growing faster than the chip business. Salesforce $CRM and CrowdStrike $CRWD also report tonight and will get ignored.

Kevin Warsh at Jackson Hole

Friday at 10 a.m. Eastern, his first major policy speech as chairman. Traders want one thing: any hint on September.

Thanks for reading - you are now the more informed 🙂

- John

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